The UK stock market has endured a tough March so far as conflict in the Middle East has worried investors. Some FTSE 250 stocks have fallen significantly in a very short period of time. Here’s one I’ve spotted that has fallen so far I think it could be undervalued.
Understanding recent moves
I’m referring to the Big Yellow Group (LSE:BYG). The share price is down 17% over the last month, bringing the loss over the past year to 6%.
The firm is a pretty simple business to understand. It owns and operates self-storage sites across the UK, renting out space to households and businesses that need somewhere to stash anything from furniture to documents. That might not sound exciting, but boring can be beautiful in investing. Self-storage tends to generate recurring income, can benefit from price rises over time, and often sits on valuable property in good locations.
Despite this advantage, the share price has been hit so far this year by a few different factors. One was the unspectacular trading result in January. Closing occupancy was 76.7%, a decrease of 1% from the same time last year. Next came the news that CEO Jim Gibson is set to retire after 23 years in the role. Even though he’ll stay on until July, it’s still big news.
Finally, the company has been hit by a sharp change in interest rate expectations in the UK. Due to the elevated oil price, there are concerns UK inflation is set to soar later this year. This could force interest rates to rise rapidly. Given that the company has debt on the balance sheet and uses loans to finance new projects, the potential for higher financing costs has negatively impacted things.
The long-term view
I believe the share price weakness could create a long-term opportunity. In the 2025 fiscal year, it delivered store revenue growth and increased rents. It also continues to expand, opening a new Slough store and progressing a development pipeline. For me, that matters because self-storage is one of those rare property segments where demand can come from several angles at once. It covers everything from moving house to downsizing, from business stockholding to online retail. You do not need a booming economy for people to need storage.
Another point is valuation. I need to be careful here, because cheap is a subjective term. But the stock is close to 52-week lows on the back of concerns that I don’t think will last long. For example, if we do get a resolution in the Middle East in the coming months, oil prices should fall. This eases concerns about interest rate hikes. Further, an orderly change of CEO over the summer, along with a clear strategy from the new leader, should be a positive for the stock.
Therefore, I think the stock is currently pricing in a worst-case scenario from recent events. Given my views that this won’t play out, I think the share does look cheap, and I feel investors could consider it right now.
