Skip to content

Share tip: This FTSE 250 stock has an attractive valuation and room to grow

*

It is great to be back with another monthly tip column for the FTSE 350 portfolio. Markets have started to cool off a little, which is only natural after some big rises since the start of the year. I have decided to prune the portfolio a little, to lock in some gains and take some risk off the table with some of the shares that haven’t done as well as I have hoped.

The two shares I am looking to sell from the portfolio are CMC Markets (+238%) and Entain (-31%)

CMC Markets up 238%

CMC Markets [LON:CMCX] has had a great run, with the business improving significantly over the last few months as capital has flowed back into markets. This share was a perfect example of the fundamental thesis (as set out in the original tip) playing out. An undervalued share, with a tailwind that the market hadn’t yet woken up to. Combining this with a strong chart pattern, and a management team looking to improve the business through cutting costs and you have a winner.

With the latest trading update for CMC markets showing good progress, the shares re-rated swiftly higher and are now valuing CMC very fairly in my opinion. It could go on a little further, but I am comfortable taking profits with a 238% return in around 6 months.

Entain shares down 31%

Unfortunately not all theses play out in the way you might imagine, and Entain [LON:ENT] fits this category. I could very much see the current environment rhyming with the exuberance seen in 2020/21. In the Covid era, money made in cryptocurrencies and tech stocks flowed over into traditional gambling markets and all of the bookies made terrific returns. With the rise of the AI bubble and potential for rates to come down in the U.S, I thought this would light another torch underneath the shares of gambling companies.

To some extent this has happened, with the US’ DraftKings [NASDAQGS:DKNG] up 240% from the lows in 2023. But, sadly Entain has failed to pick up some of the sparkle associated with companies across the pond. I still think Entain’s US joint venture with MGM will create value for the business, and potentially lead to a buy out. However for now, the gloomy U.K business, and regulatory issues overseas cast too long a shadow to make the shares work from here. We are going to cut our losses and move on.

More to come from our latest FTSE 250 share tip

This week trying to replicate the success seen with CMC, I am returning to look for undervalued businesses with potential for strong underlying tailwinds, and I am choosing a former digital winner, which has a very attractive valuation, valuable assets with strong intellectual property and potential to grow with some unique market dynamics. The shares are up strongly this year as the market has woken up to the potential for a turnaround, but I think there is more to come for this digital winner.


Want the full story? Access all of The Armchair Trader's content for just £5.99 per month.

Get weekly investment ideas and tips that will take your investing to the next level. Sign up here.

Free 28 day trial. Cancel anytime.


Log In or Sign Up to Armchair Trader+

Already a member? Log in here:


Not a member yet? Sign up for your free trial or check out the benefits of membership.

Further content of this article is not available as it is for members only. Please visit the registration page for Armchair Trader Plus+ for further details on the benefits of becoming a member.

Looking for great investing ideas? Sign up to our free newsletter.

Join us on WhatsApp

This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

'How to' Guides

Our latest in-depth company reports

Detailed reviews of selected companies and investment trusts.

On the podcast

Sign up for great investing stock tips

Thanks to our Site Partners

Our partners are established, regulated businesses and we are grateful for their support.

Aquis
CME Group
FP Markets
Pepperstone

TMX
WisdomTree
IG
FxPro
Back To Top