Key points
- Molten Ventures and Hochschild Mining have extremely competitive earnings growth records
- They provide welcome diversity to my portfolio
- The companies are well-run, profitable, and expanding
The FTSE 250 index can be an excellent place to find exciting growth stocks for long-term gains. I believe I’ve found two ‘no-brainer’ companies to purchase for my own portfolio. They come from the mining and technology sectors and, therefore, enable diversification in my own holdings. Why should I buy these two stocks? Let’s take a closer look.
A FTSE 250 miner
Hochschild Mining (LSE: HOC) is a silver and gold mining company operating in Argentina, Chile, and Peru. It is clear that this stock has been performing year in, year out for its shareholders.
The calendar years from 2016 to 2020 tell a story of extraordinary growth. The earnings per share (EPS) data from 2016 was ¢0.11, rising to ¢6 in 2020. What this means is that the company’s EPS has a compounding annual growth rate of 122%. This is competitive by any standard and is a major reason why Hochschild Mining stands out to me on the FTSE 250.
Furthermore, a production report for the 2021 calendar year revealed that the company was producing gold and silver with all-in costs per ounce of $1210 and $14, respectively. At current levels, Hochschild’s production costs are 33.7% and 39% below the market price. The company will inevitably benefit when it sells these precious metals to market.
With the upcoming US Federal Reserve rate hike, however, I am concerned that the underlying silver and gold prices will be negatively impacted. While this is possible, there is not actually a strong historical correlation between rate hikes and commodity slumps.
The FTSE 250 stock will soon acquire Amarillo Gold, based in Brazil. This is an example of how the management is eager to expand and fits the “long-term strategy of acquiring and optimising development stage projects”. Hochschild is clearly thinking long term.
An exciting tech stock
Molten Ventures (LSE: GROW) is similar in terms of its earnings growth. For the 2017 fiscal year, EPS was 80.8. By the same period in 2021, this figure stood at 208. By my calculations, this results in a compounding annual growth rate of 20.8%. While this FTSE 250 stock is not as competitive as Hochschild Mining, it is certainly strong and consistent.
Another factor that makes Molten Ventures attractive is its profitability. Between the fiscal years 2017 to 2021, profit has grown from £33.68m to £267.45m before tax. This strongly suggests that the stock’s business model of finding early stage tech companies is working.
Indeed, it has a strong record of finding companies that have later listed publicly. These include Trustpilot Group and Cazoo Group. Furthermore, the FTSE 250 stock is recycling its earnings efficiently, investing £259m in 12 primary and 15 secondary projects for the 2022 fiscal year.
In spite of this, the recent tech sell-off impacted Molten Ventures and is concerning. However, I believe this is a short-term problem that will subside in the near future. The company stated this month, for instance, that it was enjoying “continued momentum”.
Both of these stocks are ‘no-brainers’ in my opinion. The growth records speak for themselves and suggest that both companies are performing for their shareholders. By investing in mining and tech, I will also further diversify my portfolio. I will be buying shares in both stocks immediately.
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.
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