As the outlook for the UK economy starts to improve, I’ve been looking for FTSE 250 stocks to add to my portfolio. Here are five companies I’d buy today.
FTSE 250 stocks to buy
I think a couple of key themes will dominate the economy over the next few years. Infrastructure spending is set to boom as governments try and spend their way back to growth after the pandemic. And it seems to me as if spending on connectivity services, such as 5G, will continue to expand as the world becomes more connected.
To that end, I’d buy FTSE 250 stocks, Airtel Africa and Balfour Beatty.
The former is one of the largest mobile network providers in Africa. By acquiring this stock for my portfolio, I’ll be able to gain exposure not only to the growth of the telecoms network across the continent but also to Africa’s economic expansion. These twin tailwinds could translate into healthy earnings growth for the business as we advance.
Meanwhile, I think Balfour will be able to profit from growing infrastructure spending here in the UK. As one of the country’s largest construction businesses, Balfour should benefit from the government’s commitment to spend £100bn on infrastructure over the next few years.
As well as these opportunities, these businesses also face some significant risks. Construction is a notoriously low margin business. Therefore, while Balfour might win contracts, there’s no guarantee this will translate into profits.
At the same time, Africa can be a tricky place for companies to operate. This suggests Airtel may be a riskier investment than some of its developed market peers, such as Vodafone. Even after taking these risks into account, I’d still buy these FTSE 250 stocks for my portfolio.
As well as the growth stocks outlined above, I’d also buy recovery stocks Carnival, Close Brothers and C&C. These three FTSE 250 stocks operate in entirely different sectors, but I think they’ll all profit from the economic recovery.
Carnival’s sales have vanished in the pandemic but, as the global vaccination programme gathers pace, the business is reporting increasing demand for its cruises. I think this suggests the company may see a strong recovery in the years ahead.
Yet lenders such as Close Brothers should see rising demand for their services if consumer confidence picks up. As the economy starts to reopen, there are already signs that this is happening.
Finally, drinks maker C&C should profit as drinkers return to pubs over the summer. There are already signs that drink sales in the pubs already open are exceeding 2019 levels. That’s excellent news for C&C and its peers.
However, all of these FTSE 250 businesses are exposed to a considerable risk. Another wave of coronavirus could setback reopening plans around the world. This would inflict yet more pain on these companies.
They’ve been able to survive the past year, but there’s no guarantee they’ll survive another wave. What’s more, if the recovery doesn’t live up to expectations, shares in Carnival, Close Brothers and C&C may languish for years.
Despite these potential risks, I’d buy all three FTSE 250 stocks for my portfolio today.
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.