Unfortunately since then, the stock has struggled to return to its previous highs. It’s currently dealing at around 1,628p, some 5.7% below its 52-week high. However, I think this could be a fantastic opportunity to acquire shares in one of the world’s leading insurance groups ahead of what could be a great year of growth for Hiscox.

Market recovery

Over the past three years, the global insurance market has been under pressure as an influx of capital has pushed down premiums. This has made it harder for companies like Hiscox to earn attractive returns. The good news is, this trend seems to be coming to an end.

In its first-quarter trading update published today, the company reports insurance rates have increased by approximately 4% year-to-date, and management is making the most of this by trying to grow market share in the areas where it has the most experience. As a result of these initiatives, gross written premiums grew by 3.3% in constant currency during the opening quarter of 2019. 

If rates continue to rise, Hiscox should be well on the way to meeting City growth forecasts for the year. Analysts have pencilled in earnings per share growth of 153% for 2019, followed by growth of 10% for 2020. These estimates put the stock on a 2020 P/E of 17.5. That might look expensive, but I think it’s a price worth paying when taking the company’s explosive earnings growth into account. For income investors, there’s also a 2.1% dividend yield on offer as well. 

Market leader 

Another FTSE 100 growth stock I think it worth snapping up for your portfolio today is Auto Trader (LSE: AUTO). 

Shares in this digital automotive marketplace have more than doubled in value over the past 24 months, and I think there’s a strong chance the stock could double again from current levels. 

What I really like about Auto Trader is the fact that it’s so cash generative. Last year, the firm generated £187m of cash from operations and only spent £3m on capital spending, giving a total free cash flow of £184m. Management was able to use this cash to reduce debt, buy back stock, and fund the company’s dividend. It’s difficult to ignore these market-leading cash returns, and as earnings continue to expand, I think they’re only going to improve.

Analysts have pencilled in earnings growth of 11% for 2019, and 13% for 2020, putting the stock on a 2020 P/E of 25.9. This might appear expensive, but the company is also trading a price to free cash flow ratio of 26.9, in line with the software and IT services sector average. With this being the case, I think it’s worth snapping up shares in Auto Trader today. There’s a dividend yield of 1.3% on offer for income investors as well.

The post 2 FTSE 100 growth stocks I’d grab for my Stocks and Shares ISA right now appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Auto Trader. 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.

I think this is a mistake and it could only be a matter of time before investors realise what is on offer here and rush to buy back into the company. 

So, here’s why I’m buying Prudential before the market comes to its senses.

Global growth

Prudential is a truly global operation. Its Asian division has grown to become its most prominent and most successful business over the past decade, and analysts don’t see this part of the group slowing down any time soon. 

However, the share price has been held back by the company’s exposure to the slower growing UK market.

The good news is, last year management announced plans to split off its UK business from its US and Asian operations, both of which I believe have much more than long-term potential. The UK business will comprise asset manager M&G, which currently manages around £351bn, and its UK-focused insurance and pension business.

Management believes Prudential could be worth more as two separate businesses rather than staying together as one. The City seems to agree. Analysts think the stock could be worth more than 2,000p a share when broken up. I have also heard rumours that Lloyds Banking Group could be interested in taking over the separated UK business. Meanwhile, Chinese insurer Ping An has been touted as a potential acquirer of the Asian unit.

These rumours and Prudential’s impending break-up lead me to conclude the enterprise will be worth substantially more in several years than it is today.

Outstanding track record 

Another leading FTSE 100 stock that has recently caught my attention after sliding 16% is insurance group Hiscox (LSE: HSX). 

Over the past five years, this company has consistently proven itself as a profit engine, and the stock has smashed the broader market. For example, over the past 15 years, shares in Hiscox have yielded a total return of 14.8%, a performance that helped the firm achieve a place in the FTSE 100 last year.

Recently, however, the stock has come off the boil as analysts have turned more cautious on its outlook. In October last year, the City was forecasting earnings per share (EPS) of just under 80p for the group for 2018. Now, the average earnings target for 2018 is 41p, a drop of nearly 50%.

Because insurance is a relatively unpredictable business, this kind of earnings volatility isn’t unheard of. Looking back at Hiscox’s own earnings record, I can see at least one year in the past five where EPS fell more than 90%, and at least three years of 20%+ EPS growth. Indeed, even though analysts have revised down their forecasts for 2018, they are still expecting year-on-year growth of more than 300% because 2017 was an unbelievably lousy year for the insurance industry.

This kind of volatility might put some investors off, but considering Hiscox’s history of generating wealth for investors, I’m not one of them. I think now would be the time to buy the stock and take advantage of recent declines. To sweeten the deal, there’s a dividend yield of 2.4% on offer as well.

The post 2 FTSE 100 stocks I’m buying before the market comes to its senses! appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Prudential. The Motley Fool UK has recommended Prudential. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Hiscox (LSE: HSX) is a great example. Over the past 15 years, shares in this insurance giant have produced a total compound annual return for investors of 15.1%, turning £1,000 into £8,200. 

I believe this performance is set to continue.

Growing business

Today Hiscox reported yet another set of strong results, sending the shares up by just under 8% at the time of writing.

It reported numbers for the first half of the year, noting “strong growth” in insurance premiums written across the group. Pre-tax profit increased 27% to $164m following an increase of 21% to $2.2bn in the value of insurance premiums written. 

The group’s combined ratio, a quick and easy measure of insurance profitability, declined to 88% down from 91% in the previous period (if the combined ratio is less than 100%, the insurance business is profitable).

On the back of these numbers, Hiscox’s management has rewarded shareholders with a 5% increase in the interim dividend. The current dividend yield is 2.3%. 

The bulk of the company’s growth over the past few years has come from its retail division. According to today’s update, this business is on track to hit 1m customers this year, which is still relatively small compared to the size of the insurance market. Motor insurer Admiral, for example, has nearly 6m customers, so there’s plenty of room for Hiscox to expand further in my view. 

As it continues to invest and build out its retail business, I believe that it can continue to produce double-digit annualised returns for investors. And looking at City expectations for growth, the shares are not too expensive either as they trade at a 2019 forward P/E of 16 — not too bad for a business that is expected to grow EPS 31% over the next two years.

Income champion 

Another company that has a record of producing market-beating returns for investors is River and Mercantile Group (LSE: RIV).

This asset management business has attracted my attention due to its dividend potential. This year, analysts have pencilled in a per share payout of 17.1p, giving a dividend yield of 6%. Next year, the company is expected to hike its distribution 10%, which will provide an estimated dividend yield of 6.6% at the current price.

Like Hiscox, River and Mercantile is also benefiting from rising demand for it services. According to an update published by the company today, fee-earning assets under management increased 9% across the group for the 12 months ended 30 June, putting the firm on track to hit the City’s EPS growth target of 17% for 2018. Based on this estimate, the shares are trading at a forward P/E of 14.8, an attractive multiple for a business growing earnings at a double-digit rate.

What’s more, this company has more than £20m of net cash to back up the dividend. In fact, this cash balance is equivalent to just under 10% of River’s current market capitalisation of £232m.

The post This FTSE 250 income and growth stock could double your money appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Admiral. 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.

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.