The FTSE 250‘s in a really interesting place at the moment. Despite the index as a whole being close to record highs, all I see when I look at it is opportunities.
That’s actually true of the stock market in general right now. But there are a couple of familiar names from the UK’s secondary index that make it onto my buying list for February.
Gamma Communications
Gamma Communications (LSE:GAMA) is a company I think is in the right place at the right time. The B2B cloud communications firm has two main things going for it.
One is the upcoming switch off of the UK copper network and the other is its expansion into Germany. I think both mean the firm’s growth prospects are better than its share price suggests.
Gamma’s in a good position, but it won’t have things all its own way. It faces competition from no less a company than Microsoft – and that’s a risk for investors to take very seriously.
A shift to cloud-based communications will likely involve voice calls going through Teams. And businesses can just buy packages from Microsoft instead of going through Gamma.
It’s worth noting though, that the FTSE 250 firm is doing well on this front. It reported a 12% increase in the number of voice-enabled Teams users in its most recent six-month update.
There are good reasons for this – it offers a more reliable service than Microsoft and its bundled minutes can be cheaper for larger teams. At today’s prices, I’m looking to add to my investment.
Vistry
Like Gamma, I think Vistry (LSE:VTY) might be on the edge of something big. The firm’s shifted away from traditional housebuilding and into partnerships at what looks like exactly the right time.
The UK government has allocated £39bn for affordable housing projects over the next five years. And the FTSE 250 company has a huge advantage over its rivals in terms of accessing this.
Vistry has well-established relationships with affordable housing providers, which should put it in a much stronger position than its rivals. The trouble is, some might say its position is too strong.
Competitors are arguing that the firm’s advantage is unfair. They object that it has too much of a head start in terms of early insights into funding decisions from its work with Homes England.
The idea that Vistry might not be able to make the most of its advantage is a genuine risk. And that could result in future earnings being lower than I’m expecting in terms of the opportunity ahead.
Right now though, the stock’s trading at a lower price-to-book (P/B) multiple than Bellway, Barratt Redrow, or Taylor Wimpey. Considering its advantages, I think that’s a buying opportunity for me.
The time’s now
Both Gamma and Vistry look good value to me. But I’m not just buying because I think they’re cheap – I can see real sources of earnings growth for both companies in the near future.
In both cases, I can add to my existing investments while maintaining a diversified portfolio. So that’s what I’m planning to do in February.
