If I had invested £20k in the FTSE 250 1 year ago, this is what I would have today!

I am a big fan of investing in FTSE 250.This is an index of medium-sized UK companies that live under the FTSE 100 in size.

About a third of my personal portfolio is invested in FTSE 250 stocks – and here’s why.

While many of the companies in the FTSE 100 are world leaders with attractive dividends, many of them are also slow to grow.

In contrast, the FTSE 250 is home to a much broader mix of (usually) proven and successful companies – but still young enough to deliver significant growth.

Opportunity to buy?

Over the past 20 years, the FTSE 250 has risen a healthy 185%. During the same period, the FTSE 100 gained only 66%. That’s without dividends. Although the FTSE 100 tends to offer higher yields, it is not enough to cancel out the strong long-term performance of the FTSE 250.

After falling slightly in 2022 and 2023, the FTSE 250 has taken off again in the past 12 months. The index is up 12% from November 2023. This means that a £20,000 investment in the FTSE 250 one year ago would be worth £22,400 today, plus dividends.

The good news is that the index’s recovery has been driven by strong earnings for many FTSE 250 companies.

The FTSE 250’s price-to-earnings ratio of 15 and 3.4% dividend yield doesn’t seem expensive to me. I see long-term value right now in index investing. I will do this with a cheap tracker bag like Vanguard FTSE 250 UCITS ETF.

However, as an active investor, my goal is always to beat the market. I can’t do that with an index tracker, which will always match the market.

For this reason, I have been hunting for stocks to consider buying in the FTSE 250. Here is one stock that I think is worth researching right now.

Cheap and safe?

We may cut back on treats when we visit the supermarket. But how often do we cut back on spending money on our pets?

Pets at Home (LSE: PETS) has an impressive 24% share of the UK pet care market. The company’s business model includes online operations, large pet stores and in-store pet supplies and grooming services.

This all-inclusive approach helps build customer loyalty. Indeed, the pet loyalty scheme has 8m active members, who benefit from personalized rewards and discounts.

Another potential risk is the ongoing competition investigation into the UK veterinary sector. This could end up hurting the profits of large vet chains like Pets at Home. However, my guess is that the group superstore approach might make it easier to adapt to any changes that are needed.

The pets at home share price has fallen by almost 40% from the highs of 500p seen during the pet violence crisis. This price drop has left the stock trading at a 2024/25 forecast P/E of 13, with a dividend yield of 4.8%.

I think the stock should be considered a long-term buy today. I don’t have any empty space in my personal portfolio yet. But when I’m in the mood to buy, Pets at Home will be on my short list for further research.