While the FTSE 100 gets most of the attention, investors shouldn’t overlook FTSE 250 stocks, with the index hitting an all-time high of 22,204.89 last week.
Over the last 12 months, FTSE 250 stocks are up by 38%, double the growth of the FTSE 100. Danni Hewson, financial analyst at AJ Bell, says it has benefited from the UK’s “supercharged vaccine rollout.” Some have benefited more than others.
Best performing FTSE 250 stock this year is GameSys Group, up a thumping 70.1%. This sizzling performance has been driven by takeover talk. US firm Bally’s is sizing up the business for £2bn, equivalent to £18.50 a share.
The top performing index
The stock jumped almost 20% on the news and now trades at £19.24, as investors gamble on a rival bid pushing the price higher. Given the thin gains if that happens and large potential drop if the bid falls, I’m steering clear.
Next best-performing FTSE 250 stock is Tullow Oil, up a whopping 68.9%. I’m glad to see it powering upwards after a long dismal run. A decade ago, Tullow traded at around 1,250p a share. Despite the rebound, it still trades below 50p today.
Tullow was hammered by last year’s plunging oil price, with profits down 47% to $403m. It’s now benefiting from the rebound. Sentiment was also lifted by a new $1.7bn facility negotiated in February, while selling its Equatorial Guinea and Dussafu assets to Panoro Energy has trimmed debt. It has embarked on a multi-year, multi-well-drilling programme in Ghana.
While I’m glad to see Tullow bounce back, the oil exploration game is too risky for me. Especially since the oil price could be becalmed from here, with Morgan Stanley predicting it’ll be stuck in the $60 range all summer.
Here’s an even more dramatic recovery play. Cineworld Group is the third best-performing stock on the FTSE 250, up 64.7%, AJ Bell figures show. Measured over six months, it’s up 248%. Investors who chanced all on the bombed-out leisure and entertainment sector have been amply rewarded. Sadly, I decided it was too risky for me and just have to accept that I missed the boat on this one. Cineworld’s future is still far from secure.
I’d consider these two FTSE 250 stocks
Facilities management firm Mitie Group is fourth best performer, up 59.3%. It started the year well, reporting a 6.7% rise in Q3 organic revenues to £573.9m, plus a slew of new contract wins. Management fuelled investor optimism by predicting the second half of the year will be better than the first.
Mitie dropped last year’s dividend as aviation and financial services customers struggled, and office occupancy fell. That may reverse, but slowly. One to watch if the recovery beds in.
In fifth place, financial services company Just Group is up 50.4%. I tipped this stock last year so I was glad to see full-year total revenues jump 21% to £4.64bn. Just had to build its capital coverage to meet stricter regulatory demands on equity release mortgages, and is now enjoying the fruits of its labours.
Financial services is a competitive sector. The Just share price may be due a breather after recent success. It remains one of my favourite FTSE 250 stocks though.
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Harvey Jones 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.