Have these FTSE 250 stocks been massively oversold?

Royston Wild reveals two FTSE 250 (INDEXFTSE: MCX) stocks that could be considered savvy contrarian picks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It comes as little surprise that precious metal producers like Centamin (LSE: CEY) have seen their share prices surrender vast chunks in recent weeks, the result of collapsing gold and silver values.

Centamin’s share price has shed 21% of its value since hitting record peaks of 180p per share in mid-August. Some retracement can be expected following the gold digger’s stunning ascent — Centamin still remains more than 140% up from levels seen at the start of the year

But the mining giant’s recent reversal coincides with investors increasingly ploughing their cash into the FTSE 100 and away from the ‘safe-haven commodities’ suite, a factor that has driven gold values sharply lower again.

Indeed, the yellow metal was last at $1,250 per ounce, a significant discount from above $1,300 at the beginning of October and some way off this summer’s peaks of $1,370. This was the most expensive level since early 2014.

However, I believe there’s enough mud in the macroeconomic waters to prompt a fresh surge into the precious metals complex, and provide Centamin’s share price with fresh fuel.

Indeed, gold exchange-traded fund (ETF) holdings rose to 2,335.6 tonnes in September, according to World Gold Council data, up another 38.1 tonnes from August. And gold demand is likely to keep bubbling as Brexit bothers continue and wider concerns over slowing global trade persist.

Recent share price weakness leaves Centamin dealing on a forward P/E rating of 8.7 times, some way below the London blue-chip average of 15 times. I reckon this gives plenty of room for a significant share price upgrade should — as I expect — global economic indicators continue to toil.

Cut-price colossus

Budget retailer B&M European Retail (LSE: BME) is another FTSE 250 (INDEXFTSE: MCX) stock caught in a severe sell-off in recent weeks. The Liverpool company has seen its share value collapse 18% since the eve of Britain’s European referendum.

Of course the painful EU withdrawal process could play havoc with much of the high street as shoppers tighten their pursestrings. But I believe this could play into the hands of ‘discounters’ like B&M as their cut-price goods come increasingly into fashion.

The spat between Unilever and Tesco last week due to sterling pressures could present similar troubles for B&M’s margins. But the business has proved effective at tackling these issues in prior years. And, as Credit Suisse notes, many of B&M’s single-price rivals like Poundland will have to undergo massive transformation to switch to a multi-price model.

Meanwhile, B&M’s new store rollouts are proving extremely successful, and further progress here should light a fire under the bottom line — the retailer plans to unveil 50 new stores in the UK in the year to March 2017, and another 19 in Germany.

Recent share price weakness leaves B&M delaing on a forward P/E multiple of 16.7 times. I believe this is very reasonable value given the company’s compelling  growth case.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »