The Motley Fool

Local lockdowns: are these FTSE 250 pub stocks risky investments?

Image source: Getty Images

The hospitality industry has had a tough year. March’s market crash saw the share prices of the FTSE 250 pub companies J D Wetherspoon (LSE: JDW), Marston’s (LSE: MARS) and Mitchells & Butlers (LSE: MAB) plummet, and all three have barely started to recover.

Britons were excited to return to pubs from July, but local lockdowns, Boris Johnson’s suggestion that the UK is “now seeing a second wave” of Covid-19 and the introduction of a 10pm curfew suggest that a pint might soon be out of the question once again.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Let’s see if these three FTSE 250 companies are worth the risk.

J D Wetherspoon

J D Wetherspoon’s 52-week low of 559.5p per share came just before each of its 873 sites closed in March. According to its website, 858 of those have currently reopened, but its share price is still well below 1,000p. In September 2019, 1,500p was average.

Despite this, the Eat Out To Help Out scheme and increased outdoor seating areas have helped the FTSE 250 company get back on its feet, while its current ‘Stay Out To Help Out’ initiative is providing a leg up against competitors. 

On top of that, it seems confident in its own long-term growth. Two new J D Wetherspoon pubs have opened since July, the reduction of VAT on food sales in pubs and restaurants to 5% has allowed further price reductions, and various waivers and loans have given increased financial security.

At the moment, J D Wetherspoon seems like it could be the safest FTSE 250 pub stock, and Roland Head agrees that J D Wetherspoon is likely to remain a good long-term investment.  

Marston’s and Mitchells & Butlers

Both Marston’s and Mitchells & Butlers tell a different story. They might both be FTSE 250 companies trading at much lower share prices than this time last year, but I have my doubts.

While Marston’s sale of 168 pubs and its 40% share of a new venture alongside Carlsberg UK (Carlsberg Marston’s Brewing Company) looks good on paper, both are attempts to reduce its rather crippling debt, which sits above £1bn and isn’t covered by cash flow.

Mitchells & Butlers started the year with a 2.6% increase in first quarter LFL sales, but Covid-19 hit the company hard. Like Marston’s, it is in a lot of debt and its earnings aren’t high enough to cover its interest.

While it doesn’t seem like either company will come crashing out of the FTSE 250 or go out of business, they both seem to have less growth potential yet more risk of being hit hard by Covid restrictions than J D Wetherspoon.

The takeaway pint

The 10pm curfew took a similar chunk out of the share price of all three companies, and they’ve all started to recover at similar rates. As such, they remain on equal (in this regard, at least) footing, and so my views haven’t changed.  

While Covid restrictions loom large, all three come with risk.

But different investors have different appetites for risk. While Matthew Dumigan believes that Marston’s is a good post-pandemic buy, I’d still buy J D Wetherspoon. A market crash could allow an exceptionally cheap price to turn into post-lockdown profit, but even without that, it seems like J D Wetherspoon is one of the safest long-term FTSE 250 investments.  

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Dan Peeke has no position in any of the shares mentioned.  The Motley Fool UK has recommended Marston's. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.