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It’s not been an amazing year for the FTSE 250. Including dividends, the index is up just over 9% since the start of the year – well below the 21% the FTSE 100 has managed.
In the context of a £5,000 investment, that’s the difference between £5,479 and £6,054. But while the index as a whole hasn’t been the most impressive, there are some individual names worth paying attention to.
Index investing
ny company or index can have a bad year. But the FTSE 250 has fallen well short of its larger UK counterpart over the last five years.
To some extent, that’s no accident. A feature of the index is that it consistently loses some of its best-performing businesses – such as Diploma and Games Workshop – to the FTSE 100.
Both of these have been outstanding investments over the last 10 years. But their recent success has made no difference to the FTSE 250, since they’ve moved on.
As a result, I’m not particularly minded to invest in the index as a whole. But I do think it can be an interesting place to look for opportunities in businesses that are on the up.
Growth
One example is Gamma Communications (LSE:GAMA). The stock has faltered this year, but the business has performed relatively well – and I think there might be more to come.
The firm provides wireless communication services for businesses. And 2026 could be a huge year with the UK set to switch off its copper phone network at the start of 2027.
According to a survey from last month, around half of UK businesses still rely on traditional landline networks. And 75% aren’t yet prepared for the impending switch off.
As one of the leading providers of cloud-based phone services, Gamma stands to benefit from this. So despite the stock falling this year, I think it’s well worth considering.
Risks
The impending retirement of the UK’s copper network means 2026 could be a huge year for Gamma Communications. But there are risks to consider.
One is the possibility of the switch off being delayed from its scheduled date. This has already happened once – the network was supposed to be retired at the end of this year.
Given that it’s been pushed back once, I think investors would be unwise to rule out the possibility of it happening again. And that could have a big impact on revenues and profits.
In its latest six-month report, Gamma’s sales grew just 1% (excluding one-off acquisitions). So the move from copper could be the difference between a good year in 2026 and a bad one.
Beyond 2026
From a long-term perspective, I don’t think it will matter whether the switch off happens in 2027 or later. Whenever it comes, I expect it to be a big boost for Gamma Communications.
The fact that its best-performing businesses often leave for the FTSE 100 means I’m not that excited by the FTSE 250 as a whole. But it’s been a great place to find individual opportunities.
Gamma is one of the names from the index on my radar heading into 2026. I think it’s well worth a look at today’s prices – and it’s not the only one.
