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Typically, there is a shake-up of UK stocks on the main FTSE indices every quarter. Actions that have obtained good results are promoted to the FTSE 100while low performers fall to FTSE 250 (and vice versa). This is not subjective, but is based on the market capitalization of each stock. Here are two that I think could be on sale at the end of the year.
A solid investment trust
There are seven FTSE 100 stocks with a current market capitalization of less than £4bn. On the contrary, Witan Alliance (LSE:ALW) has a market capitalization of £4.8bn. Therefore, I hope that this company has a good chance of being promoted next month.
The investment trust aims to provide investors with returns that outperform global stock markets. Over the past year, it has increased by 18%. He has a team of 11 managers, each of whom can hold no more than 20 high-conviction stocks at a time. These can be selected from anywhere in the world.
I like the fact that it has such a diversified approach, both with managers and sectors. For example, it has 25.2% of funds allocated to technology. However, it has a balanced allocation to many other areas that I am positive on, including financial services and healthcare.
One risk is that you focus exclusively on stocks. If this asset class underperforms over the next year, I might punish myself for not picking something related to bonds or commodities.
A diversified bank
The second action is Invertec (LSE:INVP), with a current market capitalization of just under £4bn. I regret not buying it at the beginning of summer when I wrote about it. The price is up 26% over the past year and it also has a dividend yield of 5.58%.
Like most banks, Investec has benefited from interest rates staying high for longer in the UK. This has raised the net interest income it has earned over the past year. However, it has also done well outside of this, with a recent trading update talking about “Driving revenue from our diversified customer franchises.”
The fact that it has operations in both the UK and South Africa allows the company to derive revenue from different geographies. This can mean that a good year in one area can offset weakness in another. The expected half-year adjusted operating profit for the South African unit is forecast to increase 15% from last year.
With a deeper expansion into wealth management with the recent acquisition of Rathbones, things could accelerate next year. However, this union could be seen as a risk. Sometimes two businesses don't add up and this could cause major headaches for the management team.
I think both stocks could continue to rise and secure promotion to the FTSE 100. On that basis, I'm thinking about adding both to my portfolio over the next month before this.
