When picking which FTSE 250 stocks to buy for a second wave of the coronavirus, we can look to the past for help. Stock markets crashed as the first wave of the coronavirus took hold. However, not all FTSE 250 stocks fell by the same amount. When the markets recovered, some stocks made huge gains, while others remained flat or continued to decline.
Mark Twain is often credited with saying that “History doesn’t repeat itself, but it does rhyme“. If the second wave of the coronavirus affects the economy anything like the first, then it would be reasonable to expect that stocks will behave in a similar way. There were clear stock market winners and losers in the first wave. I think IG Group Holdings (LSE:IGG), an online trading company, and Hochschild Mining (LSE:HOC), a gold and silver miner, are solid FTSE 250 stock picks for a second wave of the coronavirus.
Trading in the time of coronavirus
Volatile markets, lack of sports betting opportunities, and having more time, were some of the reasons identified by GraniteShares for people flocking to online trading during the first wave of the coronavirus. IG reaped the benefits of this surge in share trading. The company reported £407m in revenues for the six months up to 31 May 2020, compared to £235m a year before.
The second wave of coronavirus could result in a similar boost to IG’s revenues and its stock price. Of course, the boost might not be as pronounced this time around. Sport, and betting on it, has returned. People won’t have quite as much free time in the second wave as they did in the first it seems. Also, market volatility is probably not going to be as dramatic as we saw in March.
IG picked up a lot of new accounts in the first wave. Not all of those will have been closed, so expecting the companies baseline revenues to have increased is not unreasonable. That would bode well for a longer-term investment. In the short-term, a second-wave of the coronavirus could see IG gain additional unexpected revenues with a surge in online trading. That would be positive for this FTSE 250 stock.
Striking FTSE 250 gold
In times of crisis, investors flock to gold. Although the price of the yellow metal dipped as investors sold everything in March this year, it was not hit as hard as oil or stocks. In fact, the first wave of the coronavirus was positive for gold: its price is up 24% since the start of the year, and an all-time high price of $2,063 per troy ounce was hit in August.
Higher gold prices are good for the companies that mine and sell it, like Hochschild Mining. Investors might flock to safe-havens, like gold again if economies stutter in the second wave of the coronavirus. Investors bidding up the gold price would be positive for Hochschild Mining’s share price.
Beyond the coronavirus, there is the possibility of inflation returning, which is positive for the price of gold. Hochschild also mines silver which is used in things like solar cells. Net-zero targets and ‘green recovery’ packages bode well for the long-term price of silver. Higher silver prices are good for shareholders of FTSE 250-listed Hochschild Mining.
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James J. McCombie has no position in any of the shares mentioned. 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.