Key points
- Cyber defence stock Darktrace has a growing customer base
- Ferrexpo presents a solid earnings record
- Buying both companies could add diversity to my portfolio
The FTSE 250 is packed full of exciting stocks representing all manner of industries. Looking for companies in this index can bring me significant growth potential and diversity. I’ve found two very different stocks to buy for both these reasons. Darktrace (LSE: DARK), an artificial intelligence (AI) cyber defence company, and Ferrexpo (LSE: FXPO), a metals stock, both intrigue me. Why should either have a place in my portfolio? Let’s take a closer look.
A speculative buy in AI
Darktrace became a public company in April 2020. For the past six months, however, the FTSE 250 stock is down about 48%. This price action has occurred for a number of reasons, including widening losses and a short-selling attack.
This attack was conducted by a fund named ShadowFall in January 2022. The fund stated that it took action because Darktrace’s “business is watery-thin, driven by aggressive, promotional, sales focus”.
For the year ended 30 June 2021, Darktrace recorded losses before tax of $147.62m. This compared to the previous year of $26.93m. While these losses do not appear to be on a positive trajectory, revenue for the same period in 2021 was up 41% on the previous year.
Also, a recent trading update for the six months to 31 December 2021 was positive. The customer base had increased 39.6% year-on-year and customer acquisition expectations for the 2022 fiscal year were raised.
A FTSE 250 metal stock
Ferrexpo produces iron ore pellets from mining operations in Ukraine. The company supplies iron to steel mills throughout Europe and Asia.
The recent reports of increased hostilities in Ukraine, between Russia and Western countries, are a small cause for concern. While I still think full-blown war in Ukraine is unlikely, Ferrexpo’s production may grind to a halt in the event it does happen. Although I will be watching this situation closely, I think diplomacy will ultimately decide the matter instead of war.
Fundamentally, for the year ending 31 December 2020, Ferrexpo reported earnings per share (EPS) of 108.1. Compared with the same period in 2016, the company has an impressive EPS compounding annual growth rate of 26.3%. As a potential investor, solid track records in earnings are integral to my decision-making.
In November 2021, Liberium expressed positive sentiment about the FTSE 250 stock. It emphasised the company’s decision to expand into copper production. This move, according to Liberium, is forward-looking because copper is widely used in the electric vehicle industry. In the same report, however, the production of iron ore pellets for the 2021 calendar year was broadly the same as 2020.
I like both of these stocks and buying them would give me exposure to the technology and metals sectors. While Darktrace is more of a speculative purchase, Ferrexpo has a strong track record. I will be buying up these stocks now and capitalising on the diversification they provide.
Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
