Tuesday, March 09, 2004
Opportunities for investment will always exist on the UK stock exchange. No matter how badly listed companies in one sector are faring, some companies elsewhere will be making hay. The Lloyds' insurers are a prime example of a collection of companies riding the crest of a wave. In the last week Wellington Underwriting and BRIT Insurance regaled the market with strong results, both are going gangbusters.
Wellington:
Our confidence in the future is stronger than ever,reinforced by the dividend announced today and our clear statement on expected dividends for the next two years. The strong underwriting environment and visible earnings and cash flow momentum will enable Wellington to deliver superior returns to shareholders over a sustained period of time.
http://www.uk-wire.com/cgi-bin/articles/200403040700241229W.html
and BRIT smashed company records with these results:
http://www.uk-wire.com/cgi-bin/articles/200403020700510063W.html
Favourable market conditions continue to exist in key business areas with rates continuing to harden in casualty and stabilising elsewhere
Combined ratio: 88.5% for Brit's share
A purple patch if ever there was one. On news such as this it is vital to examine the key criteria to ascertain whether or not the market has priced this strength into share prices. With BRIT trading at 88p and Wellington Underwriting at 98p, in comparison to both earning's per share and asset value BRIT appears cheapest. Using my rule of thumb for evaluating Lloyd's insurers, BRIT has a fair value of 108p. This is based on net tangible asset value of 72p, which I multiply by 1.5 to give me my target price. Now, this is admittedly a somewhat arbitrary method but if I incorporate my thirty percent margin of safety, this should protect me well from downside and at 82p the shares would be trading at a not too demanding price:earnings ratio of twelve. It is encouraging to see directors at BRIT sharing my confidence in their company's value, two this week purchased more shares in BRIT, one increasing his stake by a further 100,000 shares.
So, my list of current targets reads
Tate and Lyle: 250p (today's price 300p)
Shell: 330p (377p)
BRIT Insurance: 82p (88p)
fingers crossed.
The Artful Dodger
Wellington:
Our confidence in the future is stronger than ever,reinforced by the dividend announced today and our clear statement on expected dividends for the next two years. The strong underwriting environment and visible earnings and cash flow momentum will enable Wellington to deliver superior returns to shareholders over a sustained period of time.
http://www.uk-wire.com/cgi-bin/articles/200403040700241229W.html
and BRIT smashed company records with these results:
http://www.uk-wire.com/cgi-bin/articles/200403020700510063W.html
Favourable market conditions continue to exist in key business areas with rates continuing to harden in casualty and stabilising elsewhere
Combined ratio: 88.5% for Brit's share
A purple patch if ever there was one. On news such as this it is vital to examine the key criteria to ascertain whether or not the market has priced this strength into share prices. With BRIT trading at 88p and Wellington Underwriting at 98p, in comparison to both earning's per share and asset value BRIT appears cheapest. Using my rule of thumb for evaluating Lloyd's insurers, BRIT has a fair value of 108p. This is based on net tangible asset value of 72p, which I multiply by 1.5 to give me my target price. Now, this is admittedly a somewhat arbitrary method but if I incorporate my thirty percent margin of safety, this should protect me well from downside and at 82p the shares would be trading at a not too demanding price:earnings ratio of twelve. It is encouraging to see directors at BRIT sharing my confidence in their company's value, two this week purchased more shares in BRIT, one increasing his stake by a further 100,000 shares.
So, my list of current targets reads
Tate and Lyle: 250p (today's price 300p)
Shell: 330p (377p)
BRIT Insurance: 82p (88p)
fingers crossed.
The Artful Dodger
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