Have £1,000 to invest? 2 FTSE 250 stocks I’d buy for a Stocks & Shares ISA

Roland Head explains why Brexit fears have hit this FTSE 250 (INDEXFTSE:MCX) house-builder today.

| 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.

With a controversial Brexit deal hitting the headlines, Thursday might not have been the best day for house-builder Bovis Homes Group (LSE: BVS) to release a trading update.

Shares in the FTSE 250 firm were down by 9% at the time of writing, despite the company confirming expectations for “a record year of profits” in 2018.

Sales are on track

There certainly was some good news. The firm says that it’s sold all of the houses it plans to complete in 2018, at prices that are “in line with our expectations.” Sales per outlet are unchanged from last year, averaging 0.51 per week — so there’s no obvious sign of a slowdown.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Another piece of good news is that the government has extended the Help to Buy scheme by two years to March 2023. Although the scheme will be tapered from March 2021, Bovis says it doesn’t expect any reduction in the use of the scheme in the meantime.

This worries me

In today’s update, the firm said that 15% of reservations during the second half have included a part exchange. The firm says Brexit worries are putting off “discretionary buyers” — presumably this means people who already own a house and don’t need to move.

In my view, this is a concern. Part-exchange deals can tie up a lot of company cash. Only 8% of houses were sold with a part exchange during the first half of the year. The sudden increase in H2 suggests to me that this may have been the only way the firm could hit its sales targets for 2018.

Buy, sell or hold?

As a shareholder, I intend to sit tight for now. I suspect that the business is in reasonable health, if you’re prepared to ignore Brexit jitters.

After Thursday’s sell-off, Bovis stock offers a forecast dividend yield of 10.8%, and trades at just 1.2 times its book value. I can see this as a Brexit recovery buy.

Buy this safe haven?

Mining stocks aren’t generally seen as safe choices. But gold tends to be in demand during times of uncertainty. We saw this on Thursday when shares of Egypt-based gold miner Centamin (LSE: CEY) gained 4%, while domestic stocks were falling.

Centamin has had its share of problems this year. Production guidance has been cut more than once. Indeed, the firm’s recent third-quarter update included news of another cut.

Despite this, the company’s core attractions remain intact. This FTSE 250 firm has fairly low costs, net cash of $292m, and a modest valuation.

An income buy?

Analysts expect this miner’s earnings to rise by 24% to $0.10 per share in 2019, putting the stock on a modest forecast P/E of 12.5. As in previous years, I’d expect these earnings to be closely matched by free cash flow, supporting further dividend growth.

At current levels, Centamin’s cash balance covers around 20% of its share price. This should provide good support for the dividend, which is expected to yield 4.5% this year, and 6% in 2019.

Owning shares in a profitable gold miner can be a good way to diversify your portfolio. I’d rate these shares as a buy at under 100p.

British CEO gobbles up £238,000 of own stock

What company does he run?

And why is he so confident in its long-term potential?

This new report - ‘One Top Growth Stock from The Motley Fool’ - reveals the full details, both risks and opportunities. Some of which you may find frankly, unbelievable.

Though past performance does not guarantee future results, over the past 5 years, it’s seen consistent:

  • Double-digit revenue growth
  • Returns on capital almost 600% the UK average
  • Now, profits are exploding again - up 46% in 1 year!

It’s no wonder insiders are buying this stock hand over fist. Last year, they bought a total £492,000 of shares. And now might be the ideal moment to join them.

So please, don’t miss this report, ‘One Top Growth Stock from The Motley Fool’ Including both risks and opportunities.

Secure your FREE copy now

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.

Roland Head owns shares of Bovis Homes Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Here’s how a 40-year-old could start investing £100 per week to retire early

If a 40-year-old decides to start investing today, here's how they could potentially turn £100 a week into over £500k…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

The FTSE 100 is up 60% in 5 years. Here’s why — and a big lesson!

The flagship FTSE 100 index has put in a very strong performance over five years. There's a specific reason for…

Read more »

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

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

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »