It’s hard to be confident about buying shares at the moment. But I think the stock market crash has created some great buying opportunities for savvy investors. Today I want to look at three FTSE 250 shares that look cheap to me at the moment.
By buying these today and tucking them away in a Stocks and Shares ISA, you could enjoy big tax-free gains when the market recovers.
This FTSE 250 share is motoring on
One stock I’m keen on in the current climate is Direct Line Insurance Group (LSE: DLG). The group’s main product is motor insurance, but it also sells home and travel insurance.
This business hasn’t been affected too badly by the coronavirus pandemic. Although management expect to pay out an extra £25m in travel claims as a result of the virus, motor insurance claims fell by 70% in April.
Direct Line has cancelled its dividend to preserve cash. This has left the group with a strong balance sheet and provided funding for measures such as partial customer refunds and free breakdown recovery for NHS workers. The company has also kept all staff on full pay and guaranteed all jobs until the autumn.
The Direct Line share price has fallen by more than 15% so far this year. In my view this FTSE 250 share now offers excellent value for long-term investors, trading on about 10x forecast earnings. When dividend payments restart, I’d expect a yield of about 6% from current levels.
Bricks and mortar
Most housebuilders are now restarting construction and some have reopened their sales offices. I’m not sure about the outlook for house prices, but I think FTSE 250 brickmaker Forterra (LSE: FORT) should be relatively safe.
Forterra has a portfolio of popular brick and block brands, including London Brick (Fletton), Red Bank, Thermalite and FormPave. The firm enjoys a good share of the market for new-build homes and repair and maintenance work.
Production of pre-formed concrete has continued throughout the lockdown and one brickmaking kiln was relit at the end of April. Further plants are expected to reopen in May.
Although the outlook is unclear, Forterra went into the crisis with low levels of debt and good profitability — the company generated a return on capital employed of almost 25% in 2019. At around 200p, the shares are nearly back to their 2016 IPO level. I think this FTSE 250 share could perform well from here.
Look abroad to diversify
Although some UK landlords are suffering badly in this crisis, Sirius’s property mix and German focus appear to be delivering better results.
In an update last week, the company said that in April it collected 98.8% of normal rent and service charge payments. New lettings continued through March and April, and enquiries from prospective tenants are said to be at “normal levels”.
Sirius shares are up by more than 50% from the 44p low seen in March. But the shares remain well below pre-crisis levels of around 90p and I think further gains are possible. The dividend has been maintained at normal levels and the shares currently yield around 4.9%. I remain a buyer of this FTSE 250 stock.
Roland Head owns shares of Direct Line Insurance and Sirius Real Estate Ltd. The Motley Fool UK has no position in any of the shares mentioned. 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.