UK shares have been on an unstable journey in the last few years. But with volatility comes bargains. With that, I’m going shopping in the FTSE 250.
The index is home to some of the most exciting companies the UK has to offer. From airline businesses to global investment companies, it has a lot of variety.
That said, there are a few stocks in particular that are piquing my interest.
Safestore
First up is Safestore (LSE: SAFE). I’ve slowly been adding to my position in the self-storage stalwart since first buying its shares last year. As I write, I’m sitting on a 5.9% gain.
The stock hasn’t posted the strongest performance in recent times. In the last 12 months, it has lost 21.7% of its value. Year to date, 5.6% has been shaved off its price.
Clearly, investors aren’t keen on Safestore. But I’m not one to complain. Instead, I’d happily keep adding to my position with any spare cash.
There are a few reasons for this. Firstly, with a 3.7% dividend yield, it ticks the income box that I tend to look for when making an investment. Of course, that’s not the biggest yield out there. But Safestore has grown its dividend for the last 13 consecutive years. So, there is that.
On top of that, it looks cheap. FTSE 250 stocks trade on an average of around 12.5 times earnings. Safestore, on the other hand, trades at just 9 times.
Interest rates are the most likely thing to scupper its operations in the times ahead. Higher rents may see businesses look to cut storage costs. Higher rates will also make the £800m of debt on its books more difficult to pay down.
However, a business with a strong market grip and continuous plans for expansion is something I like the sound of. The fact I can pick it up so cheaply is a bonus.
ITV
I’m also keen on ITV (LSE: ITV). Like Safestore, it has struggled in recent times. In the last 12 months, it’s down 32.3%. However, now trading on just 8.6 times earnings, I think the broadcaster may be a steal.
With the stock struggling, this has pushed up its yield, which sits at 8.6%. That’s the 10th-highest on the FTSE 250 and comfortably above the 3.5% average. However, it’s worth remembering that dividends are never guaranteed.
I’m bullish on the long-term future for ITV. But there are some nearer-term risks. Namely, the advertising industry has been hit hard in recent years. The firm’s falling advertising revenues for the first half of the year are a stark reminder of this.
Nevertheless, ITV is diversifying to offset this. It has pumped a large investment into its online streaming platform ITVX. It also has ITV Studios, which saw revenues grow 8% to £1bn in the first half of 2023.
These are just two examples of the opportunities available to investors on the FTSE 250 right now. And if I had the cash, I’d snap both of these up. I plan to keep shopping in the index for more bargains.
The post I think now could be a smart time to shop in the FTSE 250 appeared first on The Motley Fool UK.
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Charlie Keough has positions in Safestore Plc. The Motley Fool UK has recommended ITV and Safestore Plc. 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.
