Standard Life shares have been a cracking investment since their float a year ago. But will they continue to do well?
If you either invested in Standard Life
(LSE: SL.)
at float time a year ago or received windfall shares as a with-profits policyholder, you've made over 50% on your shareholding.
As this compares with around 15% upside achieved by the FTSE 100 share index and a similar effort by the insurance sector index, congratulations are in order.
But now, lucky Standard Life holders, what do you do next?
Clearly, if Standard Life is the only share you own, all your eggs really are in one basket. And though it's been a profitable one, never let past performance alone decide your opinion about what to do in the future.
It may be best to sell your Standard Life shares in order to diversify your stock market investments using a UK tracker fund. That said I tend to think of large insurance companies as quasi-investment trusts on account of their large stock and share portfolios.
Standard Life's total funds under management are now some £137bn so by holding the shares you have a sort of market proxy.
If you own Standard Life as part of your own portfolio, holding the shares becomes a matter of relative judgment.
It now sounds surprising to recall that a year ago there was actually a widespread lack of enthusiasm for the flotation, which was indeed shunned by some institutional investors*. Which may account for some of the stock's upside as the professionals have since scrambled to get on board. But the institutions are unlikely to increase their relative weightings much further so the re-rating has probably now happened.
And in the short term there will inevitably be some profit taking as shareholders who have held on for the bonus shares sell out.
Operationally Standard Life is doing well, reporting new business results in May that were ahead-of-consensus for the first quarter and confirming that second quarter sales were maintaining the momentum.
Specifically, new worldwide life and pensions sales in the three months to the end of March were up 40% against last year to £3.9bn, UK life and pension sales were 52% higher at £3.2bn and individual SIPP (self invested personal pension) business increased by 117%.
The company also cut 1,000 jobs which helped improve margins.
With the next set of figures expected to be equally impressive and faster than the industry averages, the general market perception is that Standard Life is a much stronger, more positively managed operation now than pre- float. Cost cutting is expected to continue.
Further out, industry consolidation is possible. In other words the company could be seen as a potential takeover target, which would give the shares an extra boost at some stage.
Of the 11 brokers with a current view on the stock, seven are neutral. So there doesn't appear to be any disconcerting huge over-optimism out there. And despite their quality overall performance, the shares have pulled back from highs of 350p.
So strong business momentum at a sensible valuation (a consensus forecast price/earnings ratio of 13.3 times and a yield of 3.5%) should make the shares a relatively solid investment for long term holders.
And finally ... yesterday we urged Standard Life shareholders who have not yet claimed their windfall shares to do so.
To repeat, if you had a Standard Life with-profits policy set up before 30 March 2004 and which was still in force at the end of May 2006, and you haven't claimed your windfall, contact the company at www.standardlife.com or phone 0845 275 3000.
More: Standard Life Is Priced To Go
