The FTSE 250 index is comprised of mid-cap companies, which often have greater growth potential than their large-cap counterparts. I’ve been looking at three UK stock market winners from the FTSE 250 that have enjoyed share price increases of 97%+ over the past 12 months – more than any FTSE 100 stock.
Let’s explore where they could go next and whether I should buy.
Investec: a dividend stock with a solid yield
Specialist Anglo-African banking group Investec (LSE:INVP) has climbed higher than any other FTSE 250 stock over the past year. The blistering 137% growth in the Investec share price hasn’t dented the stock’s passive income appeal. It still yields a healthy 3.7%.
I also like the geographic diversification away from the UK economy that it offers via significant exposure to emerging markets from its Johannesburg operations. At £14.1bn, over 53% of its net core loans are in Southern Africa.
The FTSE 250 bank should also prove resilient in a rising interest rate environment. These factors make Investec stock a great pick to protect my portfolio from the twin threats of a domestic recession and inflation.
On the other hand, credit rating agencies have expressed concerns about rising government debt in South Africa. This could pose a headwind for Investec. Nevertheless, with adjusted operating profit of £377.6m for 2021 and positive forecasts for 2022, the potential risks wouldn’t dissuade me from buying the shares today.
Indivior: a pharma growth stock
Another star performer in the FTSE 250 index is healthcare company Indivior (LSE:INDV). The drug manufacturer’s share price is up by 132% on a 52-week basis and a stunning 585% over two years.
Indivior specialises in opioid addiction treatments. Demand for its products is rocketing due to the opioid problem currently haunting the US. According to the CDC, overdose deaths involving opioids increased by 138% from 2015 to 2021.
Unsurprisingly, Indivior’s financials have benefited. Net revenue increased from $647m to $791m last year, driven primarily by an 88% uptick in net revenue from its extended release injection, Sublocade.
Indivior stock is not without risks, however, demonstrated by its payment of a $600m settlement in 2020 to resolve liability arising from false marketing of its Suboxone Film treatment in Massachusetts, which at one stage threatened to bankrupt the company.
But with its legal troubles in the rear-view mirror and investment in R&D to expand its pipeline into Cannabis Use Disorder treatments, this pharmaceutical company has a bright future, in my opinion. I’d buy.
Drax Group: a FTSE 250 energy stock
Drax Group (LSE:DRX), the owner and operator of the UK’s largest biomass and coal-fuelled power station, has seen its share price almost double over the past 12 months.
Moreover, the company’s adjusted profits rose from £800m to £843m in 2021. Shareholders also benefit from a handy 18.8p dividend per share.
There are clear concerns about investing in a fossil fuel business. However, Drax Group has taken steps to mitigate this.
It is the world’s first energy company to announce an ambition to become carbon negative by 2030. Indeed, the company currently supplies 12% of the UK’s total renewable energy.
Furthermore, there is increasing pressure to diversify away from Russian oil and gas. In this context, I’d buy shares in this homegrown FTSE 250 energy company today.