The most significant advantage the company has over buy-to-let property, in my opinion, is its global diversification in a growing market.

As the world economy continues to expand overall (despite trade wars) and many consumers become more affluent, insurers like Beazley are seeing their sales rising with more and more customers turning to the group to insure their assets against disaster. 

Growing earnings

Over the past six years, Beazley’s sales have grown at a compound annual rate of 5.3%. That might not seem like much, but because the market is only growing, over the long term, this steady revenue growth adds up. Over the past 30 years, the company has gone from having almost no income at all to sales of $2.6bn. 

I think this trend can continue, which is why I reckon the stock can help you make a million. Over the past decade, shares in Beazley have returned 20.7% per annum, including dividends, as the company has benefited from global growth and expansion in the US and Asia. 

I don’t think it is realistic to expect this 20%+ per annum return trend to continue, of course, but I believe there is a good chance the company can post annual earnings growth in the 5% to 10% range, which would an annual return in the region of 10% over the long term. This rate of return is enough to turn a £100,000 investment into £1m in just 24 years. 

Shares in Beazley are currently dealing at a PEG ratio of 0.5 for 2019, implying the stock offers growth at a reasonable price. On top of this discount valuation, there’s also a dividend yield of 2.1%. 

Copper champion

Alongside Beazley, I think copper miner Kaz Minerals (LSE: KAZ) could be a millionaire-maker stock. Kaz is one of the world’s largest pureplay copper miners.

Demand for this metal is only expected to rise as renewable energy becomes more widespread, and the world becomes more connected. Indeed, the copper market expanded at a compound annual rate of 4.2% in the decade to 2019, and analysts are expecting a similar rate for the next decade.

I expect Kaz to benefit significantly from this growth. The company is targeting 300,000 tonnes of copper production in 2019 and has a handful of big expansion projects in the works. These include its first mine outside of Kazakhstan, the Baimskaya copper project that it acquired earlier this year and is expected to cost $5.5bn to develop. 

Most mining companies would baulk at such a large commitment, but Kaz has a history of successfully developing large mining projects. I think the probability of the company repeating past success here is high.

At this point, it is difficult to tell how much value the Baimskaya copper project will create, but even without this, shares in Kaz look cheap. The stock is currently dealing at a forward P/E of 6.4 and supports a dividend yield of 1.5%.

I think the shares are worth double considering Kaz’s long-term potential, that’s without taking into account the $5.5bn Baimskaya mine, which could increase the group’s value by as much as 200%.

If the company manages to pull this development off, investors could see a four-to-fivefold return on their money, according to my calculations. 

The post Forget buy-to-let! Here’s how I think these 2 FTSE 250 bargains can help you make a million appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

The FTSE 250 contains a number of companies most of us have never heard of. They operate behind the scenes of industry and commerce but are still sizeable, important businesses.

Today, I want to look at two such companies in that index, both of which I think have impressive and overlooked income qualities.

Protecting you from disaster

Specialist insurance group Beazley (LSE: BEZ) isn’t a company who will insure your car. But if you own large assets that need protection from risks including natural disasters, cyber-attacks, and terrorism, then Beazley might be able to help.

Pre-tax profit fell 55% to $76m at the £3bn firm last year, as its policies paid out claims for US hurricane damage, Californian wildfires, and Japanese typhoons. However, I’m pleased to see the group has remained profitable despite those high level of claims last year.

The good news is that higher levels of claims tend to support price rises which, in turn, support future profit growth. That certainly seems to be true here. The rates charged on policy renewals rose by 3% in 2018, compared to a 1% fall in 2017.

Dividends + growth

Beazley is also continuing to expand, most notably in the US. Gross premiums written — the value of all insurance sold by the firm — rose by 12% to $2,615m last year. The US business underwrote more than $1bn of premiums for the first time.

The company’s dividend will rise by 5% to 11.7p per share this year, giving a useful 2.2% yield. Because of the high level of claims, no special dividend will be paid. However, these payouts provide a useful boost in quieter years. For example in 2016, shareholders received a special dividend of 10p per share on top of the ordinary payout.

In my view, insurance dividends such as these are a good way to diversify your portfolio. After today’s figures, I’d continue to rate Beazley as a long-term buy for income and growth.

The ultimate long-term income?

Another dividend stock I rate highly is HICL Infrastructure (LSE: HICL). This investment portfolio invests in projects such as roads, schools, hospitals and utility businesses in the UK and other developed markets.

It’s set up to deliver reliable long-term cash flows, most of which are returned to shareholders in the form of dividends.

At the time of writing, HICL’s stock was trading at 165p, slightly above its net asset value of 156p per share. This suggests the stock is fully priced, but the shares still offer an attractive forecast dividend yield of 4.9% for 2019.

The structure of the group’s investments means that the income they provide tends to rise with inflation. This has been reflected in HICL’s dividends, which have risen by an average of 2.4% per year since 2013.

In my opinion, this is an excellent buy-and-hold stock for investors wanting a reliable income from long-term assets.

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Roland Head 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.

Now, though, the company has a new strategy. It released an update on Wednesday which suggested that its refreshed plan is being delivered. This could provide it with a growth catalyst for the long run. Could it therefore be worth buying alongside another stock which reported positive results on Thursday?

Improving performance

The company in question is specialist insurance business Beazley (LSE: BEZ). It released a trading statement for the first nine months of the year which showed a rise in gross premiums written of 11% to $1,958m. It was aided in some insurance classes following last year’s catastrophe losses. It was boosted by improving performance in the US, where it recorded premium growth of 18%. The company expects this positive momentum to continue, which suggests that it could have a bright future.

Looking ahead, Beazley is expected to post a rise in earnings of 36% in the current year, followed by further growth of 62% next year. These are clearly stunning rates of growth, but the market does not appear to have factored them into the company’s valuation. The stock has a price-to-earnings growth (PEG) ratio of 0.2, which suggests that it could offer a margin of safety. As such, now could be the right time to buy it, with its strategy seemingly sound and it trading at a discount to its intrinsic value.

Uncertain future

The update released by Marks and Spencer on Wednesday suggested that the company is getting to grips with changing consumer tastes. It is investing heavily in its supply chain and online capabilities. This could be a shrewd move, since consumers are demanding an omnichannel experience with their favourite stores, and the company has lacked appeal in this sense versus a number of its industry peers.

Other areas which the company is focused on include reducing its profit-dilutive offers across the Food segment, while it is also seeking to deliver major efficiencies over the coming years. Together, these changes could help to support margin growth at a time when the UK High Street is experiencing an uncertain period.

With Marks and Spencer set to report falling earnings in the next two financial years, it is difficult to see a clear financial catalyst for its share price. However, operational improvements could lead to investors adopting a more positive outlook towards its investment prospects. As such, while it could continue to underperform versus some of its slicker retail sector peers over the short run, the changes being made to its business model could create a stronger entity in the long run. Therefore, now could be the right time to buy it ahead of a period of intense change.

The post Is Marks and Spencer’s share price a steal after this news? appeared first on The Twelfth Magpie.

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Peter Stephens 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.

This company might not be a household name, but that hasn’t stopped it. Beazley (LSE: BEZ) is one of the largest specialist insurance businesses in the UK. And with operations around the world, the business is truly a play on not just UK, but international economic growth as well.

Over the past 10 years, shares in the company have produced a total annual return for investors of 21.7%, turning every £1,000 invested into £7,127.

And I believe that this outstanding record of performance is set to continue.

Explosive growth 

After a rough 2017, when some of the biggest hurricanes ever to hit the United States caused billions in damage, which insurers like Beazley had to pick up the bill for, analysts are expecting the firm to return to growth this year. Earnings per share (EPS) are projected to rise 42% to $0.34 (26p) giving a forward P/E of 22. 

Growth is only expected to accelerate for 2019. Analysts have pencilled in EPS growth of 64% to $0.56 (43p). Based on this estimate, the stock is trading at a 2019 P/E of 13.4.

As well as breakneck earnings growth, Beazley has attractive dividend credentials. The dividend yield of 2.1% might not be the highest around, but the payout of $0.16 (12p) per share is covered twice by EPS. To me, this high level of cover suggests that the distribution is shielded from earnings volatility — one of the critical factors I like to consider when evaluating a firm’s dividend potential. Analysts are expecting the payout to hit $0.22 (17p) next year, providing a more lucrative yield of 2.9%.

Overall, looking at the company’s record of producing returns for investors, coupled with its growth outlook, I believe Beazley won’t let you down.

Low risk, high potential reward 

If you’re looking for an investment with more growth potential for your portfolio, you might want to consider Rockhopper Exploration (LSE: RKH). 

There’s lots to like about this oil minnow. For a start, the company is one of the few early-stage oil businesses with positive free cash flow.

According to half-year figures, published today, Rockhopper generated cash flow from operations of $4.9m during the first six months of 2018. With cash operating costs of $11 per barrel of oil produced, this looks set to continue.

Rockhopper’s funds are essential to support the development of its flagship Sea Lion development in the Falklands. Management is targeting year-end net cash of $30m (down from $46.4m at the end of the first half) and is planning to secure further financing for the prospect towards the end of 2018. Its partner on the $1.5bn project is Premier Oil which is pushing ahead with the development of Sea Lion. It could yield as much as 1.7bn barrels of oil in the best case.

What I like about Rockhopper is that the company is already self-sustaining but has huge upside potential if Sea Lion proves to be as good as expected. If everything goes to plan in the Falklands, Rockhopper could be a multi-bagger investment for shareholders.

The post Have £1,000 to invest? Why I believe you can’t go wrong with this FTSE 250 income champ appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

But there have been no further profit warnings in this time. The group’s trading since December as been stable, suggesting that last year’s troubles may have been a one-off.

Indeed, I believe that Saga’s 7% dividend yield could be a buying opportunity. I’ll explain more shortly, but first I want to look at another insurer that’s reported an unexpected shortfall in profits.

Earnings slump

Shares of sector specialist Beazley (LSE: BEZ) fell by 12% when markets opened on Friday, after the company reported a 64% drop in half-year profits. Pre-tax profit for the period to 30 June fell from $158.7m to $57.5m, missing analysts’ forecasts by a significant margin.

When I last wrote about Beazley — which specialists in catastrophe insurance — I suggested it could be “a buy-and-hold stock for the next decade.” I was optimistic that profits would recover strongly this year after being hit by the triple whammy of hurricanes Harvey, Irma and Maria in 2017.

Today’s figures suggest this recovery might be slower than I was expecting.

Not a catastrophe

According to the company, this slump in profits was caused by an increase in losses on certain property businesses and lower returns from the group’s investment portfolio.

To reduce future losses, pricing and terms have been tightened on some property policies. And investment returns are expected to improve as a result of higher US interest rates.

I don’t think either of these issues are showstoppers. But I suspect full-year earnings may now be lower than expected.

The right time to buy?

Last year’s hurricanes have allowed the firm to put up its insurance rates. During the first half of this year, gross premiums written rose by 15% to $1,323.8m. This should support higher levels of reserve releases in 2019. This money — cash held in case it’s needed for claims — is often returned to shareholders through special dividends.

I believe Beazley remains an attractive long-term income stock. But today’s figures are a little disappointing and the share price remains close to its all-time high.

I’d continue to hold after today’s news, but I’d wait to see if the shares get cheaper before buying anymore stock.

Should I buy Saga instead?

One of the highlights of last year’s Saga results was that the firm was able to reduce its net debt slightly, despite lower profits. This suggested that underlying cash flow remained quite strong.

Indeed, the results themselves weren’t too bad. Underlying earnings per share were almost unchanged at 13.8p, providing a decent level of cover for an increased dividend of 9p per share.

Trading so far this year is said to be in line with expectations, with both insurance sales and tour bookings broadly unchanged. Analysts are forecasting earnings of 13.4p per share, down slightly on last year’s underlying figure of 13.8p. The dividend is expected to be unchanged at 9p.

These projections give Saga a forecast P/E of 9.4 and a prospective yield of 7.3%. I think the shares could be a good buy for income at this level.

The post Why the Saga share price could be heading back to 200p appeared first on The Twelfth Magpie.

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Roland Head 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.

Unstoppable long-term growth?

If I had to choose a single sector of the market to grow over the next decade, I’d probably choose pharmaceuticals. Ageing populations in developed countries, plus growing personal wealth in emerging markets, must surely mean that demand for medicine will grow.

This week’s results from FTSE 100 pharma giant AstraZeneca (LSE: AZN) appeared to support this view. The group reported “strong growth in China,” where sales are expected to rise by more than 20% this year.

Not quite there yet

The long-term future may be bright, but AstraZeneca isn’t quite there yet. Falling sales of older products meant that revenue at the Anglo-Swedish firm fell by 2% last year. The company’s preferred core measure of earnings also fell by 2%, to $4.28 per share.

The group’s painful transition is expected to continue in 2018. Core earnings should fall by around 20% to $3.30-$3.50 per share this year, as patent expiries continue to hit profits.

“Completely on track”

Chief executive Pascal Soriot maintains that the group is still “completely on track” to hit its growth targets for the next five years. If he’s right, then revenue should rise from $22.5bn to more than $40bn by 2023.

Such a gain should transform the group’s profits and could lead to big gains for shareholders. In the meantime, Mr Soriot has reiterated the group’s commitment to the dividend, which was left unchanged at $2.80 per share.

Despite the short-term uncertainty, I think AstraZeneca’s 4.1% yield and long-term growth remain attractive for patient investors.

A proven performer

2017 was a tough year for specialist insurance companies such as Beazley (LSE: BEZ), which were hit by high levels of property damage claims following hurricanes Harvey, Irma and Maria.

Wildfires in California didn’t help matters either, and the group was forced to issue a profit warning in September.

However, disaster claims are part of the usual business of specialist insurers and often provide buying opportunities for savvy investors. Today’s full-year results show why. Although pre-tax profit fell by 43% to $168m last year, the group still managed to squeeze out a small profit from its underwriting operations, and enjoyed a big increase in investment income.

The company was also able to release $203.9m of reserves from the previous year, helping to cushion the impact of higher claims payouts.

Double-digit growth

For insurance companies, the reality is that high levels of claims make it easier to increase renewal prices.

The group’s gross written premiums rose by 7% to $2,343.8m last year, but chief executive Andrew Horton sees “potential for double digit growth” in 2018, when earnings are expected to double.

The shares currently trade on a 2018 forecast P/E of 16.8 with a prospective yield of 2.7%. I believe the prospects for further growth are good, especially as shareholder returns have often been boosted by special dividends in quieter years. I’d rate this as a buy-and-hold stock for the next decade.

The post AstraZeneca plc isn’t the only dividend stock I’d hold for the next decade appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.

Throughout his career, Buffett has made billions investing in undervalued stocks and unloved industries, but there’s one sector where he’s made more money than anywhere else. 

Cash cow 

Insurance is Buffett’s favourite industry for many reasons, the most important of which is the industry’s profitability. Over the years his Berkshire Hathaway has made billions selling insurance products and then reinvesting the proceeds. The good news is, investors like us can also benefit from insurance’s lucrative traits. 

Beazley (LSE: BEZ) has produced double-digit returns for investors over the past four years. Last year the stock generated a total return of 25.7% following a performance of 2% in 2016, 34.6% in 2015 and 15.4% in 2014. Following these gains, £1,000 invested at the beginning of 2014 would today be worth approximately £1,980. 

It looks as if these lofty returns are set to continue. Today the company announced that, following a profitable year, management “anticipates pre-tax profits for the year ended 31 December 2017 that will be ahead of current market expectations.” Even though 2017 saw some of the worst natural disasters recorded for some time, forcing more than $300bn of losses on the insurance industry, Beazely still expects to make a profit for the year with an estimated combined ratio of 99% (a ratio of less than 100% implies an underwriting profit). 

City analysts had been expecting the company to report earnings per share of 20p on a net profit of $147m for 2017. For 2018, analysts are expecting a net profit of $264m and earnings per share of 34p (at current exchange rates). Based on these forecasts, the shares are trading at a forward P/E of 15.3, which is around the industry average. The shares also offer a dividend yield of 2.8%, and the payout is expected to grow in line with earnings. 

So overall, considering Beazley’s historical performance, and impressive performance this year against a turbulent backdrop, I believe the company could be a great addition to your portfolio. 

Special payouts 

Another insurance stock I’m positive about is Direct Line Insurance (LSE: DLG). This is a personal and small business general insurer, so it operates in a different segment of the market to Beazley, which is less exposed to global catastrophes. 

This means the group’s cash flows are a bit more predictable, supporting larger cash distributions to investors. Since its IPO in 2013, Direct Line has returned 133.3p to investors via regular and special dividends equivalent to around 57% of its 233p IPO price. 

And it looks as if Direct Line will remain a dividend champion for the foreseeable future. Last year the company didn’t make a special payout, but for fiscal 2017, analysts are expecting a total distribution of 29.3p, including the 6.8p already paid. Based on this estimate, the shares are trading with a projected yield of 7.9% and at a forward P/E of 11.8. 

If Direct Line continues to return excess cash to investors and grow earnings, it’s not unrealistic to suggest that the group could produce a total return of 10% or more per annum (7% from income and 3% earnings growth, the average of the last five years) going forward — essentially doubling investors’ money every 7.2 years. 

The post 2 Warren Buffett-style stocks to help you make a million appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares). 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.

Indeed, since 2007 shares in Beazley have produced a total annual average return of 14.8% while shares in Hiscox have returned 15.5% per annum on average. For some comparison, over the same period, the FTSE 100 has returned around 5.5% including dividends. 

Based on these historical returns, and looking at the two companies’ outlooks, it seems to me that Beazley and Hiscox are great stocks to retire on. 

Room to grow

Shares in Beazley have charged higher over the past decade as the company has increased earnings steadily. And it looks as if this growth is set to continue as today the company reported that gross premiums written for the nine months ended 30 September rose 6% to $1,762m. 

Unfortunately, even though the value of premiums written is rising, the number of catastrophes this year will hold back Beazley’s profitability. According to today’s release, management expects the firm’s combined ratio for the full year — the sum of incurred losses and expenses divided by earned premiums — to be around 100%. A combined ratio of 100% or more indicates that an insurer is making a loss from underwriting operations. 

Insurance losses mean that analysts are expecting the company to report a decline in earnings per share of 57% this year. However, assuming there are no substantial losses during 2018, earnings are expected to recover next year. Based on estimates for 2018, the shares are trading at a forward P/E of 16. Considering Beazley’s historical returns, this valuation does not seem too demanding. 

The shares yield 2.4%, and the company has historically returned any additional capital to investors via special dividends. For example, for 2016 the company paid a special dividend 10p per share, equal to around 95% of the regular payout for the year. 

Takeover target 

Beazley’s peer Hiscox is another firm that I believe is a great long-term buy. Hiscox also operates within the insurance sector the company is expected to take a hit from 2017’s string of disasters. Earnings per share are projected to decline 76% this year before surging 161% for 2018. Based on these City figures, the shares are currently trading at a forward P/E of 18.4, which I once again believe is suitable considering the company’s historical performance. 

The firm also distributes any excess profit to investors via dividends. There was no special payout last year, but between 2012 and 2015 the company distributed 135p per share in additional profits, which works out at around 18% of the 2012 share price. 

There’s also a strong possibility that Hiscox and Beazley could be taken over by a larger business, as almost all of their listed peers have been during the past few years. The economics of the insurance sector means that in the current low-interest rate environment, scale is key and the sector has consolidated as a result over the past decade. Novae Group and Amlin plc are just two of the companies that have lost their independence, and there have been rumors that Beazley could be next.

The post Buying these 2 stocks now could make you a million for retirement appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

The shares had already risen by 46% this year, before news of the bid emerged, but bidders Blackstone and CVC Partners clearly still see value in the stock. I think the lesson here is that private buyers will often take a longer view and be willing to pay more for a company’s future earnings than stock market investors.

Today I’m going to look at two other financial stocks. I believe both of these firms could become bid targets, despite having delivered big price gains over the last year.

Surplus cash

FTSE 250 insurance group Beazley (LSE: BEZ) has risen by 33% so far this year. The group provides a range of specialist insurance services for corporate customers and asset owners. Although companies in this sector have faced soft trading conditions in recent years, several have been taken over at attractive premiums.

It’s easy to see why. Although the gross premiums written by the company only rose by 2% to $1,149.3m during the first half of this year, pre-tax profit rose by 6% to $158.7m. The group was able to release $83.4m of “prior year reserves“. This is money that was set aside to pay out for claims last year but which has not been needed.

Much of this cash will be returned to shareholders in the form of dividends. For example, last year Beazley released $180.7m of prior year reserves and paid dividends totalling about $108m.

Today’s interim results suggest that the company is successfully defending its profit margins. Renewal rates on existing policies fell by 2%, but the group’s earnings per share rose by 17% to 20.2p. The group has also opened a new Dublin-based company to ensure that Brexit doesn’t disrupt its European operations.

Beazley stock currently trades on a forecast P/E of 15.5, with a prospective yield of 3%. This may not seem cheap, but for income investors willing to take a long view, I believe it offers good value. There’s also the possibility of a takeover bid.

A better alternative?

Rival group Hiscox (LSE: HSX) has had a more buoyant start to 2017, recording a 17.3% rise in gross written premiums during the first quarter. The group said its retail operations — selling insurance to consumers and small business — was responsible for most of the gains.

Retail growth is helping to offset declines in the group’s marine and property business, where it is seeing “single-digit rate decreases across the board”. Like Beazley, Hiscox is establishing a new EU-based company to make sure that it doesn’t lose access to European markets after Brexit.

Hiscox’s strong retail growth has encouraged investors to award the stock a higher rating. The shares currently trade on a 2017 forecast P/E of 20, falling o a P/E of 18.5 for 2018. Interestingly, the company didn’t declare a special dividend for 2016, choosing instead to retain spare cash to help fund growth.

Analysts currently expect Hiscox to pay a total dividend of 29.2p per share for 2017, giving a forecast yield of 2.1%. I’d continue to hold this stock, but would probably prefer to buy Beazley today.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any 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.

Berkeley squared

The headline figures showed annual profits before tax up 53% to £812.4m, against £530.9m last year. Net cash soared from £107.4m in April 2016 to £285.5m today, and that’s after dividend payments of £254.6m and share buy-backs of £64.5m. Revenues rose 33% to £2.72bn with sales rising 3.4% and the average selling price leaping 31% to £675,000. Net asset value per share rose 18.4% to £15.56. 

Forward sales at the Cobham-based builder dipped slightly, from £3.25bn last April to £2.74bn, but its land bank posted a solid 8.1% increase to 46,351 plots with 16 new sites added to the land bank. Berkeley shows outstanding balance sheet strength with cash due on forward sales of £2.74bn, estimated future land bank gross margin of £6.4bn and net cash of £285.5m.

Brum, here we come

Chairman Tony Pidgley said Berkeley “is in excellent shape with further additions to our unrivalled land bank in the period” while warning that “it is an inescapable fact that we are facing a number of headwinds and a period of prolonged uncertainty”. Brexit and global economic uncertainty are the main concerns. The housebuilders generally have recovered well since last year’s referendum shock, helped by low mortgage rates and the shortage of property, yet Berkeley is yours at a lowly forecast valuation of 7.4 times earnings.

Berkeley is confidently moving out of its London and southern England comfort zone into Birmingham and beyond. Its share price is up 150% over five years and the firm remains on target to hit £3bn of pre-tax profit in the five years beginning 1 May 2016. It seems very nicely priced to me, especially on a forecast yield of 6.1%, covered 2.2 times.

Beaz knees

Some people think insurance is boring but investors in Lloyds of London insurer Beazley (LSE: BEZ) have enjoyed a high old time lately, with the stock up a barnstorming 30% in a year and 251% over five years. However, it has hardly been a party animal lately, posting a 2% drop in gross premiums written to $573m in the three months ending 31 March 2017, while premium rates on renewal business fell 1%. It has posted a year-to-date investment return of 0.9%.

Chief executive officer Andrew Horton nonetheless hailed a solid start to the year with the speciality-risk insurer and reinsurer announcing the acquisition of Canadian insurer Creechurch Underwriters in February, as part of its longer-term strategy to develop its non-US speciality lines business, in parallel with its growing US operations.

Terror threat

Beazley has warned investors that the rating environment remains challenging due to terrorism, war and catastrophe and the business looks set for a choppy time, with earnings per share forecast to fall 17% this year, before recovering to rise 6% in 2018. Pre-tax profits may flatten this year and next at around £196m. Today’s valuation of 12.5 times earnings is forecast to rise to 15 times.

The insurer’s forecast yield of 3.3% is covered two times by profit, while the ongoing reorganisation should boost profits in the longer run. Today Berkeley would be my pick of the two.

The post These 2 exciting growth stocks still look cheap appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones has no position in any 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.