While equities have experienced some volatility over the past few days, I’m still optimistic that a stock market recover is in the works. As the UK economy reopens over the next few months, I think many FTSE 250 companies will see a significant improvement in trading.
Of course, this is only a projection. There’s no guarantee any company will see an improvement in sales or profits this year. The opposite could happen if the economic situation does not improve.
I’m well aware of this uncertainty, but nevertheless, here are three FTSE 250 growth shares I would buy ahead of a potential stock market recovery.
Stock market recovery
One FTSE 250 stock I would buy to play the stock market recovery is Pagegroup (LSE: PAGE). The pandemic has floored the recruitment consultancy. Its earnings are predicted to fall around 90% for 2020.
However, recent figures suggest the UK employment market is already starting to stabilise. As the economy begins to open up again, demand for employees could accelerate. That would be good news for companies like Pagegroup. Analysts are already forecasting a substantial increase in earnings for 2021.
This business isn’t without its risks. The company’s earnings are highly sensitive to the economic cycle. That means if the recovery stalls, Pagegroup’s recovery will as well. This corporation could generate high returns, but there is also a risk of high losses as well.
FTSE 250 growth
Wizz Air Holdings (LSE: WIZZ) is another high-risk, high reward opportunity. This airline entered the crisis with a strong balance sheet and market position. As a result, it has been able to survive where others have failed.
This has put Wizz in pole position to capitalise on the economic recovery over the next few years. Improving investor sentiment due to the stock market rally should also help the stock.
That said, the airline business is notoriously difficult. Just because Wizz has been able to navigate this crisis does not mean that it will be able to navigate the next. Further, coming out of the pandemic, airlines could engage in a price war, which would push down profits across the industry. This would impact shareholder returns at Wizz and other airlines.
I would buy the FTSE 250 constituent to play the stock market recovery, but it may not be suitable for all investors.
Construction enterprise
Finally, I would buy FTSE 250 construction business Polypipe (LSE: PLP).
The UK housing market is booming, and the combination of low-interest rates, high demand, and the stamp duty holiday, which may be extended, suggests this trend will continue.
The government is also planning to unleash billions of pounds of infrastructure spending over the next few years, helping stimulate the construction sector.
This may be good news for businesses like Polypipe. A manufacturer of plastic piping systems for the residential, commercial, civil and infrastructure sectors, the company may benefit from rising demand if construction sector spending increases.
Polypipe may see high demand for its products and services over the next few years, but it could also face challenges. Like the airline industry, construction is a notoriously challenging industry to navigate. Commodity costs have also been increasing recently, which may impact the manufacturer pushing down its profit margins.
