As the UK economy reopens, I’ve been looking for British stocks to add to my portfolio that could benefit from the economic recovery. Here are three FTSE 250 stocks I’d add to my portfolio today.
FTSE 250 stocks to buy
The first company on my list is challenger bank OSB (LSE: OSB). I think this lending and savings business should see an increase in the demand for its services as the economy reopens. Consumer and business confidence is growing, and this could translate into higher borrowing demand.
City analysts believe the group’s earnings will increase 23% this year and 12% in 2022. These are just forecasts at this stage, but I think they show its potential for the years ahead.
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There’s always going to be a risk that the FTSE 250 business will not meet growth expectations. Another wave of coronavirus or a sudden increase in interest rates may reduce demand for borrowing. This would have a negative impact on growth.
Despite the above risks, I’d buy the stock for my portfolio as an economic recovery play.
Turnaround opportunity
Unlike many other FTSE 250 companies, Serco (LSE: SRP) grew its earnings last year. A string of new government contracts helped the group report a net profit of £134m in 2020, up from £50m in 2019.
After struggling with falling sales and rising losses between 2015 and 2017, that year of growth was precisely what the company needed. It has been able to use these profits to reduce net debt and invest in the business.
With this tailwind, I think the group’s well-positioned to capitalise on the economic recovery in the months and years ahead.
That said, Serco is still haunted by low-profit margins and a mixed reputation among customers, so it might not suit all investors. Indeed, its past troubles show just how quickly fortunes can change. When losses hit £155m in 2015, shares in the company crashed nearly 60%.
Even after taking this risk into account, I’d buy the FTSE 250 stock for my portfolio today.
Jobs recovery
The UK jobs market is starting to recover. I think an excellent way to invest in this recovery is to buy a recruiter such as Hays (LSE: HAS).
Recruiters are incredibly cyclical businesses. They can achieve large profits when the economy is booming. However, they’re usually the first to feel the pain of an economic downturn. This means they may not be suitable for all investors. They can be much more volatile investments than other blue-chip stocks.
The company’s profits plunged last year, falling more than 50% from 2019 levels. However, analysts are expecting a recovery by 2022. Profits could more than double from 2020 levels by 2022, according to current forecasts.
As such, it could be some time before investors are rewarded for their patience. But, as a way to invest in the global jobs recovery, I’d buy Hays for my portfolio of FTSE 250 stocks.
