The stock market crash has seen the FTSE 250 fall by 35%. It’s been painful for investors and many FTSE 250 shares are trading at all-time lows.
However, I think it’s worth remembering the UK’s second index has beaten the FTSE 100 by 45% over the last 10 years. I’m pretty sure that last month’s crash has created some bargain opportunities for long-term investors. Today, I want to share three of my top tips with you.
Focus on the future
Emerging markets often have great growth opportunities, but there can be pitfalls too. In my experience, it’s hard for private investors to do well in these remote markets. Although I’m a dedicated DIY investor, I think this is an area best left to the experts.
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One of my preferred companies in this sector is emerging markets debt specialist Ashmore Group (LSE: ASHM). This FTSE 250 share has fallen by 40% so far this year. But I think this sell-off is likely to be a great long-term buying opportunity.
Ashmore is run by founder Mark Coombs, who still owns about 35% of the business. So his interests are well aligned with private investors. The group has an outstanding record of profitability and generated an operating profit margin of 64% last year.
The group has plenty of cash and has never cut its dividend since listing in 2006. At current levels, the shares offer a forecast yield of 5.5%. I don’t expect Coombs to cut the dividend. I also believe the shares — on just 11 times forecast earnings — are very cheap at this level.
I’d buy this FTSE 250 share for income
My next pick is Telecom Plus (LSE: TEP). This group sells electricity, gas, mobile and broadband to customers under the Utility Warehouse banner. But, unlike regular utilities, Telecom Plus isn’t an energy supplier, but a reseller.
This business model has proved pretty successful over the years. And although new customer recruitment — which is usually done by word-of-mouth — is likely to slow during as a result of the coronavirus pandemic, I think the firm’s profits (and dividend) should be fairly stable.
The market seems to agree — the Telecom Plus share price has only fallen by 17% this year, compared to a FTSE 250 fall of 34%.
I see this share as a good long-term buy for income. Telecom Plus generates plenty of cash and I think the current 4.5% yield will be safe. I’d be a buyer at this level.
This FTSE 250 stock could double
My last pick might seem risky, but hear me out. Kingfisher (LSE: KGF) owns B&Q and similar chains in France and Eastern Europe. The group also owns Screwfix, which has grown very strongly over the last few years.
Unlike some retailers, Kingfisher has come into this crisis with almost no debt and strong free cash flow. This has left the group in a much better state to survive the coronavirus pandemic than some other retailers.
A second attraction is that, so far, the group’s stores have been classified as essential businesses and allowed to remain open. So, although trading is likely to be down, Kingfisher is still generating revenue.
New chief executive Thierry Garnier is determined to return the business to growth. I think he’ll succeed. And with this FTSE 250 share trading on just 7 times forecast earnings, I think there’s plenty of upside potential for patient buyers.
