I think now’s a great time to go shopping for cheap FTSE 250 shares.
The UK-focused index has fallen 5% since the turn of the year. Even high-quality stocks have sold off heavily as fears over weak growth and persistent inflation have battered investor confidence. To me, this represents a brilliant buying opportunity.
Here are two beaten-down beauties on my radar right now. I think they could rebound strongly from current price levels.
Safestore Holdings
Property company Safestore Holdings (LSE:SAFE) has a bright future as demand for self-storage cubicles booms. Studies suggest this market will grow at a compound annual growth rate (CAGR) of 7.53% between now and 2027.
This real estate investment trust (REIT) — which owns assets across the UK and multiple European markets — is expanding rapidly to capitalise on this opportunity, too.
The company has opened 13 new properties since last November. And it has a huge pipeline of 1.5m square feet spread over 30 assets. This is equivalent to 18% of its existing portfolio.
Safestore’s share price has sunk 18% this year as interest rate hikes have pushed up its borrowing costs and depressed its asset values. Yet its excellent long-term potential and resilience during this tough period still make it an attractive buy. Like-for-like revenues rose 1.7% in the 12 months to October.
Today it trades on a forward price-to-earnings (P/E) ratio of 16.5 times. This is well below its historical average that ranges in the mid-to-high 20s. It also packs a healthy 4% dividend yield, providing more for value investors like me to get excited about.
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AJ Bell
Financial services provider AJ Bell (LSE:AJB) has endured an even-larger share price reversal in 2023. As I type, this FTSE 250 firm is down a whopping 23% in the year to date.
I think the company now looks like an exceptional dip buy. Its forward-looking P/E ratio of 16.2 times sits well below recent norms around the high 20s. And its corresponding dividend yield comes in at a very healthy 4.5%.
AJ Bell has slumped as worries over the UK economy — and how this could damage demand for its investment and retirement products — have persisted. This remains a threat going into 2024 as the cost-of-living crisis endures and unemployment rises.
But the company has remained pretty resilient so far in spite of these pressures. Net inflows dropped to a better-than-expected £4.2bn in the last financial year (to September 2023) from £5.8bn previously.
Meanwhile assets under administration rose 11% to a fresh record of £70.9bn, and customer numbers increased 12% to 476,532. This is all pretty reassuring.
Like Safestore, I think AJ Bell has tremendous long-term growth potential. Growing uncertainty over the State Pension means people are stepping up retirement-related investing.
And the number of elderly people in the UK is also booming (the number of over-65s is tipped to increase by 10% by 2033 and 32% by 2043). I think the long-term returns here could be huge.
The post Down 18%+ this year! 2 cheap FTSE 250 shares I’m hoping to buy in 2024 appeared first on The Motley Fool UK.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc 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.
