Are these the best FTSE 250 shares to watch in January 2024?

Heading into the new year, the UK’s macroeconomic environment is perhaps more encouraging than has been the case for most of 2023. CPI inflation has fallen to 4.6% and appears on a downwards trajectory — and while the base rate remains at a relatively elevated 5.25%, many analysts consider that monetary policy will start to ease in 2024.

However, UK GDP fell unexpectedly in October — by 0.3% in the month, after a 0.2% growth in September. Meanwhile last month, The Financial Times reported on Insolvency Service data indicating that company insolvencies are at their highest level since 2009.

Analysts remain divided on whether the UK will experience a recession in 2024, or scrape through to a relatively soft landing. Indeed, whether equities, commodities or real estate, there appears to be no shortage of fence sitting — making considering the best FTSE 250 shares to watch next month somewhat of a challenge.

For perspective, the index is essentially flat for the year, reflecting this ambiguity. The FTSE 250 started out at 19,134 points, rose sharply to 20,615 points in early February, fell to 16,783 points by late October and is now at 19,221 points.

However, where’s there’s uncertainty, there’s also often opportunity. But of course, past performance is not an indicator of future returns.

Top FTSE 250 Shares to watch

Persimmon (LON: PSN)

Persimmon shares sunk dramatically over the course of 2023 to just 960p as recently as late October — and was ejected from the FTSE 100. But the housebuilder has since recovered sharply to 1,343p as investors digest whether the selloff was perhaps an overreaction.

For context, mortgage rates now appear to be cooling, with some fixed deals currently falling below 4%. And while new home completions were 37% lower year-over-year in Q3 2023, Halifax is predicting that UK house prices will fall by just 2-4% in 2024.

Of course, Persimmon’s market capitalisation remains at less than 50% of its mid-2021 value, reflecting weaker results and a poor outlook. But housing is well-known as a cyclical industry; and long-term investors with an eye on value may take note. Any significant upside in 2024 could well see the housebuilder readmitted to the FTSE 100.

easyJet (LON: EZJ)

easyJet shares enjoyed a volatile 2023 — and were worth just 360p in mid-October but have recovered to 499p today. The airline recently reported a record H2 2023 financial performance and now maintains a ‘positive outlook’ for FY 2024.

For perspective, the FTSE 250 airline saw FY23 headline profit before tax of £455 million — a £633 million year-on-year improvement — while easyJet holidays jumped by 221%, delivering £122 million in profit before tax. Total revenue rose by 42% to £8.17 billion, driven by pricing power, increased capacity, improved load factors and the aforesaid growth of easyJet holidays.

On the other hand, costs rose by 30%, but easyJet remains on track to restart dividends, with 4.5p per share worth £34 million to be paid out in early 2024. And it even expects this payout to ‘increase to 20% of headline PAT on FY24's result’ with the ‘potential to increase level of future returns to be assessed over the coming years.’

With substantial fleet expansion promised, the long-term ambition is to deliver more than £1 billion of profit before tax.

Halfords (LON: HFD)

Halfords shares sunk late last month after issuing tightened guidance to the lower end of previous expectations. The auto and bicycle retailer now expects FY24 underlying pre-tax profits to come in at between £48 million and £53 million, down from £48 million to £58 million.

The FTSE 250 company attributed this fall to weaker demand for discretionary expensive purchases, but also noted that needs based and B2B sales displayed strong growth. And despite the ‘challenging macro environment,’ the retailer still saw revenue in the 26 weeks to 29 September rise by 13.9% to £873.5 million.

Further, it remains confident in its mid-term target of £90 million to £110 million underlying pre-tax profit — and is going into the typically higher-demand Christmas period.

Baltic Classifieds

Baltic Classifieds shares have risen by 60% year-to-date as the Lithuanian company — which specialises in classifieds portals — rebounded after a weak 2022 to 232p.

In recent half-year results, the group saw operating profit rise by 36% to £19.4 million and increased annual revenue growth guidance to between 18% and 19%. At the time, CEO Justinas Šimkus enthused that ‘we have seen record numbers of advertisers, as well as an improved competitive position and increased yields across our entire portfolio.’

Peel Hunt has upgraded its price target to 245p, arguing that the business model is now proven and further, that there are significant opportunities for growth through 2024. Accordingly, the interim dividend is up by 25%, and the company has also delivered €7 million in share buybacks.

Currys (LON: CURY)

Currys shares spent some time in 2023 suffering in the doldrums — but enjoyed a good day after releasing a half-year trading update described by CEO Alex Baldock as ‘a really good self-help job.’

The FTSE 250 company is maintaining profit guidance for the year, but has also advised that group sales have fallen by 4% year-over-year to £4.2 billion in the six months to October. However, there are some silver linings; the Nordic business has seen profit margins recover to similar levels experienced two years ago, and the company has also seen some cash inflow as a result of its decision to sell its Greek and Cypriot divisions for £172 million.

Encouragingly, while this cash is earmarked for paying down debt and funding the pension scheme, Currys is also exploring ‘the potential to return any surplus capital to shareholders.’ And it’s also worth noting that the current half of the retailer’s trading year may be more profitable as it contains Black Friday alongside the crucial Christmas trading period.

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*Based on revenue excluding FX (published financial statements, October 2021).