In April, world inventory markets had a meltdown and many shares shortly went on sale. I managed to put money into a Nasdaq 100 index tracker on the time, and that has since jumped by 22%. Now, I’m questioning if I ought to do the identical with the FTSE 250.

Why?

The primary cause I’ve thought of the mid-cap index is as a result of it’s out of favour with traders. Certainly, it was greater on the finish of 2019 than it’s at this time!

But when traders reassess many FTSE 250 corporations’ prospects sooner or later, there might be profitable features. Particularly as there’s additionally a 3.4% dividend yield on provide.

However why is it struggling to push on? There seem like quite a few causes for the stagnation. The obvious is that most of the corporations within the index are usually extra domestically targeted, making it a greater barometer of the UK economic system than the worldwide FTSE 100.

Sadly, the UK economic system hasn’t achieved very properly lately. It has confronted sluggish GDP development following each Brexit and the pandemic, and persistently poor productiveness is a long-running — maybe structural — drawback. 

Excessive inflation is difficult for shoppers and companies, whereas extreme laws have a tendency to dam significant development (in response to the federal government). 

As we all know, taxes on people and companies are very excessive, and there’s mounting stress on the Chancellor to extend taxes additional to steadiness the books. The Organisation for Financial Co-operation and Growth (OECD) not too long ago downgraded the UK’s development prospects for 2025 and 2026.

In the meantime, UK power payments are among the many highest on the earth, which piles additional stress on British business and shoppers. In keeping with commerce organisation Make UK, producers’ power payments within the UK are 46% greater than the worldwide common.

Lastly, the mid-cap index lacks vital expertise publicity, to place it mildly. Simply 3.94% of it’s categorized as data expertise, versus 51.6% for the Nasdaq 100.

We’re residing by means of a strong technological revolution, which is simply more likely to speed up with developments in AI. This lack of tech makes me query the FTSE 250’s future development prospects.

Selecting particular person shares

In fact, there’ll at all times be profitable alternatives inside the FTSE 250. One in every of my best-performing UK shares lately has been Warhammer maker Video games Workshop, which joined the FTSE 100 final 12 months after a protracted interval of outperformance.

So, somewhat than put money into an index tracker, I’ll proceed to selectively think about particular person mid-cap shares. One which pursuits me at this time is Gamma Communications (LSE: GAMA), which is able to be part of the FTSE 250 later this month.

Gamma is a telecoms and cloud companies supplier targeted on enterprise prospects within the UK and Europe. It gives voice, information, cellular, and cloud-based communication options, with round 90% its income recurring. 

Final 12 months, income elevated 11% to £580m, with working revenue leaping 34% to £95.6m. Its UK enterprise now has over 1m lively licenses, and has attracted main purchasers like Morrisons, Equiniti, and the AA.

An financial downturn is a near-term danger right here, as this might see companies pause investments. However as European corporations transfer in direction of extra cloud-based communications options, Gamma seems set up for strong development over the long term.

With the inventory buying and selling at simply 12.5 occasions ahead earnings, I believe it’s value contemplating.