I’d buy these FTSE 250 shares for a second stock market crash today

Alan Oscroft
·3-min read
Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

The FTSE 250 has performed a little better than the FTSE 100 during the stock market crash, down 18% compared to 23%. The mid-cap index dipped further during the early days of the Covid-19 crisis. But it’s bounced back a little more strongly. So the smaller index has been the more volatile — no surprise there. What bargain buys are there? Here are two FTSE 250 stocks I’d buy to weather any further storms.

Shares in AJ Bell (LSE: AJB) crashed as hard as the FTSE 250 in March. But they’ve come storming back for one of the better 2020 recoveries. The AJ Bell share price is down just 4% year-to-date. And looking at Thursday’s year-end trading update shows why. It makes it look like there’s been no stock market crash at all.

The investment platform provider saw customer numbers grow by 27% in the year, and total assets under administration climbed 8% to £56.5bn. The growth is mostly due to platform customers, up 29% to 281,000. Of those, the ranks of advised customers rose 11% to 109,000. Underlying net inflows increased 28% to £4.1bn.

A top IPO investment

AJ Bell seems to be benefiting from the increased number of people investing in shares since the stock market crash hit us. But I think there’s also a boost from growth in business following the firm’s IPO. Since entering the FTSE 250 in December 2018 with an entry price of 160p, the shares have more than doubled. I’m usually bearish on flotations, which so often flop, but this is one of those rare successes.

AJ Bell shares are still on a bit of a growth valuation. But when I add the resilience and relative safety to the equation, the result is a stock I’d buy for the long term.

Stock market crash pain

Moneysupermarket.com (LSE: MONY) shareholders haven’t had such a good year. Like AJ Bell, the Moneysupermarket share price did recover quite quickly from its slump in the early stock market crash days. But it’s fallen back again in recent months. On a year-to-date drop of 23%, it’s fallen below the FTSE 250.

An update Thursday showed why, with revenue down 16% in the third quarter and down 11% in the nine months to 30 September. The firm’s markets have suffered during the pandemic. That’s especially clear from its money division, which faces a 40% drop in Q3 revenue. Insurance, home services and other businesses all declined too.

I’m not too surprised, with lending criteria being tightened as banks focus on cash preservation. The near halt to the home buying market won’t have helped. And in energy services, the availability of savings diminished and switching “reduced substantially.”

FTSE 250 bargain?

For the medium-term future, Moneysupermarket reckons its markets are likely to remain tough. I agree, especially if the second Covid wave goes on for months, and if we really do see a second phase to the stock market crash. But Moneysupermarket enjoys a strong balance sheet, with net cash of £5m at 30 September (after paying the interim dividend).

I think Moneysupermarket will make it through to better times just fine. And while the share price is down, I see it as an attractive FTSE 250 recovery stock. I’d buy now at what I see as a tempting valuation.

The post I’d buy these FTSE 250 shares for a second stock market crash today appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. 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