With the ongoing stock market weakness, I think it’s a great time to hunt for FTSE 250 stocks to buy. And over recent days and weeks I’ve been loading up my own portfolio.
My guess is most retail investors take a contrarian approach to investing. It’s when the economic clouds are gathering that we tend to find the best long-term bargains.
Resilient retailers
For example, I’m keen on homeware and furniture retail chain Dunelm. On 14 September, the company released a robust-looking full-year results report. Overall sales came in just over 16% higher year on year. And they were 41% up on the 2019 result before the pandemic.
Looking ahead, chief executive Nick Wilkinson acknowledged the current operating and economic environment is “extremely challenging”. However, he said Dunelm emerged from the pandemic as “a bigger, better business”. And the directors believe the company “has the tools in place to do that again.”
Positive outcomes aren’t certain. But the way Dunelm navigated the pandemic encourages me to believe the business can thrive when the current economic headwinds diminish.
A strong sector
Continuing the retail theme, I also like Watches of Switzerland (LSE: WOSG), the UK and US watch and jewellery retailer. In August, the first-quarter trading update declared a, “strong start to the year with waitlists continuing to extend”.
The report covered the 13 weeks to 31 July. And the figures were impressive. Overall year-on-year revenue rose by 25% at constant currency rates. But within that, revenue from the US shot up by 76%. In the first quarter, US sales accounted for almost 39% of the total.
Looking ahead, the directors said they are keeping an eye on the wider macroeconomic environment. But they seem unworried. They believe the strength of the luxury watch category “will continue to support long-term, strong and sustainable sales growth”.
Time will tell whether they are right or not. And it’s worth me bearing in mind that operational challenges can hit any business from time to time. Nevertheless, I’ve aligned my portfolio with the fortunes of this apparently thriving business by buying some of its shares. And my plan is to hold on to them for the long term as the underlying growth story plays out.
Robust cash inflow
I’m also holding a clutch of Britvic (LSE: BVIC) shares. The company operates in the soft drinks sector. And it owns some well-known and popular brands such as Tango, Robinsons, Fruit Shoot, and others.
July’s third-quarter trading update revealed year-on-year sales up by just over 11%. And chief executive Simon Litherland said the outcome reflected “resilient demand”. However, looking ahead, he acknowledged the uncertain economic environment could “continue to weigh on consumer confidence”.
But he is, nevertheless, “confident” in Britvic’s ability to deliver a full-year performance “in line with market expectations”. Meanwhile, City analysts following the firm expect earnings to increase by around 37% in the current year to 30 September. And they have pencilled in a further uplift of about 6% for 2023.
Of course, analysts’ estimates can prove to be wrong. But I’m holding on to my shares in the company because of its long record of steady incoming operating cash flow.