Boris Johnson’s Conservative government announced a new, Help to Build scheme late last week. The new proposal is meant to help Britons get onto the property ladder amid the increase in house prices outstripping wage growth. So, here are three FTSE shares that I think stand to gain from this new programme.

Grafton

Grafton (LSE: GFTU) is a FTSE 250 constituent, and could be a beneficiary from the Help to Build scheme. This is because, unlike Help to Buy, the new initiative won’t directly benefit property developers such as Barratt and Taylor Wimpey. The loan is only available for houses built by self-builders and custom builders. As the scheme is set to last until 2026, the group could end up benefiting from a long-lasting tailwind.

Grafton is a builders merchant that sells all sorts of goods required to build a house. These include building materials, timber, decor, DIY items, and pipes. Its manufacturing segment only accounts for 5% of its revenue, so I expect the business’ distribution segment to fair better from the new builds. Not to mention, its history of producing healthy profit margins makes it an attractive stock for me to purchase. However, it’s worth noting that the current cost-of-living crisis could hamper sales figures.

Breedon

Breedon (LSE: BREE) is the UK’s largest independent construction materials firm. It is listed on the FTSE AIM index. The company produced a combine 31.6m tonnes of cement and aggregates in 2021. But more importantly, the board expects further growth this year.

Constructing a new house typically uses more than a 100 tonnes of cement and aggregates. Therefore, I expect the Help to Build scheme to act as a tailwind for the FTSE firm. That being said, Breedon’s revenue doesn’t just stem from building houses. It paves roads and builds other infrastructure as well. Given how well the S&P Global/CIPS UK Construction Purchasing Managers Index (A measure of how well the construction sector is doing) has been performing, Breedon shares could improve in the long term. Its share price also currently trades at a decent price-to-earnings (P/E ratio) of 13, so I see this as a buying opportunity for me.

Dunelm

Inflation continues to run rampant. Thus, new home owners will be looking for bargains in furniture. Thankfully, FTSE 250 staple Dunelm (LSE: DNLM) provides exactly that. Its everyday necessities have an average price of £6, while its furniture has a low average price of £120.

Management has stated its goal of bringing better value proposition to its customers too. This is evident as Dunelm introduced more entry price products and promotional buys, which should entice more customers and purchases.

The retailer still has to compete with IKEA though, as its competitor offers cheaper products in certain categories. That being said, consumers still seem to prefer shopping at Dunelm. This is due to its excellent customer service, such as cheaper deliveries. On that account, as long as Dunelm can maintain its competitive prices and good customer service, I see it being one of the few FTSE shares riding the tailwinds of the new Help to Build scheme.

The post 3 FTSE shares I’m buying with the Help to Build scheme! appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

But if you stretch the comparison back to 1999, the difference becomes even greater. The FTSE 250 has risen by a stonking 264% since April 1999, compared to a gain of just 16% for the FTSE 100. It’s a powerful argument for investing in medium-sized businesses that are still small enough to deliver meaningful growth.

A perfect case study?

One of the companies that’s helped drive FTSE 250 higher over this period is fluid technology group Spirax-Sarco Engineering (LSE: SPX). This stock has risen by 861% since 1999.

Spirax-Sarco’s outperformance has continued this year. The firm’s share price is up by 24% in 2017, compared to 10% for the FTSE 250. Today’s trading update suggests to me that further gains may be possible.

The group reported solid growth across its business, especially in Asia Pacific and Europe, the Middle East and Africa. The weaker pound has also provided a “significant currency tailwind”, according to the firm.

Although this effect is fading as the pound regains some lost ground, management says that at today’s exchange rates, currency factors should add 5% to sales and 8% to profits in 2017, compared to last year.

Still a buy?

Spirax-Sarco’s impressive track record means that this stock isn’t cheap. However, the firm’s five-year average operating margin of 21.3% suggests to me that it may deserve a premium valuation.

Earnings per share are expected to rise by 24% in 2017 and by a more modest 8.6% in 2018. These figures give a 2017 forecast P/E of 26 and a dividend yield of 1.5%. For investors focused on growth and momentum, I think Spirax-Sarco could be worth a closer look.

Up 39% in four months

Irish building merchant Grafton Group Units (LSE: GFTU) has been a stunning performer this year, climbing almost 40% despite an uncertain market backdrop. The group’s shares have recovered all of the loss which followed the EU referendum vote and are now worth 10% more than they were on 23 June 2016.

Grafton has reported a strong start to the year, with revenue up 7.7% so far in 2017 compared to the same period last year. Like-for-like sales rose by 6.1% during the four months to 30 April, with growth in all markets except Belgium.

Gavin Slark, Grafton’s chief executive, says that “the outlook is positive” and the group expects “favourable trends in the Irish and Netherlands businesses” to continue. However, Mr Slark is more cautious about the UK, noting “recent economic and political developments”.

It’s certainly true that City analysts who cover Grafton have cut their forecasts over the last year. 2017 forecast earnings per share have fallen from 54p one year ago to 48.8p today. That leaves Grafton on a forecast P/E of 15.7 with a prospective yield of about 1.8%.

Like Spirax-Sarco, Grafton has a strong balance sheet and attractive cash flow. Further gains are possible and the stock’s momentum appears strong. However, the UK business accounted for 70% of sales last year, so any weakness at home could hit profits hard. I’d rate Grafton as a hold until market conditions become clearer.

The post These FTSE 250 high flyers could help you retire early appeared first on The Twelfth Magpie.

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Roland Head has no position in any 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.

But of course Brexit came along and ruined the party, with the resulting collapse leaving the shares in the FTSE 250 firm close to 12-month lows around 1,500p. So should investors be wary of buying into the airline in such times of uncertainty, or should bargain hunters step in before the airline’s shares take off once more?

Passenger numbers up

In its most recent trading update following the referendum, Wizz Air reported growth in profits for the first quarter of its financial year, but also pointed to weakness in its fares as a result of the fall in the value of the pound. The Central and Eastern European-focused airline said that weakness in sterling following the Brexit vote led to a weakness in fares in euro terms on routes to and from the UK.

But Wizz has a plan. The airline has started readjusting its network and halving its intended second-half growth to the UK, redeploying this capacity to other non-UK routes. Meanwhile passenger numbers are still on the up and up, with the airline reporting a 17.9% rise in its passenger numbers for last month to 2.14m, with the load factor improving from 90.9% to 91.6%.

No doubt there remains much uncertainty in the airline industry with regards to the impact of Brexit, and City analysts are expecting growth to come to a standstill this year with forecasts suggesting just a  2% lift in underlying profits to £93.1m for the year to the end of March. But things should pick up next year with profits rising above £100m and revenues surpassing £1.5bn for the first time. Wizz Air’s shares are down by a quarter since the June referendum, and I believe the impact of Brexit is already baked-into the price. Trading at just eight times forecast earnings for next year, Wizz Air could be a sound long-term recovery play.

Hard Grafton

Building materials firm Grafton Group (LSE: GFTU) was another casualty of the June referendum with shares in the Dublin-based business plummeting to three-year lows following the shock result. Despite posting a rise in pre-tax profits for the first half of the year, the group warned of a challenging backdrop in UK merchanting. The mid-cap firm reported an 8% rise in pre-tax profits to £62.8m on higher revenues of £1.2bn thanks in part to strong growth in the Republic of Ireland and the Netherlands.

Growth in both revenue and earnings is expected to continue over the medium term at least, albeit at a slower pace than in recent years. With the shares trading at a much lower valuation than in recent years, I see the post-referendum slump as a buying opportunity for patient contrarians looking for a long-term recovery play in the building materials sector.

The post Check out these beaten-down Brexit bargains before it’s too late appeared first on The Twelfth Magpie.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Interim results announced this morning suggest the data-driven approach to collections is working as year-on-year revenue leapt 34% and pre-tax profits were up 24.7%. So with astounding top line growth, high margins and dividends offering a 2.8% yield with room to grow, why are the shares trading at a mere 9.9 times forward earnings?

Perhaps surprisingly for a company that buys defaulted loans, the company is comfortable tacking on significant amounts of leverage. At the end of June the company owed some £739m, good for 3.8 times EBITDA. And, while Arrow believes it will bear little ill effect from any Brexit-related slowdown, there’s always the risk customers without a job will be less likely to pay off old loans.

Building profits

Unless you’re big into DIY home repairs or are in the building industry, Grafton (LSE: GFTU) may be one of the biggest companies out there you haven’t heard of. Grafton sells building supplies to retailers and contractors alike and business is booming with revenue over the past six months climbing 14% year-on-year to reach £1.2bn.

As you can imagine though, margins in this industry are very tight. That’s why statutory operating profit for the same period clocked in at a meagre £66.1m. That means operating margins were a very low 5.3%.

The good news is that Grafton has a healthy balance sheet with only £95.7m of net debt and earnings covered dividends a very safe 3.3 times over last year. It’s always good to see a company’s management remain level-headed during the boom years and avoid over-leveraging to fund unsustainable growth and pay huge dividends.

However, reliant as it is on the continued health of the homebuilding industry and offering quite low margins, I believe there are better options to gain exposure to the sector.

Room to grow

Irish Continental Group (LSE: ICGC) is another name that may not mean much to many, but if you’ve ever taken a ferry between Britain and Ireland it’s likely you set sail on one of their vessels. Alongside passenger and freight ferries, the company also runs cargo terminals at the Belfast and Dublin ports.

This business is inextricably tied to the health of economies on both sides of the Irish Sea and with the Celtic Tiger roaring once again, times have been good. Interim results released today showed revenue up 5.2% and operating profits up 27% year-on-year to €150.5m and €20.8m respectively.

With the fallout from the last time the Irish economy collapse fresh in its mind, management hasn’t allowed itself to be carried away by bumper results. Net debt was whittled down to a mere €18.9m at the end of June while dividends rose a sustainable 5%.

ICGC’s business may not be very exciting but it’s relatively reliable and the current 1.9% dividend yield has room to growth with earnings covering payouts a solid 2.6 times over.

The post Do today’s results make these under-the-radar large caps stellar opportunities? appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.