This being the case, I think it’s more essential than ever that investors ensure they hold a properly diversified portfolio. Today, I’m looking at two FTSE 250 stocks from very different sectors that could help provide the recession protection they’re looking for.

“Exceptionally strong” trading

This morning’s trading update from general merchandiser B&M European Value (LSE: BME) goes some way to explaining why its share price has already recovered to pre-crisis levels. 

The company experienced a great end to its financial year thanks to what it describes as an “exceptionally strong” performance in Grocery in March. Like-for-like revenues rose 6.6% over the 13 weeks to 28 March as the great stockpiling rush ensued. 

The trend has continued into the new financial year with like-for-like revenues soaring 22.7% in the first eight weeks. Although people were making fewer trips to the stores, they were spending a lot more than normal. DIY and gardening-related items were particularly sought after. This makes sense given the lovely weather we’ve been experiencing and the fact that rival retailers were shut. Even so, revenue was still up a very healthy 10.3% if these categories are excluded.

All this has come at a cost, of course. The need to enforce social distancing and decision to pay higher wages to its workers during the pandemic means that operating costs have been higher than usual. 

There’s also no getting away from the fact that the bounce in sales will likely prove temporary as things get back to ‘normal’ (whatever that looks like). The uncertainty over whether the coronavirus has been defeated or not makes providing guidance on trading rather tricky as well.

Nevertheless, I suspect B&M will fare better than most retailers during a recession as consumers become increasingly careful with their cash, even when it comes to staple goods. This makes the company a fairly defensive pick, in my opinion.

Sure, some of today’s good news already looks priced-in to the shares. At less than 17 times earnings, however, the valuation isn’t excessive. 

Recession-proof

Another way of diversifying a portfolio in preparation for a hard recession is to get some exposure to gold. The precious metal is regarded as a safe haven in troubled times due to its tendency to be negatively correlated with global markets. It’s also a hedge against inflation and a weakening US dollar.

FTSE 250 African-focused explorer Centamin (LSE: CEY) looks a good play on this. The £2bn cap miner has a presence in Egypt, Burkina Faso and Cote D’Ivoire. It began producing from its main asset — the Sukari Gold Mine — 11 years ago. 

Is an investment in Centamin devoid of risk? Of course not. The gold price can be volatile. Any drop also tends to be magnified in the stocks of those mining for it.

At 15 times forecast earnings based on current projections, however, the valuation still looks decent to me. The company has zero debt on its balance sheet and almost $350m in cash. At $172.9m, post-tax profit also came in 13% higher in 2019 than in the previous year. I’d buy it as a recession looms.

The post Recession fears? I think these FTSE 250 stocks could offer protection appeared first on The Twelfth Magpie.

More reading

• Not sure what a SIPP is? 3 reasons it could pay to know!
• Up 15%, B&M shares are leading the FTSE 250 higher! Is the comeback on?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of B&M European Value. 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.

The business of developing medicines for livestock and companion animals is becoming an ever-more lucrative one, and Dechra’s latest set of financials underlined the exceptional profits potential here. Net revenues leapt 18% between July and December at constant currencies, the FTSE 250 firm advised, the strength of its drugs pipeline helping sales to grow beyond the broader market, too.

What’s more, Dechra continues to build its pipeline (as well as its global footprint) to keep the top line roaring higher through shrewd M&A action. In December, it snapped up Brazilian pharmaceuticals giant Venco, a major player in the country’s gigantic food animal product market.

It’s not surprising, then, that City analysts expect earnings to rattle 13% higher in the year to June 2019, and by an extra 15% the following year. In my opinion, the company’s exceptional growth record and market-leading product stable makes it worthy of a high forward P/E ratio of 26.7 times.

Ring the bells

A more attractive pick for cash-strapped investors may be Bellway (LSE: BWY), though, the house-builder dealing on a bargain-basement prospective P/E multiple of just 6.7 times.

Don’t, however, take this low valuation as a sign of weakness. Sure, the stratospheric property price growth may be behind us, something which brokers believe will slow profits expansion at the builder to 2% in the years to July 2019 and 2020.

But the robustness of the UK housing market, supported by increasingly-generous mortgage packages and an inadequate number of new homesteads entering the market, means that Bellway should keep its long-running growth record motoring along nicely. Just this week, Lloyds unveiled its 100% mortgage product, for example, requiring no deposit at all from borrowers in the latest leg of the ongoing ‘mortgage deal wars’.

Continental colossus

B&M European Value Retail (LSE: BME) is another great growth share that I’m tipping to thrive over the next decade.

The cut-price retailers may not have had the best of it in November as sales slowed, but this proved to be a temporary problem, B&M advising this month that it enjoyed a “pleasing finish” in the three months to December. This doesn’t shock me in the slightest as you’d expect its value products to fly off the shelves in tough times for shoppers such as these.

That said, as the rampant influence of Aldi and Lidl on the global stage has already shown, consumers, both in the UK and beyond, have become increasingly accustomed to squeezing every last ounce of value out of their shopping trips. And by expanding across its home territory, as well as in Germany, B&M is positioning itself to exploit this phenomenon across the continent.

City analysts expect the firm to follow a predicted 3% earnings rise in the year ending March, with an even-better 15% increase in fiscal 2020. A forward P/E ratio of 16.5 times is, in my opinion, an attractive valuation, given the prospect of brilliant earnings growth at B&M in the medium term and most probably well into the 2020s.

The post Want to get rich? 3 FTSE 250 growth stocks that I’d buy and hold for the next 10 years appeared first on The Twelfth Magpie.

More reading

• Not sure what a SIPP is? 3 reasons it could pay to know!
• Up 15%, B&M shares are leading the FTSE 250 higher! Is the comeback on?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of B&M European Value. The Motley Fool UK has recommended Lloyds Banking Group. 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.