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

The FTSE 250 has started 2024 by dropping by 1.7%, reflecting yet more uncertainty in the UK’s ongoing domestic economic performance.

There is some good news — CPI inflation has fallen to 3.9% and traders expect the measure to continue to fall over 2024 — with Deutsche Bank analysts arguing it could fall below 2% by spring. Accordingly, the markets are pricing in four base rate cuts in 2024, leaving the base rate at 4.25% — with the first cut as soon as May.

It's worth noting that UK GDP shrank in October’s reading, while Insolvency Service data has corporate insolvencies at levels not seen since the Global Financial Crisis. The next looming problem may be recession — though many analysts think that a soft landing remains achievable.

And market expectations are not set in stone.

Best FTSE 250 shares to watch

1. Persimmon
2. Greggs
3. Games Workshop
4. Spire Healthcare
5. Babcock International

Persimmon (LON: PSN)

Persimmon shares leapt by 6.3% yesterday after reporting that full-year total completions had come in ahead of expectations at 9,922 homes — though this was circa a third less than the year before. And with lower build volume comes lower economies of scale; when also factoring in inflation, operating profit margins roughly halved to 14%.

However, average private selling prices rose by 5%, and there was a ‘strong improvement’ in Q4 sales rates. But Persimmon still expects 2024’s market conditions to be highly uncertain — leading to a company decision to invest less in new land.

With inflation easing, rates perhaps soon to fall, and a government that may choose to use policy to boost the housing market in an election year, Persimmon could be a strong FTSE 250 share to watch.

Greggs (LON: GRG)

Greggs shares rose by 5.2% yesterday, buoyed by positive results. The baker saw 2023’s total sales leap by 20% to £1.8 billion, lifted by its partnership with Uber Eats which is now working with 25% of its shops. Now the largest fast food company in the UK, CEO Roisin Currie has enthused that ‘we are nowhere near peak Greggs.’

For context, the company plans to open 160 new shops in 2024 — it opened 145 net new shops last year — bringing the total shop count to 2,900. Currie has also noted that falling inflation means the company is no longer planning further price rises, but it is planning to expand its product offering this year.

For context, Panmure Gordon analysis of Hospitality Data Insights information now shows that £2 of every £100 spent in UK hospitality is spent on Greggs.

Games Workshop (LON: GAW)

Games Workshop is one of the FTSE 250’s top growth stories, and 2024 appears to have started well. Recent interim results saw the FTSE 250 stock report a revenue increase of 11% year-over-year to £236 million, while profit before tax rose by 14% to £95 million.

This represents an impressive profit margin, and the business is still growing — better yet, profits grew slightly faster than revenue, which suggests that even at the size it is now, the company is still benefitting from increased economies of scale. And given its specific niche in the market, arguably GAW can grow on a smaller marketing budget than other retail operators.

There’s also the Amazon angle to consider — the titan has finalised a deal to bring Warhammer 40,000 to its streaming service, with A-lister Henry Cavill on board as an executive producer.

Spire Healthcare (LON: SPI)

Spire Healthcare may be in for a strong 2024. The second-largest private healthcare firm in the UK reported half-year results in September — where revenue rose by 13.1% and adjusted operating profit by 24.2% compared to the same half the year before.

But most importantly, NHS revenue rose by 17.1%, as Spire also works with the health service in specific areas. This matters because the most recent figures for the NHS waiting list — the number of treatments waiting to be carried out — was at 7.61 million at the end of November 2023. This is roughly equivalent to one in every nine people in the UK.

With junior doctor strikes ongoing amid an ageing population, Spire appears to be well-placed over the coming months.

Babcock International (LON: BAB)

Babcock International shares enjoyed an upgrade from broker Numis on Wednesday from ‘hold’ to ‘buy’ as analysts hiked their price target from 325p to 530p. They cited ‘a brighter outlook, healthy order intake, achievable targets and still relatively undemanding valuation.’

After the Ukraine war, Israel-Hamas war, and rising tensions over Taiwan — where closely watched elections are currently taking place — defence has arguably once again become a wider political priority.

The company recently reinstated its dividend, and also signed a Memorandum of Understanding with Bechtel Australia and HII under the AUKUS collaboration to develop Australia’s conventionally armed nuclear-powered submarine program.

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Best FTSE 250 shares to watch summed up

The FTSE 250 is — unlike its older brother the FTSE 100 — well-known as a domestically-focused index. While the UK economic direction may be difficult to ascertain, the above five companies represent a cross-section of top stocks to watch.