1 of the best mid-cap FTSE 250 shares to buy right now

This FTSE 250 company has restored its pre-pandemic earnings and there are robust forecasts for progress ahead.

| 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.

London’s FTSE 250 index contains around 250 of the next largest companies after those in the lead FTSE 100 index. That’s broadly as measured by their market capitalisations.

Many FTSE 250 companies still have expanding businesses. So, a FTSE 250 tracker fund can be a decent way to get some growth potential into a diversified portfolio.

But I reckon there’s even more potential for growth if I select some of the best stocks from within the FTSE 250 and invest directly in those. But, of course, higher potential also comes with higher risk if I concentrate my money into just a few names.

However, I’m prepared to embrace the risks in pursuit of higher returns. And in that spirit, I like the look of Beazley (LSE: BEZ) right now.

Pre-pandemic earnings recovered

The company is a global insurer with offices in Europe, Asia, and North America. In 2021, the business underwrote gross premiums worldwide of just over $4.6bn. And that achievement follows steady growth over more than three decades.

The areas covered by the firm include professional indemnity, cyber liability, property, marine, reinsurance, accident & life, political risks, and others. And in last week’s full-year results report for 2021, the company posted a “robust” pre-tax profit of just over $369m.

That outcome suggests a major recovery is underway in the business after the pre-tax loss of almost $50m in 2020. And chief executive Adrian Cox said first-party pandemic-related claims have “almost entirely been paid and fully accounted for“.

Cox said Beazley experienced growth across all its lines of business. And, looking ahead, he’s “particularly encouraged” by the opportunity in the cyber market where the company is seeing “significant” improvement in rates. 

Robust growth estimates

City analysts have pencilled in double-digit percentage increases for earnings in 2022 and 2023. And the directors reinstated dividends by declaring an interim payment of 12.9p per share for the 2021 trading year. They also declared the company’s intention to operate a progressive dividend policy in the years ahead.

Overall, Beazley strikes me as a business that has recovered from the effects of the pandemic with robust growth opportunities ahead. Meanwhile, with the share price near 502p, the forward-looking earnings multiple for 2023 is just under 10. And the anticipated dividend yield is running around 2.5%, when set against analysts’ expectations.

For a growing business with strong immediate prospects, I find that valuation to be undemanding.

Cyclicality could be a challenge

However, one of the uncertainties involved in an investment in Beazley shares is the inherent cyclicality of the business. Over the long term, the company has so far grown — a lot. But we’ve seen how fast events such as the pandemic can damage the business in the short term. And there’s a significant amount of risk for shareholders in that situation.

It’s also worth me bearing in mind the company goes ex-dividend on 17 February regarding the declared interim payment. So we’ll likely see some share price weakness as the stock adjusts to account for the payment.

Nevertheless, Beazley tempts me. And I’d add the stock to my long-term diversified portfolio with the aim of capturing its potential for ongoing growth.

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.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »