The Motley Fool

Stock market rally! Here are 2 FTSE 250 shares I’ve been buying for the next bull run

Image source: Getty Images.

With promising coronavirus vaccines continuing to hit the headlines, stock markets have been rallying strongly in November. Today, I’m covering two FTSE 250 shares I’ve been adding as part of my own buying spree.

FTSE 250 contrarian play

Like most in the market, online price comparison site Moneysupermarket.com (LSE: MONY) hasn’t had the easiest 2020 so far. In its most recent update, the FTSE 250 member revealed a 16% decline in revenue over Q3, due to travel restrictions and banks pulling products from the market.

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...

But let’s not get distracted by a temporary period of troublesome trading — Moneysupermarket still ticks many boxes on a quality-focused investing checklist:

  • Sky-high returns on capital employed? Check.
  • Huge operating margins? Check.
  • A strong brand? Check.
  • Net cash on the balance sheet? Check (£5m).
  • Still paying dividends? Check.

In addition to all this, Moneysupermarket should benefit from a rush for travel insurance when people start flying again. Even those that aren’t so inclined to travel will still be wanting to use the site to save money on monthly bills. 

Could I make greater gains buying battered travel and leisure stocks? Quite possibly. The issue with this strategy, however, is that many of these simply aren’t very good businesses when it comes to making money for their shareholders. And, as Warren Buffett would surely attest, it’s the quality of a business that really matters in the long run.

Assuming things do get back to normal next year, Moneysupermarket shares trade at 17 times forecast FY21 earnings. That still looks great value to me, considering the five-year average PE of 22.

Down but not out

A second battered FTSE 250 stock I’ve bought more of in November is high-performance polymer supplier Victrex (LSE: VCT). Like Moneysupermarket, recent trading hasn’t been great, due to the chaos caused by the coronavirus.

Last month’s update spoke of end markets remaining “subdued” after sales volume and revenue fell 26% (to 695 tonnes) and 27% (to £55,7m) respectively in Q4. Job cuts will help mitigate the company’s high fixed costs, but it’s hardly the sort of news to make investors bullish. There’s also Brexit to ponder.

As negative as this sounds, Victrex remains a classy operator. Let’s look at some of the attractions: 

  • High returns on capital employed? Check.
  • High operating margins? Check.
  • Operating in multiple industries. Check.
  • A market leader in what it does? Check.
  • Lots of net cash on the balance sheet? Check (£67.4m).
  • Dividends? Check (a dividend for FY2020 is expected).
  • Growth opportunities? Check.

Thanks to its exposure to the aerospace industry, I also think Victrex is another good ‘picks and shovels’ play on the recovery in travel. Tapping into the growing trend for green investments, the company’s lightweight thermoplastics help make aircraft more fuel-efficient and environmentally friendly.

Play the long game

Naturally, big gains won’t come overnight. As an investor however, it pays to distinguish between short-term hurdles and game-changing problems. The coronavirus, I submit, is the former.

A valuation of 24 times forecast earnings does look dear, given current headwinds, but this should reduce as profits recover over the next couple of years. Just like star UK fund manager Terry Smith, I think price is of secondary importance compared to buying a great company with solid growth prospects. This belief certainly hasn’t adversely affected the performance of his Fundsmith Equity Fund.

Victrex’s eventual rebound should be worth the wait.  

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!

Paul Summers owns shares of Moneysupermarket.com and Victrex. The Motley Fool UK has recommended Moneysupermarket.com and Victrex. 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.