Should I buy this FTSE 250 stock that’s getting promoted to the main index?

The FTSE quarterly reshuffle has been decided on, with Burberry and Metlen Energy & Metals (LSE:MTLN) getting the call-up from the FTSE 250 to join the FTSE 100 later this month. Burberry is a well-known stock that some investors will choose to focus on. However, Metlen is less familiar to some, which is why I wanted to explore it and determine if it’s worth considering.

The new kid on the block

You could be forgiven for not being that knowledgeable when it comes to Metlen. It only moved its primary listing from Athens to London in August. Yet, in the process, it recruited enough market interest to deliver a market cap of €7bn. This is well above the threshold needed for FTSE 100 inclusion. This reshuffle was the best opportunity to make this happen. It also changed its name from Mytilineos to Metlen as part of the move.

When the move happens, it’ll mark a milestone, being the first Greek multinational to break into the FTSE 100. Being added to the main index triggers mandatory buying by index funds and ETFs tracking the benchmark. This could see the share price rally further, even after accounting for FTSE 250 index funds selling the stock to rebalance.

Yet, before I get too far ahead of myself, let’s run through whether the business is doing well at a fundamental level.

Talking through basics

Metlen is a heavyweight Greek industrial and energy conglomerate. It is Greece’s largest private energy operator. This includes developing and operating thermal, solar, and wind plants to managing grid infrastructure. At the same time, it runs Europe’s only fully vertically integrated bauxite mine. This is the most common ore of aluminium.

Needless to say, these unique selling points have made the company very profitable over the years. There isn’t much trading history on the London Stock Exchange, but the Athens listing shows the stock has jumped by 54% over the past year.

Given the nature of operations, I feel it’ll have constant demand going forward. It combines both renewable energy elements with normal grid infrastructure. I believe this helps to future-proof the business, regardless of how it pans out with regard to energy consumption.

The flipside

Metlen is a new business to me. I hadn’t heard of it until very recently. Even though it has a good reputation, I try to follow Warren Buffett’s advice to only invest in what I know and am comfortable with.

For example, it has moved to the UK listing for greater visibility, which I understand. At the same time, I’d like to see it bed here in first before making a decision. It’s also heavily exposed to commodity prices. Of course, this is the same with UK-listed energy companies. But does it make sense for me to take the volatility risk that these stocks have, as well as dealing with a company operating outside of the UK? I’m not sure.

The news over the next few weeks will certainly gather a lot of media attention. But I’m going to sit on my hands right now to see how the market digests things before making any decisions.

The post Should I buy this FTSE 250 stock that’s getting promoted to the main index? appeared first on The Motley Fool UK.

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Jon Smith 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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