How I’d invest £1,000 in beaten-down FTSE 250 shares before the 5 April ISA deadline

The FTSE 250 index is home to many high-quality shares. With the new tax year approaching, Harshil Patel looks for some mid-cap bargains.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It has been a rocky few months for FTSE 250 shares. The UK mid-cap index is down by 13% so far this year. The tragic events in Ukraine and signs of an economic slowdown have pulled shares lower.

Despite recent weakness, the longer-term prospects for the FTSE 250 could be much better over the coming months and years.

For instance, over the past decade, it produced an annual return of 8.4%. That’s enough to turn a £1,000 investment into £2,240.

Should you invest £1,000 in Games Workshop right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Games Workshop made the list?

See the 6 stocks

That said, it’s important to remember that past performance can’t predict the future. But with so many good-quality and growing companies in the FTSE 250, I reckon it has great potential. And with the Stocks and Shares ISA deadline fast approaching, I’ve got until 5 April to use my allowance before it’s gone for good.

Fantasy shares

So if I added £1,000 to my ISA right now, what should I invest in? To spread my risk, I’d consider splitting it between a few carefully selected shares. I’m currently looking to add these FTSE 250 shares to my watchlist.

First, I’m looking at fantasy miniature firm Games Workshop (LSE:GAW). Its share price has almost halved since September. But the company remains a highly profitable, cash-generative business with excellent earnings growth. Yes, there could be some further cost pressures but I reckon this high-margin business will manage.

What I find remarkable is that its share price is now trading at the same level as before the pandemic. Yet, it has grown sales by 28% since then and now earns 48% more in profits. For such a high-quality and growing business, I’d say the shares are cheap.

A FTSE 250 top pick

The UK is home to several excellent housebuilder shares. One from the FTSE 250 that stands out is Vistry (LSE:VTY). It’s a great example of a stock that has demonstrated an above-average annual return over the past decade, but where its share price has lagged in recent months. So far this year, its share price is down by 15%. I think it’s an opportunity for me to buy a quality share at a reasonable price.

It recently reported excellent progress across all areas of the business. It saw gains in the total number of completions and gross profit. Looking forward, Vistry expects to deliver its 2022 target of at least £1bn in sales and an impressive 40% return on capital employed. I like that it’s also supported by a juicy 7% dividend yield.

Bear in mind that it’s seeing some increased labour costs, but so far, its supply of materials and staff is stable. Also, demand for new housing is related to affordability and the availability of mortgages. An economic downturn or significant jump in interest rates could have a material impact on Vistry’s sales. That said, it has been in business for many years and has managed through several economic cycles.

Overall, I reckon it’s a quality business that I’ll definitely add to my watchlist.

Should you buy Games Workshop shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Games Workshop. 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.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Here’s the Tesco share price forecast for the next 12 months!

Tesco's valuation has dropped to multi-year lows after recent share price weakness. Is now the time to consider buying the…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: March’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

I asked ChatGPT for the best FTSE 100 investment trust to buy… here’s what it said

There aren't many FTSE 100-listed investment trusts and according to ChatGPT there’s only one winner. Dr James Fox explores.

Read more »

Investing Articles

How much should investors put in an ISA to achieve the average UK wage in passive income?

Millions of Britons use the Stocks and Shares ISA as a vehicle to build wealth, but a successful investor can…

Read more »

Investing Articles

2 cheap FTSE dividend stocks to consider buying for an ISA

The deadline for using up the Stocks and Shares ISA allowance is almost upon us. Paul Summers has spotted two…

Read more »

Investing Articles

£20k in a Stocks and Shares ISA? Here’s how an investor could target £1,342 in passive income each month

Christopher Ruane explains how a long-term approach to investing a Stocks and Shares ISA could generate a four-figure monthly income.

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

Millions are missing out on ISA account benefits! Here’s what I’m doing now

Swathes of people are missing the chance to supercharge their returns with a Stocks and Shares or Lifetime ISA account.…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Here’s my plan to survive and thrive in a stock market correction

A falling stock market can be an opportunity, but investors need a plan. Stephen Wright shares his strategy for taking…

Read more »