Frantic selling of UK assets over the past week has slammed the FTSE 250. The London Stock Exchange’s second-tier stock index actually closed at two-year lows in recent days.
The FTSE 250 is highly geared towards companies dependent on a strong British economy. So it’s no surprise that the index has tanked amid the government’s plans to push ahead with its controversial ‘mini budget.’
However, I think much of the selling has been driven by panic rather than investing logic. Some top quality UK shares have been heavily sold alongside more vulnerable companies.
This provides an opportunity for eagle-eyed investors to buy quality at knockdown prices. Here are two I’m considering buying for my own portfolio in October.
1. Pets at Home Group
Investing in the retail sector is risky as costs rise and consumer spending power falls. But Pets at Home (LSE: PETS) is a company I think could weather the worst of the crisis.
In recent years the petcare market has been more resilient than the broader retail sector. This is evident in Pets at Home’s latest financials, which showed like-for-like sales up 6% in the three months to June.
Demand for pet food, litter and accessories remains solid at all points of the economic cycle, then. And Pets at Home has another powerful weapon in its arsenal: it operates hundreds of in-store and standalone veterinary practices. The essential service they provide gives the FTSE 250 firm another layer of resilience.
I also think the stock’s impressive market share gains make it a lifeboat in these difficult times. The country’s dominate petcare retailer has grown its total take of the market to 24%, up an impressive 6% in just five years.
Pets at Home’s share price has sunk 44% in 2022. I expect it to recover strongly over the long term as the animalcare market strongly grows. Analysts believe the industry will expand at an annualised rate of 5.2% to be worth $232.1bn by 2030.
2. Urban Logistics REIT
Property stock Urban Logistics REIT (LSE: SHED) has slumped 32% in value this year, meanwhile.
Real estate investment trusts (REITs) have been hit particularly hard since the ‘mini budget.’ Their high valuations have left them vulnerable to heavy share price falls. And more weakness could be possible in the near term.
But I’d use Urban Logistics’ recent share price reversal as an excuse to buy. Its growing portfolio currently comprises more than 100 warehouses and logistics centres across the UK. Its focus on these types of assets could deliver impressive long-term profits as e-commerce steadily expands.
Urban Logistics is already benefitting strongly from a large supply and demand imbalance in its chosen markets. It said in June that is is witnessing “continued upward momentum on rents” due to a shortage of available properties.
I also think the FTSE 250 firm is a safe-haven during this period of high inflation. Property firms like this can effectively pass on their rising operating costs by raising rents for their tenants.
One final thing: recent share price weakness has increased the REIT’s dividend yield to an impressive 6%.
