Investing in the FTSE 250 can unearth some hidden gems. One of them is shining in my portfolio right now.
I bought insurer Just Group in November 2023 and added to my holdings last May. And last week, my trading account showed share price growth had hit the magical 100% mark.
Just has kindly doubled my money in less than 15 months. So what should I do now? Let my money run, or cash in and look for the next FTSE 250 recovery play?
One thing’s certain. I don’t expect my shares to double in value again over the next year, as growth trajectory has slowed. While the Just Group share price is up 104% over the last 12 months, it’s only climbed 12% in the last six. No stock keeps smashing the market forever.
The shares have smashed it
It still looks incredibly cheap though, with a trailing price-to-earnings (P/E) ratio of 5.8. That’s well below the index average of 10.7 times.
Recent performance has been impressive too. Its update for the year to 31 December, published on 15 January, showed a 36% jump in retirement income sales to £5.3bn.
It’s making hay in the bulk annuity market, where insurers assume the risk of managing company-defined benefit pension schemes. It recently completed its largest transaction to date, a £1.8bn full buy-in with the trustee of the G4S pension.
New business strain, which reflects the initial loss incurred by a life company in the first year of a policy, is expected to remain low at 2%.
The disappointing news is that Just anticipates full-year 2024 new business margins will be lower than the first half of the year. It said this is principally down to business mix, as it maintains pricing discipline and limits risk.
For income-focused investors, Just might not be the most attractive option. Its trailing dividend yield’s a modest 1.27%. That pales in comparison to FTSE 100 insurers Aviva and Legal & General, which yield 6.7% and 8.6% respectively.
High growth, low income
Analysts’ sentiment is positive but not ravingly optimistic. The seven brokers offering one-year share price forecasts have produced a median target of around 186p. If correct, that’s an increase of 14% from today.
Five out of seven analysts rate it as a Strong Buy, and two as a Buy.
There are risks. While the bulk annuity market offers a huge growth opportunity, it’s very competitive. Also, sales of individual lifetime annuities may fall once interest rates start dropping from today’s relative highs. If that happens, profit growth will slow.
I won’t add to my stake in Just. It’s reasonably large after its blistering run. Also, I already have more than enough exposure to the UK financials sector. It’s proving to be a happy hunting ground for both dividend income and share price growth.
I’m expecting solid returns ahead, but won’t push my luck. There are other FTSE 250 stocks I’d like to buy. Maybe they’ll double my money too. No guarantees though.
