My top FTSE 250 buys for an instant starter portfolio
While the FTSE 250 may be more volatile than its big brother the FTSE 100, it has historically offered higher returns. For example, in the last five years it has gained 46% versus 15% for the FTSE 100.
As such, many investors may be considering a switch of at least part of their portfolios to the mid-cap index. This could prove to be a sound move - especially for investors who are able to buy and hold over a multi-year time period.
With that in mind, here are two FTSE 250 stocks which seem to offer a mix of income, growth and value potential. They could deliver impressive total returns in the long run.
Thursday saw insurance company Esure(LSE: ESUR) releasing a first quarter trading update. The business was able to increase gross written premiums by 18% versus the same period of the prior year. There was strong growth in Motor, with gross written premiums rising by 21.1%. And while the Home segment suffered from challenging weather conditions, after adjusting for them, the group remains on track to deliver a similar combined operating ratio to 2017.
Looking ahead, Esure is forecast to post a rise in its bottom line of 11% in each of the next two financial years. Despite an impressive growth outlook, it trades on a price-to-earnings growth (PEG) ratio of just 1, which suggests that it could be undervalued at the present time.
In addition to a positive growth outlook, the company also offers a sound income future. It has a dividend yield of 6.5% at the present time. With dividends being covered around 1.5 times by profit, there seems to be scope for them to rise at a brisk pace. This mix of income, growth and value potential could mark Esure out as a strong investment opportunity within the FTSE 250.
Also offering a favourable risk/reward ratio at the present time is housebuilder Bovis(LSE: BVS). The company has experienced a tough period, with customer redress costing it both financially and in terms of its reputation. However, under a new CEO and with a refreshed strategy, the company appears to be making a solid comeback which could catalyse its share price performance.
For example, in the next two financial years it is expected to report a rise in its bottom line of 40% and 14%. These figures suggest that at a time when many of the firm's sector peers are experiencing modest earnings growth, Bovis could deliver a much stronger outlook for its investors. And since it trades on a PEG ratio of 0.4, it seems to offer a wide margin of safety in case external challenges increase.
The company's dividend yield of 8.2% is one of the highest in the FTSE 250 at the present time. While there are income shares which offer greater certainty and less risk, the return potential on offer from Bovis means that it could be a worthwhile buy for the long term.
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Peter Stephens has no position in any of the shares mentioned. 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.