Stock market rally: I’d buy these FTSE 250 stocks

These FTSE 250 companies could prove to be a great way to invest in the stock market rally and achieve long-term profits.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »