I’m buying FTSE 250 stocks for 2021. I realise this might sound like a risky strategy considering the current state of the global economy, and an uncertain outlook for UK businesses. But I’m optimistic about the prospects for these mid-cap stocks.
Today, I’m going to explain why I’ve been buying FTSE 250 stocks by the bucketload over the past few months.
Buying FTSE 250 stocks
Over the past few years, international investors have been abandoning UK equities. It’s easy to see why. The uncertainty created by Brexit and dire economic forecast for the next few years would put even the most fool-hardy international investors off from buying these stocks.
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But not all stocks are created equal. Yes, some companies might suffer adverse effects from Brexit. However, others may benefit, and some may not suffer at all. It’s these latter businesses I believe offer the best value right now.
Three opportunities
In my opinion, one of the best growth stocks in the FTSE 250 right now has to be AJ Bell. The low-cost online stockbroker has taken the market by storm. Assets under management rose to over £56bn in the first nine months of 2019. This is only around 50% of the level of the market leader, Hargreaves Landsdown. To put it another way, AJ Bell could have the potential to double in size from current levels. That’s why I’d buy the stock ahead of future growth in 2021.
Another FTSE 250 firm I’ve been keeping an eye on is Ascential. This business is focused on helping companies improve their operations with an emphasis on the digital economy. Services businesses may suffer in a no-deal Brexit, but the growth of the digital economy is set to be one of the most prominent themes of the next few decades. Ascential is one of the best ways to ride this trend, according to my research. The enterprise provides exposure to the tech sector without too much exposure to one product or sector.
One stand-out stock market performer this year is Games Workshop. The firm has beaten all expectations in 2020 as the pandemic hasn’t dented the demand for its miniatures from collectors. If an epidemic didn’t dent demand, Brexit is unlikely to have a significant impact on the group either.
As such, I’m considering buying the shares for 2021. Although the stock does look a bit pricy right now, I think it’s always worth paying extra for a quality business. Over the past 12 months, Games Workshop has proven to me it’s a quality business.
The bottom line
All in all, I think there are currently some great bargains to be had in the FTSE 250. Despite the risks facing the UK economy, I think a strategy of buying high-quality stocks at reasonable prices should yield positive returns in the long run. I reckon the companies above fall into this bucket.
