In the unpredictable world of investing, market dips can be nerve-wracking, as we learned last week. But for savvy investors, they’re also golden opportunities to snap up quality stocks at bargain prices. One FTSE 100 gem that’s caught my eye is Beazley (LSE:BEZ), a speciality insurer that’s been quietly seeing real success in the market.
What does it do?
The company has grown from a plucky upstart to a major player in the Lloyd’s of London market. But this is no stuffy old insurance company. The firm is at the cutting edge of risk management, offering solutions for pretty much everything, from cyber threats to property risks.
In its latest earnings report, the company smashed analyst expectations, with earnings soaring by a jaw-dropping 178% over the past year. That’s the kind of growth that makes even tech start-ups jealous!
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But despite this performance, the shares are trading at what a discounted cash flow (DCF) calculation suggests could be a bargain price. With this estimate a full 74% above the current share price, and a price-to-earnings ratio of just 4.6 times, it’s possible there’s some real value here.
Of course, it’s not just about the numbers. From the looks of it, management has positioned itself well in the market. It’s a big fish in the Lloyd’s of London pond, which gives it access to a smorgasbord of risk and opportunity. And it’s not resting on its laurels either. The company is making big moves in the cyber insurance space — a sector I suspect is only going to grow as our lives become increasingly digital.
Focus on growth
Now, I know what many investors in the insurance space are thinking. This all sounds great, but what about some income? While its 1.96% dividend yield might not have investors popping champagne corks, it’s a nice little earner on top of the potential for capital growth.
Most interestingly to me, the City bigwigs seem pretty sweet on Beazley too. Analysts are forecasting a potential price rise of over 26% from current levels. Although such forecasts are far from guaranteed, when the suits in the Square Mile are getting excited, it’s often worth paying attention.
Of course, no investment is without risk. Annual earnings are expected to dip by a worryingly high 15% over the next few years. Like all insurers, it’s exposed to the risk of major catastrophes, such as the global IT outage experienced last month. Such an event can spook analysts into forecasting major declines in profits, and is likely the reason for the potential undervaluation. However, in my view, these risks are all part of the sector.
And let’s not forget the regulatory tightrope that insurers walk. Changes in insurance regulations or tax laws could throw a spanner in the works. Plus, as the firm expands into new markets and risk categories, it’s venturing into uncharted waters. So, while I’m excited about the potential, I’m keeping my rose-tinted glasses firmly in my pocket.
I’ll be buying
Regardless, if the market takes another tumble, you’ll find me bargain-hunting for Beazley shares. With its strong market position, attractive valuation, and potential for growth, I reckon it could be a winner for FTSE 100 investors like me willing to weather a bit of short-term turbulence for potentially juicy long-term gains.
