The FTSE 250 has outstripped the FTSE 100 in the recovery stakes as we emerge from the pandemic crisis. But which are the best stocks to buy to capitalise on that? Here are three that all share one characteristic I think could be worth pursuing.
First is Primary Health Properties (LSE: PHP), which announced its latest acquisition on Tuesday. The company is to buy Sarak Group Limited, along with its Crwys Medical Centre in Cathays, Cardiff. The deal is worth £4.5m, of which £1m will be settled in new shares.
Why does this attract me? I think there are plenty of companies and assets out there that are valued too cheaply right now. PHP’s chief executive Harry Hyman says the company has “a strong pipeline of opportunities in the UK and Ireland and are well positioned to continue to grow our portfolio.”
The acquisition only makes a modest addition to Primary Health’s overall portfolio of 516 properties, but it sounds like it could be followed by plenty more.
My main caution is over the current price. PHP shares are on a lofty growth valuation with a trailing P/E of 26. But I’m going to look more closely at this one.
A substitute for cows
My next FTSE 250 pick is Hilton Food Group (LSE: HFG). Hilton has agreed “to acquire the remaining 50% shareholding of leading vegan and vegetarian manufacturer, Dalco Food.“
CEO Philip Heffer said the buyout “will further strengthen Hilton’s position within the vegan and vegetarian market, at a time when our customers are increasingly seeking out innovative, high quality vegetarian products at scale.”
Is Hilton’s expansion into this area of the food business a good one? I think it could be, considering the growing movement away from meat products. We only need to look at where the Beyond Meat share price has gone in the US to get a feel for the potential of this market.
We’re looking at a more modest growth valuation here, but there’s also been a fair bit of volatility. Hilton shares have gone nowhere overall since I looked a year ago. And that up and down trend could continue. I’m still tempted, mind.
FTSE 250 property investment
The third acquisition that caught my eye today comes from LondonMetric Property (LSE: LMP). With the retail business so badly hammered by the pandemic lockdown, there must be plenty of commercial properties available at good prices now, right? LondonMetric seems to think so.
The FTSE 250 real estate investment trust has just announced the acquisition of three urban logistics warehouses for a total of £35.4m. One is in Worthing, one in Uckfield, and the third in Exeter. Chief executive Andrew Jones says the three are “in good locations and let on long leases with certainty of income growth.”
What’s the risk? Well, the commercial real estate business faces a very uncertain future. And I think we could be in for a period of stagnation in occupancy and rental incomes. But I can’t help feeling that could make this a good time to buy for those happy with the risk. And I’m a big fan of investment trusts of all varieties.