Three UK mid-cap stocks that should prove to be long-term winners

Georgina Brittain of the JPMorgan Mid Cap Investment Trust highlights three of her favourite stocks from the UK's FTSE 250 index.

Looking beyond immediate uncertainty can be challenging. The Covid-19 virus is causing considerable volatility across markets and social-distancing policies have had significant short-term effects. Nevertheless, we remain optimistic about the outlook for medium-sized British companies over the long-term.

UK mid-caps provide investors with a means to access some of the country’s finest businesses earlier in their growth trajectory; by the time a stock becomes a member of the blue-chip FTSE 100 index, it is often mature and grows only slowly.

While the FTSE 250 mid-cap index can be more volatile in the short term, attractive growth opportunities remain and there are many examples of companies where we feel the market may have overreacted. Our focus remains on identifying companies that not only have the potential to be long-term winners but could also emerge from this turmoil stronger than before. 

The shift to online shopping

Several retailers are in difficulty: the move to online shopping has made retail hugely competitive. However we believe that Dunelm (LSE: DNLM), the No.1 UK home-furnishings retailer, is one of the exceptions. To survive and thrive as a retailer, data and technology are key. The group’s newly upgraded website was already benefiting from significant investment, with online sales up by over 30% in the first 10 weeks of 2020, and Dunelm was taking market share. 

The stores are currently closed but Dunelm has reopened its website after a temporary closure to ensure the safety of their staff while maintaining customer service. We are confident that Dunelm is well placed to keep taking market share from competitors struggling to match it on product, technology, or marketing spend. Dunelm’s management was one of the first to take a voluntary pay cut when the crisis broke – a sign of true leadership.

A unique corporate culture

We have owned Softcat since it floated in 2015, and it has consistently delivered. Long-term success stems as much from the culture of a company as from the products, and Softcat (LSE: SCT) has maintained its unique culture even while delivering stellar growth. Customer service is key to standing out from the competition for a supplier of bespoke Information Technology (IT) products and infrastructure. Softcat excels in this respect, as evidenced by strong results and awards. 

It is well placed to come out of this downturn with even stronger customer relationships and is likely to have gained new clients as working from home has evolved from an option to a necessity for many of us. 

Future (LSE: FUTR) is a publishing group that owns websites, events and online magazines with over 57 million worldwide users every month. Future provides authoritative information in spheres such as technology, video gaming and photography. Technology is at the core of the huge success that Future has enjoyed under current management, and it has been acquiring businesses to add to the roster. As with Dunelm, we believe the current situation will have led to greater website traction as so many of us sit at home. We expect further acquisition opportunities to arise as weaker competitors struggle. 

Recommended

How to invest in blockchain without buying cryptocurrencies
Bitcoin & crypto

How to invest in blockchain without buying cryptocurrencies

Many investors have been searching for a way to invest in bitcoin in their Sipp or Isa via a regular broker account. This fund fits the bill nicely, s…
27 Jan 2022
The Federal Reserve has turned inflation-fighter – how do you invest now?
US Economy

The Federal Reserve has turned inflation-fighter – how do you invest now?

The US Federal Reserve has become much more hawkish on inflation and less concerned with the markets' reaction to rising interest rates. John Stepek e…
27 Jan 2022
Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in
Investment strategy

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in

Many people scoff at cryptocurrency speculators pouring money into an asset they may barely understand. But the same could be said of investors in man…
26 Jan 2022
How to invest in energy and metals as tech stocks crash
Commodities

How to invest in energy and metals as tech stocks crash

It’s been a terrible week for stockmarkets. But not everything is crashing – “real” assets such as metals and energy are holding up well and should ha…
26 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022