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All things considered, i FTSE 250 had a good year (up 7.6%). But some of its members have fared much better, showing that stock picking has the potential to be very profitable for those willing to take big risks.
Today, I’m touching on two mid-caps whose share prices will more than double by 2024 to very small fans. Do they buy it for me?
Delicious profit
A snack food manufacturer Greencore (LSE: GNC) is not the kind of stock to get the blood pumping. That is, until one examines its recent performance. As I type (13 December), the Dublin-based business has seen its share price rise by 122% in 2024 alone.
This seems to come down to good returns, which is the old fashioned way of trading. Helped by an earlier decision to exit low-cost contracts, the £1bn-cap announced a 36.1% jump in annual pre-tax profits to £61.5m in the 52 weeks to 27 September.
The good form has also allowed Greencore – which supplies supermarkets and convenience stores with sandwiches and salads – to reduce its debt, launch share buybacks and return dividends. Those who held the stock on 9 January will be entitled to a payment of 2p per share.
Will this purple space continue?
Despite increased labor costs due to the UK’s October Budget, management appears firm on the earnings outlook. Adjusted operating profit for FY25 is already forecast to be in the upper half of analyst expectations (£98.1m-£107.1m).
Then again, no investment is without risk. Considering how many office workers are likely to buy what it produces, anything that might interfere with commuting strikes me as a potential hindrance. Think extended periods of bad weather, transportation problems or, yes, another global pandemic. The enduring popularity of working from home is something to keep in mind as well.
At about 16 times earnings, the valuation also looks rich to me. I wonder what would happen if that profit improvement stopped coming. With this in mind, I am eager to open a position today.
Another FTSE 250 stock that delivered goods this year did Hochschild Mining (LSE: HOC). Little sleeper Greencore, its share price increased by 115% in 2024. As well as being a great result for its owners, this also shows that big winners can come from any sector.
Hochschild’s purple patch is the result of rising precious metal prices. Both gold and silver were in excellent condition as investors looked for safe havens following a series of elections and conflicts in Europe and the Middle East.
Conveniently, the £1.2bn cap also managed to bring its Mara Rosa mine in Brazil into commercial production on time.
Dirt cheap
Trading at a forward price-to-earnings (P/E) ratio of just six, one can say that Hochschild shares still look cheap, especially if prices keep rising.
However, we know that mining is hard, unpredictable work and the company has no say in assigning the value of what it mines. There have been no benefits since September 2022 either. So there will likely be no compensation for investors if stocks give up some of their gains next year.
With so much beyond our control, I’m happy to sit on the sidelines.
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