The stock market rally has really taken off over the past few weeks. However, here at the Motley Fool, we’re long-term investors. That means we’re not really interested in what happens to the stock market over a period of weeks or months. We like to evaluate investments based on their potential over several years.
With that in mind, here are my favourite FTSE 250 stocks I’d buy right now. I think each of these businesses has a bright and improving outlook. I reckon they’ll continue to grow no matter what happens in the rest of the market.
Looking past the stock market rally
Investors have been buying stocks recently as the global vaccine rollout has inspired confidence that the global economy will return to growth later this year.
Unfortunately, it’s impossible to say if this’ll be the case at this early stage. The global economy faces many risks at present. Anything could happen over the next few months, which would destabilise the recovery.
Nevertheless, I believe buying high-quality firms is likely to be a successful strategy in the long run. Of course, nothing is ever guaranteed when it comes to investing. But, by focusing on companies with strong balance sheets and competitive advantages, I think I can swing the odds of success in my favour.
Two FTSE 250 businesses, in particular, tick these boxes.
Greggs and Grainger are two very different firms. One is a retail bakery, best known for its sausage rolls, and the other is a large residential landlord. Despite these differences, I think both businesses have strong balance sheets and, more importantly, strong competitive advantages in terms of their brand and scale. This doesn’t mean these stocks are without risks. Greggs’ sales have suffered significantly from rolling lockdowns.
This could continue if the virus remains a threat. Rising wages and ingredient costs may also put pressure on the FTSE 250 business. Meanwhile, Grainger is at risk from regulatory changes and rising interest rates, which could destabilise its business model.
Still, I’d buy both of these businesses to capitalise on the stock market rally and take part in their future growth potential.
FTSE 250 financial services
One way to play the UK economic recovery is to buy financial services stocks. One option is Virgin Money. In my opinion, this challenger bank is one of the most exciting financial businesses in the country. It has the size and scale to compete with larger financial groups, and the Virgin brand is known the world over.
Despite its opportunities, the company does face challenges. Low interest rates have become a persistent challenge for lenders over the past decade. It doesn’t look as if this is going to change anytime soon. What’s more, the lender has announced it will have to write off £726m of loans due to the pandemic. This figure could increase as the true impact of the crisis becomes known.
Despite these risks, I’m incredibly excited about the company’s future. That’s why I’d buy the stock for my portfolio today.
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Rupert Hargreaves 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.