3 FTSE 250 growth stocks I’d buy right now

Roland Head flags up three stocks he’d buy from the fast-growing FTSE 250 (INDEXFTSE: MCX) index.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Where should we look for growth right now? In my view the opportunity lies in finding individual companies that are performing well, rather than targeting whole sectors.

The three shares I’ve selected for this piece are all members of the FTSE 250, which has risen by 30% over the last five years. That’s a respectable performance, but my stocks have all beaten this market since 2015.

A gaming winner?

As a general rule, I think online gambling stocks are a better bet than high street bookmakers. But one company with land-based operations that I rate highly is Rank Group (LSE: RNK), which owns Grosvenor Casinos and Mecca Bingo.

This week’s half-year results revealed that net gaming revenue from these venues rose by 10% to £312.3m during the second half of 2019. Although the company does have some online operations, these are still playing catch-up – revenue rose by 14% to £65.2m during the same period.

The good news for shareholders is that operating profit rose by 70% to £55.1m, on an underlying basis. This is down to an effect known as ‘operational leverage’. In short, if sales rise when costs are mostly fixed, then profits will rise much more quickly than sales.

Rank shares have risen by 77% since the end of August, but rising profits mean they still look reasonably priced to me, on 12 times 2020–21 forecast earnings. I remain a buyer.

An emerging market opportunity

Chief executive Mark Coombs owns 37% of emerging market asset manager Ashmore Group (LSE: ASHM). His leadership of the company he founded is one reason why I’m a big fan of this stock.

The other reason I like Ashmore is that Coombs’ track record suggest he and his team have a good grasp of the investment opportunities available in emerging market debt.

This specialist area isn’t the kind of investment where you can easily dabble with small amounts. You need a big stack of cash and a lot of specialist knowledge to be in with a chance of making money.

Ashmore ticks both of these boxes. Assets under management rose by 24% to $91.8bn last year, during which the company generated a return on equity of more than 20%.

The shares look fully priced on 18 times forecast earnings. But there’s a 3.3% dividend yield and I think this business has the potential to keep growing. I’d be happy to buy Ashmore for a long-term portfolio.

This double bagger could keep going

Catering firm SSP Group (LSE: SSPG) operates branded food outlets in travel locations, such as airports and railway stations. Some of these are operated on behalf of firms like Burger King, Jamie Oliver, and Starbucks. Others belong to SSP, such as Upper Crust and Ritazza.

SSP’s operations span 2,800 units in 35 countries. The company has been in business for 50 years but only floated on the London market in 2014. The shares have risen by 165% since then, but in my view the business still only looks slightly expensive.

As far as I can see, this is an excellent business operationally, providing good service in many locations. The main risk I can see is that a global recession could cause sales to slow in a number of major markets. So far there’s no sign of this.

The stock is pricey on 21 times forecast earnings, but I believe long-term growth prospects remain strong and I would remain a buyer.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head owns shares of Ashmore Group. The Motley Fool UK owns shares of SSP Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »