When looking for investments, many investors focus on the FTSE 100. I think this is a mistake. There are just as many high-quality companies to be found in the FTSE 250. With that in mind, here are two secondary index shares to buy right now based on their long-term potential.
FTSE 250 bargain
The first FTSE 250 mid-cap stock I’d buy for my portfolio is Wizz Air (LSE: WIZZ). Like all airlines, this company has been significantly impacted by the coronavirus pandemic. However, unlike other airlines, Wizz entered the crisis with a robust balance sheet, which has helped it weather the storm.
According to the firm’s fiscal third-quarter trading update, which covered the three months to 31 December, group revenue fell 77% year-on-year. The statutory net loss for the period was €116m but, more importantly, the organisation ended the period with cash of €1.2bn.
I think this gives the business a large cushion to use to ease through the crisis. It also provides funding for the group to launch itself back into the market when the pandemic’s over. Therefore, as a recovery play, I think this is one of the best FTSE 250 shares to buy right now.
However, Wizz isn’t without its risks. The airline industry is notorious for having low-profit margins and volatile profitability. The pandemic is an excellent example of how a company that was flying high can become grounded very quickly.
Still, despite these headwinds and potential challenges, I’d buy the FTSE 250 stock for my portfolio today.
Shares to buy right now
The other company that’s caught my eye recently is the shopping centre owner Hammerson (LSE: HMSO). This is a recovery play, and it’s not for the faint-hearted.
As shopping centre values have plunged and rents have gone uncollected over the past 12 months, commercial property landlords such as Hammerson have struggled to stay alive. I don’t think this is going to change anytime soon. I believe retail property values will remain under pressure, and so will rent collections. This implies Hammerson will have its work cut out in the near term.
The most considerable risk facing the business is falling property values. If the property values continue to decline, the company may have trouble convincing lenders to maintain their support.
But I’d buy the stock for its long-term potential. If the business survives the current crisis, I think the shares could rise substantially from the current level. According to the group’s final results, which were published at the beginning of March, the company’s property portfolio was worth 82p per share at the end of 2020, almost double the current share price.
To put it another way, there’s a chance this FTSE 250 could double investors’ money. This is why I’m willing to overlook the enterprise’s challenges and buy the stock for my portfolio today, based on its return potential.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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.