The possibility of a full-blown trade war erupting between the US and seemingly every other country has made for a nasty start to the month for markets. But since I always love to take advantage of short-term jitters, I’m giving a lot of thought to buying a few FTSE 250 stocks if the selling pressure continues.
One example is an old favourite.
Lucky escape
It’s rare for me to sell a winning investment. That said, I jettisoned my position in Greggs (LSE: GRG) last autumn. At the time, the valuation just felt a little too rich for my liking.
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As it happened, this turned out to be one of my better moves. The stock is down roughly a third since then.
This huge drop isn’t completely unwarranted. Sales growth began to slow in Q3. Bad weather was blamed, as was economic uncertainty in the run-up to Chancellor Rachel Reeves’s first Budget. Of course, we’ve since learned that UK businesses — including Greggs — face a big increase in National Insurance Contributions from April.
A less-than-tasty trading update in January (and signs that 2025 will be challenging) compounded investors’ pain.
On sale?
On a more positive note, this has left the valuation looking much more palatable.
Before markets opened today (3 February), the company was trading at a forecast price-to-earnings (P/E) ratio of 15. That’s roughly the average among UK stocks. And Greggs is far from an average business, in my view. Margins and returns on capital have long been stellar. The brand loyalty it has among office workers and shoppers can’t be overlooked as well.
This might explain why analysts at HSBC are taking a contrarian view. They have a target price of 2,500p, believing that ‘peak Greggs’ is still some way off.
The question is when the stock will stop falling. I’m tempted to wait until full-year numbers arrive in March before making a move.
But my ‘trigger finger’ is already twitching.
Risky bet
Another FTSE 250 member I’m considering is Allianz Technology Trust (LSE: ATT). Its shares are currently heavily down on the day, no doubt in anticipation of volatility in the US market.
As its name would suggest, the trust is super-concentrated in many of the US tech titans. At the end of last year, over 10% of assets were invested in chip maker Nvidia, for example. A passive fund tracking global equities would have around half this exposure.
The Technology Trust’s portfolio is stuffed with quality stocks. But being overly-invested any sector requires requires careful consideration. What if the ‘story’ changes, even if only temporarily? DeepSeek, anyone?
Long-term winner
Naturally, judging the Allianz trust on anything other than a reasonably long timeline would be incredibly harsh. The shares are still up 124% in the last five years. By contrast, the FTSE 250 index is down almost 5% over the same time period.
Can this momentum continue for decades to come, despite the odd wobble? I think it can. For better or worse, I struggle to fathom how technology won’t continue to be a key theme for investors going forward, even if the the ‘main players’ change.
Owning a managed fund means higher fees. But this trust’s outperformance to date suggests it’s worth the cost.
