Can FTSE 250 Stocks Beat Brexit Gloom?

Mid-caps have underperformed relative to their large and small-cap peers since the Brexit vote, but are they due a recovery?

Cherry Reynard 26 March, 2019 | 9:51AM

Theresa May Brexit

There was a time when UK funds focused on the mid-cap sector dominated the top of the league tables. Mid-caps were seen as the “sweet spot” for growth: small enough to grow, but big enough to avoid risk. However, since the Brexit vote, FTSE 250 companies have struggled versus their large and small-cap peers. Has the “sweet spot” permanently soured?

In retrospect, it is relatively easy to see why mid-caps have been weak. Mid-caps are more focused on the domestic UK economy. While the companies in the FTSE 100 generate three-quarters of their earnings internationally, mid-caps have only half coming from outside the UK. At the same time, the FTSE 250 has a far higher weight in economically sensitive areas such as consumer goods (14%) and consumer services (12%). This includes high street names such as Dixons Carphone (DC.), JD Sports (JD.) and a number of the housebuilders.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Diverse Income Trust Ord82.70 GBX-0.36
JD Sports Fashion PLC652.60 GBX0.06
Softcat PLC1,136.00 GBX1.34

About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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