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Buy FTSE 250 stocks can sometimes give us a ride. But then again, the midcap index has outperformed the FTSE 100 Index in long-term returns.
We're seeing a long-term average return of the smaller index of about 11% annually, up from about 7%.
FTSE 250 shares have fallen again in recent years, but are starting to gain once again.
Growth of the FTSE 250
There are big dividends to be had from the FTSE 250, but today I have my eye on a pure growth stock.
It is a biotechnology research company. PureTech Health (LSE: PRTC). And its stock price over the last five years has been… how pale are those knuckles again?
Explosive growth?
Let's look at an obvious negative. PureTech is not generating regular profits and forecasts do not show any in the coming years.
But the company just completed a stock buyback to the tune of $100 million. Isn't it a little strange for a company that doesn't make a profit to return cash? Well, yes.
But the $14 billion sale of Karuna Therapeutics, founded by PureTech, to Bristol-Myers Squibb made a big difference in the cash pile.
And at the end of the last full year, on March 31, the company reported cash, equivalents and short-term investments of $573 million. The board of directors believes there is enough to keep it going for years to come.
Clinical research
The future lies in the possibilities of PureTech research. It specializes in medications related to the brain, gut, and immune system. And it has several candidates making their way through the EU and US regulatory systems.
In addition to its own research, PureTech has its fingers in many other matters, through its 'Founded Entities' approach… such as the success of Karuna.
He has stakes in a variety of companies working in the fields of neuropsychiatry, oncology, immunology and other fields.
The way to follow
It all depends on the hopes placed on PureTech's line of research and those of the entities that founded it, but it seems to me that this approach is more attractive than most of those used in this sector.
Speaking about the company's internal research objectives, CEO Bharatt Chowrira spoke of the options open to advance them.
I speak of “progress them in Founded Entities or through associations”as a way. And when the company launches a new company like this, they have been oversubscribed recently.
Oh, and the CEO also noted that “We are very proud of our track record of clinical success, which is six times the industry average.“.
A purchase?
Buying PureTech Health stock now would be very speculative. We simply don't have the usual measures to assess it. There is no useful price-to-earnings (P/E) ratio, no dividend yield, etc.
But analysts expect strong PureTech sales in the coming years.
It's hard to compare this to the other stocks on my watch list. But if I buy it, it will only be a small amount, since there is a chance of losing it. But if it goes well, I could expect a multibagger here.
