3 FTSE 250 Stocks To Buy In September
The FTSE 250 has been in the red all through the first week of September. However, this is a minor dip considering that year-to-date, this index is up by 16%.
It also means that now is a perfect time to buy into stocks that could perform well through the month.
While it’s not easy to tell potential winners from losers, below are three FTSE 250 stocks to buy in September.
FTSE 250 Shares to Consider:
- Elementis (ELM)
- Safestore (SAFE)
- Softcat (SCT)
1. Elementis (ELM)
Elementis (ELM) tops the list of UK FTSE 250 stocks to buy now that the economy is on a rebound.
The UK construction industry has been strong through the year, and with the worst of the 2020 disruptions almost over, it is likely to remain strong going forward. This means that demand for its products, especially paint and adhesive chemicals, used in the construction industry is only set to grow.
So far, strong growth in construction has been reflected in the share price of Elementis over the past year. Over the last 12-months, this stock has gained by 123%, and the momentum remains strong.
Besides the construction industry, post-pandemic consumer demand is rebound in most Elementis core markets, such as the US and the UK. This presents good prospects for consumer products such as deodorants, which Elementis supplies the materials necessary to manufacture.
Aside from a largely positive market outlook for the economy, Elementis’s books paint a picture of a strong company.
One of the most important metrics when analyzing the viability of a company is its current ratio. This gives an idea of whether a company has the resources to cover all its short-term debt obligations without straining operations.
Elementis’s current ratio stands at 2.04, meaning it has more than enough resources to cover its short-term debt obligations.
One of the advantages this gives the company is the room to borrow on friendly terms, if it needs to take advantage of any emerging market opportunities.
At the same time, it means the company is cushioned from a substantial increase in debt repayment costs relative to its assets, should the Bank of England decide to raise costs.
Another indicator of this company’s high intrinsic value is its cash flows. It has operating cash flows of GBP 97.7 million and leveraged free cash flows of GBP 106.86 million.
Its positive cash flow position means that it is well-positioned to handle its everyday operations without negatively impacting its operations.
Elementis’s charts paint a picture of stock with good prospects too. In the past 8-months, it has been trending up above the 100-day moving average, and every dip to this support has been bought up.
It has dipped over the first week of September and is now close to testing the 100-day moving average.
If it tests it and bounces off with strong volumes, anywhere between GBP 147 and GBP 152 is a good entry point. That’s because a bounce off this price level could see it test GBP 160 or more within the month.
2. Safestore (SAFE)
Self-storage is booming
The self-storage market is on a growth trajectory, and Safestore (SAFE) is reaping big. In the last 12-months, this stock has gained by 50%, and the momentum remains up.
One of the most bullish signals is that insiders have been buying up the stock. In October 2020, the company’s senior independent director Ian Krieger bought GBP 53k worth of SAFE shares.
Insider buying is significant because it usually points to confidence about a company by those most in the know about it. It’s also noteworthy that in the past 12-months, no company insiders sold.
Besides operating in a growth market, and insiders buying the stock, SAFE has some pretty solid fundamentals too.
It has a profit margin of 144.24%, which means it has a competitive advantage in the market. As such, it can make a significant amount of its sales without the risk of losing customers.
Its competitive advantage is also evident in its relatively high quarterly revenues growth of 11.10%.
The company’s balance sheet looks quite healthy too. Safestore has a current ratio of 1.00, which means it has enough current assets to offset its short-term liabilities. Safestore has relatively high cash flows too. The company has operating cash flows of GBP 83.9 million. This means it has more than enough resources to cover its everyday operations.
Safestore’s charts a picture of growth too. All through the year, it has been trading steadily above the 50-day moving average.
While it has been in a correction all through the first week of September, SAFE is still holding steady above the 50-day moving average. This makes its current price a perfect entry point for September.
3. Softcat (SCT)
Betting big on IT Services
Softcat (SCT) is one of the UK stocks that defied the pandemic, and in the past year, is up by 67%. With the economy on a rebound, this stock now looks more attractive than ever.
That’s because the market for IT services is only set to get bigger, as confidence in the economy triggers companies to start spending on services that enhance efficiency.
Softcat’s internal fundamentals look pretty good too. With a current ratio of 1.51, Softcat paints the picture of a company that has enough resources to handle its short-term liabilities comfortably.
Its cash flows levels are net positive too and stand at GBP 83.28 million. That’s a signal to a company with enough liquidity to carry out its daily operations without struggle. It’s a huge vote of confidence for SCT stock in terms of guaranteed business continuity.
From a look at its technicals, this stock is in a buying zone. SCT bounced off the 100-day moving average support level in late July and has been trending up since that time.
In August, it pushed through April highs of GBP 1969 and has since rallied to make new highs above GBP 2100. Given that the market environment is only getting better, SCT is a good stock to buy in September. It has the potential to make new highs in the month.
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