The FTSE 100 has been getting a lot of publicity in the past couple of weeks as it pushes to fresh all-time highs. Some believe it could even reach 9,000 points later this year. However, the FTSE 250‘s currently a way off the record highs made back in September 2021. Here’s why I think that is, along with one index member I think is undervalued.

Type of businesses included

The main reason for the underperformance relates to the constituents in the FTSE 250. The businesses are typically more domestic in nature, catering to the UK market. In the FTSE 100, the index is dominated by multinational corporations that generate most of their revenues overseas.

Over the past couple of years, UK economic growth’s been sluggish. This has been the result of a multitude of factors, with concerns over high interest rates, consumer spending pressure, and a weak property market. As a result, companies that mostly trade in the UK haven’t been able to outperform their international peers.

That’s not to say the FTSE 250’s fallen in value over the past year. It’s up 5% over this period, compared to the FTSE 100’s 15% rise. So although an investor would have made money in buying a tracker fund in the past year, it’s underwhelming versus the main index.

Value to be found

Looking forward, I feel there’s scope for some FTSE 250 stocks to outperform going forward due to attractive valuations. For example, aberdeen group (LSE:ABDN), with the business transforming at a rapid pace, beyond the decision to revert to a more ‘regular’ name from the widely criticised abrdn!

The latest annual report showed a flip from an IFRS loss before tax of £6m in 2023 to a profit of £251m in 2024. The business also improved performance with the percentage of funds beating a benchmark. Over a one-year period, 77% of investments being managed performed versus the benchmark, up from 55% a year back. Naturally, if people see their money is being managed well, it bodes well for giving the company more cash going forward.

The share price is up 14% over the past year, but the bulk of this has come over just the past two weeks. In fact, it was only in January that the share price hit its lowest level in a decade. So in terms of valuation, I believe the progress being made on the transformation makes it an undervalued share to research further.

One risk is that the wealth management space is becoming increasingly competitive, with companies noticing the large fees and commissions that can be made here. Aberdeen needs to be careful when trying to win market share.

So even though the FTSE 250 has somewhat missed out on the party, I believe there are good value picks for investors to consider buying.