Up 20% in a month, this FTSE 250 share is bouncing back hard!

Since crashing to a lifetime low in July, this FTSE 250 share has skyrocketed. It’s also up more than a fifth in a month, thanks to improved results.

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Since Friday, 27 October, sentiment in global stock markets has reversed sharply. From then, the US S&P 500 index has leapt by 10.7%, putting November on track to be the best month for stocks since July 2022. Alas, the UK’s FTSE 100 and FTSE 250 indexes are trailing their US counterparts.

The Footsie and FTSE 250 creep up

Since 27 October, the UK’s blue-chip index has gained just 2.6%. Once again, shares in Britain’s largest listed businesses continue to underperform global rivals.

Meanwhile, the mid-cap index has jumped by 9.9%, putting it just 0.8 percentage points behind the S&P 500 in this period. Of course, some company shares have done even better.

Should you invest £1,000 in Direct Line right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Direct Line made the list?

See the 6 stocks

For instance, FTSE 250 share Direct Line Insurance Group (LSE: DLG), has produced an impressive performance lately.

Direct Line runs aground

For the record, my wife and I bought this stock for our family portfolio in July 2022 at 200.3p a share. By 6 January 2023, the share price had jumped to 235.3p, delivering a decent paper profit on our purchase.

The stock then crashed spectacularly, losing almost a quarter of its value on 11 January. This followed an awful trading update in which the firm cancelled the dividend. On 27 January, CEO Penny James announced that she was stepping down.

At its 52-week low, this FTSE 250 stock slumped to a rock-bottom price of 132.11p on 7 July. However, the shares have rebounded strongly and currently stand at 188.55p, valuing this business at £2.5bn.

Here’s how the stock has performed over six different periods:

Five days+5.8%
One month+20.4%
Six months+12.5%
2023 to date-14.9%
One year-15.4%
Five years-42.5%

In the past month, this stock has surged by more than a fifth, easily beating the FTSE 250 and other market indexes. However, it has lost over 15% of its value in one year. Even worse, it has crashed by almost 43% over five years.

What’s changed?

Having bought Direct Line shares for their bumper dividend, I was sorely tempted to ditch this stock at multiple times during 2023. I’m glad I didn’t, as the share price is now trading at its highest levels since the 11 January crash.

This recent recovery has been driven by three key events. First, the shares were boosted by a positive half-year report, released on 7 September.

Second, at the same time, the group announced the sale of a non-core division for £520m in cash, plus up to £30m extra subject to earn-out provisions. Third, a positive Q3 trading update on 7 November also helped to support the stock’s comeback.

Any lessons for me?

As an older investor (I’m 55), I am much less reactive and headstrong than I once was. Sometimes, stock markets reward investors who don’t rush to sell, but take time to consider their position. On this occasion, this ‘wait and see’ patient approach worked, although it may not next time.

Finally, I don’t intend to buy any more of this FTSE 250 stock, plus I don’t intend to sell my Direct Line stake. Indeed, I will probably sit tight until the dividend is restored — fingers crossed!

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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.

Cliff D’Arcy has an economic interest in Direct Line Insurance Group shares. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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