Forget FTSE 100 shares! Buying FTSE 250 shares is another great way to make a million

Forget FTSE 100 shares! Buying FTSE 250 shares is another great way to make a million

The Motley Fool  | Jul 20, 2020 08:10

Forget FTSE 100 shares! Buying FTSE 250 shares is another great way to make a million

I love shopping on the FTSE 100. I’ve loaded my own Stocks and Shares ISA with a broad array of brilliant blue-chips such as Unilever (LON:ULVR), Prudential (LON:PRU) and Bunzl (LON:BNZL). Buying FTSE 100 shares is a particularly great idea following the stock market crash too. It’s meant some great stocks are available at rock-bottom prices.

There’s something appealing about owning Britain’s biggest companies and the term ‘FTSE 100 shares’ is one of the most popular search phrases among UK investors. But concentrating predominantly on buying shares from Britain’s premier share index means many investors are losing out on scores of other brilliant companies the London Stock Exchange has to offer.

Indeed, there are many top-quality FTSE 250 shares going cheap following the stock market crash. And they’ve ‘millionaire maker’ potential written all over them too.

Build a fortune I reckon the FTSE 250 housebuilders are some of the most appealing shares to buy following recent price falls. These include companies such as Bellway (LON:BWY), Vistry Group and Redrow (LON:RDW), construction experts which trade on rock-bottom forward price-to-earnings (P/E) ratios of around 10 times.

I own FTSE 100 housebuilding shares Taylor Wimpey (LON:TW) and Barratt Developments (LON:BDEV). Due to the threat posed by Covid-19 to the British economy, they’ve slumped during the stock market crash. But I’m not worried. In fact, I’m tempted to buy more shares at current prices.

I’d be happy to load up on FTSE 250 shares Bellway et al. Britain faces a shocking housing shortage that will stretch well into the 2020s, and likely beyond too. This means that, after a brief coronavirus-related hit, the housebuilders can expect profits to rocket again, just as they had during the 2010s. As a consequence, I expect their share prices to rebound wildly.

Brand power A crushing economic downturn in the UK means some risk-averse investors might be reluctant to buy the ultra-cyclical housebuilders. Such individuals may want to look at buying great FTSE 250 shares such as Britvic (LON:BVIC), AG Barr and PZ Cussons (LON:PZC) instead.

These fast-moving consumer goods manufacturers have a formidable economic moat. In other words, they have a clear advantage over many of their competitors, thanks to their exceptional brand power. Whether it be Britvic’s own-branded juices, Barr’s Irn Bru soft drink or Cussons’s Imperial Leather soaps, consumers remain loyal to these brands even when broader consumer spending power falls.

More great FTSE 250 shares The stock market crash allows these FTSE 250 companies to be picked up for a song. I’d also buy Safestore Holdings and Big Yellow Group (LON:BYG) following recent falls. That’s because a booming self-storage market should deliver handsome returns over the next decade.

I’d snap up car insurance giant Hastings Group as well, because of its 6% dividend yield. And gold miner Petropavlovsk’s a great value buy because of its P/E ratio of 9 times. It’s also a great way to play the likely explosion in bullion prices.

The most successful investors use market crashes to load up on bargains. And the FTSE 250 is packed with exceptional shares like these that trade below their true values. I reckon now’s a great time to go out buying.

The post Forget FTSE 100 shares! Buying FTSE 250 shares is another great way to make a million appeared first on The Motley Fool UK.

Royston Wild owns shares of Barratt Developments, Bunzl, Prudential, Taylor Wimpey, and Unilever. The Motley Fool UK has recommended AG Barr, Britvic, Prudential, PZ Cussons, Redrow, and Unilever. 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.

Motley Fool UK 2020

First published on The Motley Fool

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