On 30 November last year, I decided FTSE 250 financial services advisor Just Group (LSE: JUST) was the best share to buy for my portfolio. And I was right. It had soared 92.57% since then, more than any other stock I hold.
Just has a laser-like focus on later life and retirement income, selling products such as annuities and equity release lifetime mortgages. I thought it should do well as the population ages and grasps the importance of these things.
Just Group is my best stock in 2024
Three days before I parted with my cash, I wrote this on the Fool: “Just has a much narrower product focus than FTSE 100 equivalents such as Aviva and Legal & General Group, which has made it more turbulent”.
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In 2018, Just shares took a beating after the Prudential Regulation Authority (PRA) introduced new rules for calculating capital reserves for companies offering annuities. This forced Just to raise additional capital, spooking investors who feared dilution.
The shares plunged and continued to idle once the issue was resolved. JP Morgan was awake to the opportunity, noting that Just is “clearly punching above its weight” in the fast-growing UK pension risk transfer market, where it has a 10% share. It also benefited from the annuity resurgence, as interest rates handed retirees a better return.
I should add a disclaimer here. When I’m not writing for The Motley Fool, I’m a personal finance journalist, so I know the Just PR team. That applies to a heap of financial firms though and I wouldn’t gamble my retirement pot on them for that reason.
This stock could smash it in 2025 too
I invested because I thought the shares looked ridiculously under-valued trading at what I called “a rock bottom valuation of just 4.24 times earnings”. The price-to-book ratio was a mere 0.4. This seemed plain wrong for a company that had just doubled first-half sales to more than £1.9bn. So I swooped.
Over 12 months, Just’s shares are up 85.66%. Yet the shares still look incredibly cheap, trading at 5.57 times earnings.
Last month, Just announced its biggest ever bulk annuity deal, a £1.8bn full buy-in with the G4S Pension Scheme, covering 22,500 members. On 19 November, JP Morgan reiterated its Overweight rating and lifted the price target from 190p to 200p. Today, the shares trade at 159.9p. That suggests another 25% of potential upside.
One thing worries me. When interest rates fall, the boom in personal annuities could deflate, hitting profits. As a smaller player, that would hit Just more than Aviva or L&G. Investors are optimistic today but that can change in a moment.
By contrast to other insurers, the yield isn’t much to shout about at 1.31%. That’s partly down to its rocketing share price though, as management is progressive.
If I didn’t hold Just Group I would buy it. I expect another positive year in 2025, although nothing to match what we’ve just seen. I’ve got enough exposure now, thanks to the strong run, and will look elsewhere for next year’s big winner.
