Every month, we ask our freelance writers to share their top ideas for growth stocks with investors — here’s what they said for September!
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Beazley
What it does: This speciality-risk insurance and reinsurance business operates across a host of sectors, including professional indemnity, directors and officers, crime, healthcare, property, environmental liability, marine and political risks.
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By Harvey Jones. Lloyd’s of London insurer Beazley (LSE: BEZ) is one of the unsung heroes of the FTSE 100. Its shares are up 42.19% over 12 months and 91.92% over three years, but never quite get the attention they deserve.
So despite smashing the index, the Beazley share price still trades at a dirt-cheap valuation of just 4.82 times earnings.
One reason is that it’s risky. One or two big claims could hit annual profits, and such is the nature of insurance, they are totally unpredictable.
Beazley is also on the front line of climate change, as floods, storms and hurricanes are likely to drive up claims costs.
Yet on 8 August it announced that it had almost doubled its first-half profit to $728.9m, a record high. It also increased its combined ratio, a key measure of underwriting profitability.
Return on equity jumped from 18% to 28%. Beazley is also exploring a new opportunity in cyber liability insurance.
The yield is so-so at 1.89% but the board should complete a $325m share buyback by the end of the year. I’m keen to buy Beazley in August. At today’s low price, it would be rude not to.
Harvey Jones does not own shares in Beazley.
London Stock Exchange Group
What it does: London Stock Exchange Group is a leading financial markets infrastructure company and data provider.
By Edward Sheldon, CFA. I’ve chosen London Stock Exchange Group (LSE: LSEG) as my top growth stock this month. There are a few reasons why.
One is that the company is performing well at the moment. For the first half of 2024, adjusted earnings per share were up 8.1% year on year. On the back of this performance, the company hiked its interim dividend by 14.8%.
Another is that the company is working with AI powerhouse Microsoft to enhance its financial data platform (which is used by thousands of banks and investment managers worldwide). Looking ahead, I believe the company may be able to capture market share from Bloomberg and FactSet. Microsoft CEO Satya Nadella has said that the products will allow banks to do “more with less”.
Finally, the shares are in a strong uptrend at present. And with the stock trading on a reasonable mid-20s P/E ratio right now, I reckon the trend has legs.
Of course, if the tech sector was to experience some weakness, this stock could experience a pullback. Taking a long-term view, however, I think it has a lot of potential.
Edward Sheldon owns shares in London Stock Exchange Group and Microsoft.
S4 Capital
What it does: S4 Capital is a digital marketing agency network with a worldwide business serving a range of blue-chip clients
By Christopher Ruane. Over the past several years, my holding in S4 Capital (LSE: SFOR) has plummeted in value. That reflects a number of risks I think are still pertinent, from the key man risk of Sir Martin Sorrell’s critical role, to weak demand for advertising. The share, selling for pennies, continues to be risky in my view.
Still, although the formerly fast-growing company has seen declining revenues, I expect it to return to growth in the next year or two. It has signalled that it may also initiate a dividend.
Meanwhile, as advertising has proven more resilient in the current economy than some commentators expected, S4 could return to revenue growth sooner rather than later.
Interim results are due on 19 September. So we will know how well – or not – the business has been doing lately. An impressive client roster, strong digital marketing offering and unique talent pool are among the competitive advantages I see.
Christopher Ruane owns shares in S4 Capital.
