I firmly believe that some of the London market’s best investments are currently located in the FTSE 250. However, some companies appear to have much better prospects than others.
FTSE 250 stock to avoid
The travel and leisure sector has had a horrendous time of it over the past 12 months. The pandemic has a virtually shut the industry, which has caused companies such as TUI Travel (LSE: TUI) a significant headache.
Unfortunately, even before the pandemic, many of these companies struggled with weak balance sheets and highly seasonal business models. Thomas Cook, which was once the most recognisable UK travel brand, even failed before the pandemic started.
TUI has been able to negotiate several government bailouts, but I believe the business is still fragile even after these substantial cash infusions. As such, while the stock may look cheap compared to its trading history, I’d avoid the business entirely.
Just because the company looks cheap, doesn’t mean it’ll be a good investment. Tui’s weak balance sheet may continue to cause the organisation problems, and it may be years before activity in the travel sector recovers to 2019 levels. That suggests to me this FTSE 250 travel group may be a poor investment for the years ahead.
Growth star
I think Tui will continue to struggle. However, at the other end of the spectrum, I’m highly excited about the outlook for FTSE 250 information company Ascential (LSE: ASCL).
Unlike the travel group, this business isn’t a household name. But that doesn’t make it any less important. Ascential helps customers and professionals connect using digital means. It also provides business intelligence insights with products such as data management, e-commerce, and analytics products. To put it another way, the organisation is a one-stop-shop for companies that want to improve their digital performance.
As the world becomes more and more reliant on technology, and companies increasingly rely on technological solutions to improve efficiency and outputs, I believe consultants like Ascential, which specialise in technology, will prosper.
That’s why I think this could be one of the best FTSE 250 shares to buy right now. City analysts believe Ascential’s profits will jump to £51m in 2021, up from £20m in 2019. This could be just the start of a multi-year growth spurt if my projections about the digital economy are correct.
Moreover, the group has leaned heavily on acquisitions to increase its presence in new markets. In its latest deals, the firm acquired China-based X Target and Brazil-based Intellibrand in December. I expect more of these deals to emerge as the organisation builds on its already large global footprint.
All in all, I think this could be one of the best companies in the FTSE 250 to gain exposure to the rapidly growing digital economy.
