I’ve been examining the rise of the FTSE 250 lately. And it reminds me I’ve been overlooking the mid-cap index a little, and possibly focusing too much on the FTSE 100. But with plenty of smaller company news coming our way in September, I have the chance to rectify that.
I’ve been following Dunelm Group (LSE: DNLM) for years, often coming close to buying but never quite hitting the button. It’s nothing fancy, and it just sells bedding and other home stuff. But Dunelm is testimony to the success we can have as investors if we just go for simple things done right.
The Dunelm share price is up around 50% over the past two years, more than twice the performance of the FTSE 250. So it’s coming through the pandemic crisis pretty well. The firm’s fourth-quarter update looked very impressive, especially in terms of comparison with pre-pandemic figures.
I do wonder if there might be a reverse coronavirus effect that could hurt Dunelm. Have all the millions forced to stay at home stocked up on enough homeware products to keep them going for a while now? Full-year results are due on 8 September. And we’ll then only have to wait until 14 October to hear how Q1 is going. Dunelm remains an investment candidate for me.
Back to the tables
The hospitality industry was one of the hardest hit by Covid-19. It’s not surprising, then, that shares in Restaurant Group (LSE: RTN) are down around 18% over the past two years. They’ve recovered a little, but they’re still way down on the FTSE 250’s overall performance.
Then again, considering the way eating out came to a complete halt during the crisis, maybe that dip isn’t so bad after all. It makes me wonder if Restaurant Group might have been undervalued prior to the 2020 crash. Looking back a bit further adds to that thought, as we see a five-year fall of close to 60%.
The company recorded a loss for 2020, so we don’t have any P/E valuation for guidance. But hopefully, first-half results on 15 September should help point us in the right direction. Earlier in the year, the company was reporting customer counts getting back close to pre-Covid levels. If that’s been continuing in the months since, and the full-year outlook appears bright, I think the shares might be cheap. We’re not out of coronavirus danger yet, though.
FTSE 250 finance
Finally, I’m looking at Investec (LSE: INVP). It’s a specialist bank for corporate and private clients, offering investment and asset management among its services.
Investec has been generating cash and paying healthy progressive dividends. But earnings have slowed in the last couple of years, and the 2021 dividend came in at little more than half the 2019 figure. Still, if the bank manages to repeat the same payment this year, it would yield around 4.4% — and analysts are predicting a little more.
What’s the downside? Investec is in banking, and that’s taken a right old walloping following multiple sector crises. The bank has seen its shares suffering just as much as FTSE 100 counterpart Lloyds over the past five years. It looks like it might be risky buy, with the economic outlook so uncertain. But I think Investec might be a decent long-term income investment. I’ll be looking out for its trading update due 23 September.
