At the halfway point of the year, the FTSE 250 has fallen by around 2.5%. But even with the overall index fairly steady, there have been some wildly divergent performances among individual stocks.
As an investor, I’m always on the lookout for opportunities in UK stocks. So is there anything of interest in the best and worst of the FTSE 250?
Winner: Aston Martin Lagonda
Since its IPO in 2018, Aston Martin Lagonda (LSE:AML) shares have fallen by 91%. But since the start of 2023, they’re up by over 130%, beating Carnival into a close second.
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The company has had a few tailwinds behind it this year. Chinese car manufacturer Geely and US electric vehicle company Lucid have both announced deals with the UK car business.
Both of these have helped expand Aston Martin’s access to technology, components, and batteries. As a result, the company expects to start producing luxury electric vehicles from 2025.
Moreover, the company’s Formula One team is performing well this year. Chair Lawrence Stroll reports that this is helping drive demand and brand awareness.
With the stock having fallen so far over the last five years, signs of positivity are having a big impact. Meanwhile, the business has high debt, continues to lose money, and is increasing its share count.
Loser: Synthomer
By contrast, Synthomer (LSE:SYNT) has seen its share price fall 51% since the beginning of the year. The story here is one about pandemic trends reversing and the company being caught out somewhat.
One of Synthomer’s key products is nitrile, a chemical used in medical gloves. Demand naturally surged during the pandemic and the company took advantage by making a couple of acquisitions.
Since then, though, things have turned around sharply. The end of pandemic restrictions caused sales to fall sharply as end markets are working through built up surpluses.
On top of that, the company’s debt has spiralled as interest rates have been rising. This puts the business in something of a precarious situation in terms of its balance sheet.
The company has a plan to reduce its debt by restructuring, reorganising, and reducing its operations. Whether that can work remains to be seen, but the market is clearly unimpressed so far.
Stocks to buy?
Despite their mixed fortunes so far in 2023, Aston Martin and Synthomer have some similarities. Both are clearly companies that have seen sharp changes in their fortunes recently.
With Aston Martin, the story is one of optimism after a sustained period of decline. In Synthomer’s case, it’s more a matter of reality setting in after an unusual period of high demand.
Both have significant amounts of debt on their balance sheets, so neither is obviously attractive at the moment. But is either stock worth taking a chance on going forward?
I don’t anticipate buying shares in Aston Martin any time soon. The company has some strong brands, but it looks to me like it’s a long way from offering shareholders a meaningful return.
With Synthomer, medical glove inventories should stabilise in the near future, leading to demand coming back. There might well be an opportunity here, so I’m watching this one carefully.
