What happened? And should investors consider buying the shares following this surge?

Inspecting the share price

As a quick introduction, Beazley’s a specialist insurance group. Rather than offering general products like home and car insurance, the company focuses on niche items that command much higher margins. Think high-value artwork, ransomware attacks on corporations, or professional indemnity.

With rising demand across cybersecurity and specialist property insurance, the company’s revenues, profits, and margins have all been steadily increasing over the last five years. And as a result, even before the recent surge, Beazley’s shares had more than doubled since 2021.

But the catalyst for its latest jump wasn’t another impressive set of results, but rather an unsolicited bid for a takeover.

On 19 January, the Swiss insurance giant Zurich Insurance Group, which has seemingly been eying Beazley for a while now, issued a cash offer to acquire its peer for a total of £7.67bn, or 1,280p per share. This price was significantly ahead of the 820p Beazley shares were trading before. So it isn’t surprising the stock went on to deliver its strongest single-day return since its IPO in 2002.

Still worth buying?

With the stock now trading near 1,130p, there’s still an 13% gap with the proposed acquisition price. So does that mean there’s still an opportunity for investors capitalise on this takeover? Maybe.

The combined enterprise would become one of the largest speciality insurance groups in the world. It would have $15bn of gross underwritten premiums, with unmatched market data and distribution capabilities.

However, it’s important to remember that Zurich’s only submitted a bid. It has until 16 February to make a firm offer. And even then there’s no guarantee of success. In fact, a few days after the bid announcement, Beazley’s board has actually rejected the offer, and Zurich isn’t obliged to make another.

Even if another offer is made and accepted, the deal may also draw the attention of regulators across multiple jurisdictions. Concessions and divestments may be demanded to protect market competition. And this, in turn, could undermine the financial viability of the takeover. This potentially could lead to the whole thing being called off.

So is this a risk worth taking?

Looking at Beazley’s current trajectory, the average consensus from analysts expects earnings per share to reach $1.46 (or 108p at current exchange rates) for 2025. Assuming this target’s hit, this puts the FTSE 100 stock’s price-to-earnings ratio at around 10.6. That’s roughly in line with the wider industry average.

That suggests even if the deal ends up falling through, the stock isn’t outrageously expensive despite the recent share price surge. With that in mind, the risk-to-reward ratio could still be favourable and worth a deeper investigation from investors with a higher risk-tolerance for volatility.

But personally, I’ve got my eye on other opportunities within the FTSE 100 that could have even more long-term growth potential.

The post Up 42% in 1 day! Is this one of the FTSE 100’s best shares right now? appeared first on The Motley Fool UK.

Rising premiums

The first is Beazley (LSE:BEZ). The FTSE 100 specialist insurer is up 4% over the past year. It operates through several key lines of business, including cyber risk, marine, aviation, property and more. It serves a diversified range of clients, ranging from large corporations requiring liability or cyber coverage to SMEs needing business interruption policies.

To me, it stands out for its potential to thrive amid rising inflation. This partly stems from the fact that if inflation stays high, interest rates will remain elevated as well. Historically, insurers tend to fare well in such environments because higher rates enhance their investment yields.

Additionally, Beazley has begun increasing its insurance premiums. I expect the pace of increase to outpace inflation, with the company having the flexibility to raise prices further if needed. After all, insurance is a necessity for many people. Granted, it can’t raise premiums to a ridiculously high level, as clients will go to competitors. But there’s definite scope to boost profits even after factoring in higher inflation.

Finally, Beazley doesn’t make a physical product. This makes it less exposed to rising input prices that come as a result of inflation. However, one risk is higher claims activity. This was a factor in the 45% drop in half-year pre-tax profits, and so needs to be monitored carefully.

Long-term contracts

A second stock is Tritax Big Box REIT (LSE:BBOX). It’s a real estate investment trust (REIT) listed on the FTSE 250 that specialises in owning and managing large-scale distribution centres and logistics warehouses across the UK.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

These big-box facilities are typically very large, modern properties located near key transport hubs and motorway networks. It makes money from the rental income of long-term leases held by blue-chip companies such as Amazon and Tesco. The reason I like it during high inflation periods is because most of the contracts are inflation-linked. This means that as inflation increases, so does the rental income. This protects earnings against inflation, giving it resilient income streams even amid broader economic volatility.

Further, clients of the REIT are large companies that should be able to weather the storm of high inflation. That means the risk of default or cancelling contracts due to going out of business in the short term is limited.

Of course, one risk is that the interest costs on new debt will increase. When Tritax develops a new project, it does finance some of it from the banks. Therefore, if high inflation causes interest rates to stay elevated, it could put some pressure on rising costs.

I think both stocks can be considered by investors as a result of the latest inflation news out today.

The post 2 UK stocks that could benefit from higher inflation appeared first on The Motley Fool UK.

The Lloyd’s of London insurer reported a 2% rise in insurance written premiums. But profit before tax plunged to $502.5m, from $728.9m in the first half of 2024, due to a rise in catastrophe losses. Those losses include the Californian wildfires, and and a wave of ransomware attacks on UK and European retailers.

CEO Adrian Cox said the company’s “commitment to delivering strong profit through the market cycle is demonstrated by our 84.9% undiscounted combined ratio.” That’s a measure of underwriting profitability, and it’s up from 80.7% a year ago.

Risky business

Those of us who invest in the cyclical insurance sector shouldn’t be too fazed by these losses. They happen, they’re part of the business, and we just have to get on with it. But it’s why I think a long-term commitment is especially important here. Thinking of investing in insurance stocks for a minimum of five years? I’d make it at least 10 years, ideally 15 or even 20.

It looks to me as if the long-term focus is still strong with Beazley, considering the relatively muted response to these results. Can you imagine what would happen if, say, Rolls-Royce Holdings or Lloyds Banking Group were to report a 30% fall in profit? More than a 7% drop, I’d expect.

Lowered guidance

These results should have been largely expected, as the insured disasters weren’t exactly a secret. The only thing I see that might have surprised shareholders on the day is a lowering of the full-year outlook. The update spoke of “reducing our growth guidance to low-to-mid single digits, reflecting current market conditions.“

Geopolitical uncertainty, technological challenges, climate change… all add to future risk, the company says. The risks seemed clear enough anyway. If you insure against catastrophic losses, sometimes you’re going to suffer pain.

But the board plans to lessen the dangers by expanding its product diversification. We should hear more on that at the company’s Capital Markets Day planned for Q4.

What should we do?

On the valuation front, forecasts suggest growing earnings. They’d drop the forward current price-to-earnings (P/E) ratio to a bit over seven by 2027 if they’re right. And brokers have an average price target on the stock of 1,030p — 19% ahead of today’s price. And there’s a pretty strong Buy consensus.

What brokers say should be taken with a big dose of caution. But such a strong bullish stance does boost my optimism. I’m wary of the low dividend, mind — others in the sector offer a lot more than Beazley’s forecast 2.7% yield.

Investors who can’t sleep for worrying about the next natural disaster might think about avoiding this kind of business. But for investors who see long-term growth potential in this stock as I do, I reckon Beazley is well worth considering.

The post As the Beazley share price dips on catastrophe losses, is it time to consider buying? appeared first on The Motley Fool UK.

But 2025’s delivered a surprise. So far this year, the Footsie’s returned over 7% — slightly ahead of the S&P 500’s roughly 6.5%. That’s a dramatic change compared to recent years, and a sign that UK blue-chips are finally holding their own.

Dig a little deeper, and it’s clear what’s driving this. A handful of FTSE stocks have smashed expectations, outperforming almost every major US company. 

Mexico-focused silver miner Fresnillo is up more than 130%, engineering heavyweight Babcock’s surged 116%, and Rolls-Royce continues its astonishing multi-year run, gaining another 73% in 2025 alone.

Of all companies on the S&P 500, only Palantir’s in the top three, edging slightly ahead of Rolls this year with 84%. In fifth place is NRG Energy, up 65% year to date.

What’s driving the surge?

Much of the growth comes down to specific tailwinds. Precious metals are soaring amid global uncertainty, fuelling Fresnillo. Defence budgets are booming, propping up Babcock and Rolls. Meanwhile, a recovering oil price and resilient global demand have helped shore up many FTSE stalwarts.

But some of these moves may be getting ahead of themselves. Share prices that rocket on hopes alone can easily become ‘growth traps’, where valuation disconnects from long-term fundamentals. That’s why I prefer to keep a rational outlook when markets go a bit crazy.

Strong earnings, reasonable valuations and solid balance sheets often matter more in the long run than short-term price jumps.

A more cautious FTSE 100 pick

One stock that’s acting more ‘reasonably’ right now is Beazley (LSE: BEZ). The specialist insurer has quietly delivered moderate growth this year, up 8.8% — nothing flashy, but comfortably ahead of the index’s historical averages.

More importantly, it’s supported by solid operating trends. Earnings per share are growing at 9.9% year on year, with revenue up 7.8%. That’s feeding into a healthy net margin of 18% and an impressive return on equity (ROE) of 26.3%.

Valuation also looks attractive. The shares trade on a price-to-earnings (P/E) ratio of just 6.67 and a price-to-book (P/B) multiple of 1.55, suggesting investors aren’t paying over the odds for this quality growth.

It’s not a big income play, but the dividend yield of 2.8% is well covered by a payout ratio of just 18.3%. Free cash flow is reassuring at £1.26bn, comfortably outstripping its £614m of debt. Plus, the dividend has been raised for three years running.

Risks to watch

Of course, insurance can be a volatile business. Beazley faces exposure to large-catastrophe-linked losses, which could dent profits in any given year. It’s also vulnerable to pricing cycles in speciality insurance, which can swing from lucrative to lean quickly if competition intensifies.

But overall, I think it’s the kind of solid British business that’s worth considering for sturdy reliability.

While growth stocks fluctuate wildly, it’s these steady compounders — trading on sensible valuations — that often deliver the best returns over time. When building a diversified long-term portfolio, that’s exactly what investors should be looking for.

The post These FTSE 100 stocks are making a joke of the S&P 500 — but I’m eyeing more ‘rational’ options appeared first on The Motley Fool UK.

However, until recently, I must admit I knew very little about Beazley (LSE:BEZ), the specialist insurer. But it caught my eye after it announced a record-breaking pre-tax profit for 2024 of $1.42bn. That’s a healthy 13% increase on the previous year.

And it comes against a backdrop of an increasing number of environmental disasters, which can be costly to insurers.

Doomsday?

Investors who saw the Financial Times over the weekend (28-29 June) could be forgiven for wanting to avoid the sector. In fact, readers might want to stop investing altogether.

Under the headline: ‘Crash: How the Next Financial Crisis Starts‘, Pilita Clark describes a scenario in which a series of US climate-related natural disasters results in insurers massively increasing their premiums to help recover some of their enormous losses. In the states experiencing the most extreme weather, they withdraw all cover to homeowners.

A cash-strapped government then steps in and offers ‘cheap and cheerful’ policies, which insure less for more. Without adequate insurance, mortgages start to disappear. The property market then crashes and banks incur huge losses before — eventually — collapsing. The rest of the world then follows.

Unlike previous global crises, this one’s been caused by environmental factors.

Challenging times

The likelihood of such a series of nightmarish events becoming a reality is fiercely debated. However, with the planet continuing to warm, the risk of catastrophic weather-related disasters remains an increasing risk to the insurance industry.

For example, the eventual cost to Beazley of Hurricanes Helene and Milton is expected to be $125m-$175m. It’s estimated that the January 2025 wildfires in California will result in the insurer paying claims of around $80m.

By contrast, Beazley’s keen to point out that it has no claims exposure from President Trump’s tariffs.

But the insurer’s investment portfolio is vulnerable to the global economic slowdown that the import taxes could cause. Although three-quarters of its cash is invested in debt securities — both government and corporate bonds — these are not immune to a market downturn.

Onwards and upwards

But investors appear to have shrugged off these concerns. Over the past 12 months – since July 2024 – the share price is up 38%. And it’s more than doubled over the past five years.

This could be due to the group’s impressive return on equity. Since 2014, it’s averaged 15.5%. And this includes the pandemic of 2020, the only year in the company’s 39-year history that it reported a loss.

Beazley’s margin — as measured by the combined ratio — is also healthy. This calculates an insurer’s total costs (claims and expenses) as a percentage of earned premiums.

For 2024, the group’s ratio was 79%. This was an improvement of four percentage points on 2023. According to an October 2024 report in the Insurance Times, the ratio for the UK’s top 50 insurers was 102.2%, which implies that premiums are not covering costs.

Therefore, in my opinion, the business looks to be in good shape and it could be a stock for investors to consider. However, they should be mindful of the sector-specific risks.

The post Here’s a FTSE 100 insurer to consider buying for a SIPP appeared first on The Motley Fool UK.

The price-to-earnings (P/E) ratio reveals what it costs to buy shares compared to what each share earns the company. It’s considered a quick way to gauge whether a company is performing better than it share price suggests.

The right reasons

There are different reasons why a company may have a low P/E ratio so it’s important to assess the reason. Imagine a company’s making good earnings but behind the scenes, it’s headed for disaster. If shareholders are aware of the underlying issue, it could prompt them to sell.

But there are times when great companies with solid earnings still appear cheap. Recently, investors have been increasingly drawn to the US market, driving capital away from the UK. And falling interest rates have shifted attention to other asset classes.

Rather than lose hope, savvy investors see the long-term value in such an opportunity. Those who have been in the game long enough know that the situation can change quickly. Any major shift in global economic policy could bring capital flooding back into the local market, sending prices soaring.

How to identify value stocks

Figuring out which shares might recover in such a situation can be highly lucrative. As mentioned, a low P/E ratio can indicate good value but not necessarily long-term potential.

But when a well-established company with solid financials appears cheap for no reason, that’s a good sign. And right now, the UK market’s brimming with such opportunities.

Stocks to consider

Look at International Consolidated Airlines Group, the company that owns and operates British Airways along with several other EU airlines. For a year before November 2024, it was trading at less than five times earnings – a surprisingly low ratio for such a large firm.

Investors who recognised the value and bought the shares early benefited from the 80% price rise in the past six months. NatWest Group was also trading with a P/E ratio below five for the last quarter of 2023. The price has since recovered over 90%.

Currently, I see another major FTSE 100 stock that’s been trading below a P/E of five: insurance giant Beazley Group (LSE: BEZ).

Despite the stock climbing 61% in the past year, it still has a low P/E ratio. With earnings more than doubling between 2022 and 2023, the ratio’s levelled out. That’s a strong sign that there’s more room for price growth.

The risk is that it’s heavily exposed to growing costs from climate-related disasters. Last year, it wrote off expenses of $175m due to claims from hurricanes Helene and Milton. Another major disaster could leave it sitting with hefty bills to cover.

Analysts seem unfazed, forecasting revenue upwards of £5bn by 2026, along with a 30% earnings increase. The average 12-month price estimate of 973p is around 18.6% higher than today’s price.

Right now, I don’t have spare capital to put into the stock. But I think it’s worth considering for value investors seeking out discounted UK shares.

The post P/E ratios under 5? Are these undervalued UK shares an opportunity to build wealth? appeared first on The Motley Fool UK.

In 2025 I’ll be doing pretty much the same as I’ve been doing this year, looking around for cheap shares to add to my portfolio. I’m intrigued by these two. They’re cheaper than I would have expected.

Lloyds of London insurer Beazley (LSE: BEZ) baffles me. As a rule, shares usually look cheap after falling in value. But the Beazley share price has had a blockbuster 12 months, jumping 53.56%. It’s up 95.67% over three years.

Can the share price keep flying?

Half-year results published back in August showed profit almost doubling from $366.4m to a record $728.9m. Investments and cash up 15% to $11.43bn as “favourable” financial markets boosted its investment portfolio by 4.7% to $513m.

On 6 November, the board reiterated full-year guidance despite a “volatile claims environment”, including a $175m hit from Hurricanes Helene and Milton. And here’s what may explain its low valuation.

FTSE 100-listed Beazley is on the front line of climate change, and as the storm season seems to grow wilder, those claims will keep rolling in. There’s always a risk it will take an outsize big hit. Alternatively, a stock market sell-off will hit that portfolio.

I still think it’s a ridiculously cheap with a price-to-earnings (P/E) ratio of 5.19. The trailing yield is a modest 1.73%. It’ll be on the list when I consider which stocks to add to my ISA in the New Year.

Here’s another anomaly. Insurer Hiscox (LSE: HSX) only joined the FTSE 100 in the September reshuffle, so I expected its share price to be flying as it arrowed into the blue-chip index. Yet it’s only risen 6.16% over the last year. It’s enjoyed a little bump in the last month, presumably as index trackers add it to their portfolios, but I’m a little underwhelmed.

It looks good value too

Hiscox has been in the FTSE 100 before, back in 2020. It took a beating in the pandemic, when it was hit with more than £350m of claims. Event cancellation and business disruption payouts triggered a £269m loss.

The board quickly reversed that in 2021 with a £191m profit. It then multiplied that to £276m in 2022 and £625m in 2023. The trailing yield of 2.7% is handsomely covered 5.5 times by earnings. That’s forecast to hit 3.4% next year, with cover still solid at four.

Hiscox specialises in small business insurance, so could struggle if next year proves tough for the UK economy. Fortunately, it has exposure to the US and Asia too.

It’s very cheap, with a P/E ratio of 6.73 times. Again, climate change risk may explain that. It took a $75m hit from Hurricane Milton. Yet I think today’s low valuation is an exciting opportunity, and I’ll consider adding this value stock to my ISA before the April deadline.

The post 2 cheap shares I’ll consider buying for my ISA in 2025 appeared first on The Motley Fool UK.

The Beazley share price has jumped 32.74% over the last 12 months, at a time when the FTSE 100 rose a modest 7.77%. It’s up 83.84% over three years.

Beazley is a speciality-risk insurance and reinsurance business, which probably explains its unfamiliarity. Those who do know about it often shy away, because this puts it on the front line of climate change. 

Can the Beazley share price continue to kick up a storm?

As the world warms, floods, storms and hurricanes and all the other weather woes heading our way are likely to drive up claims costs.

On 6 November the board said it was facing an estimated hit of between $125m and $175m from Hurricanes Helene and Milton. A good insurer should hedge for this, and Beazley breezed through, reiterating full-year profitability guidance after a solid Q3.

Insurance claims may be volatile but premiums have been rising steadily, up 6.9% to $4.63bn year on year. However, rates on renewal business flattened out after rising 5% last year.

As with any insurer, Beazley has to invest the premiums it receives. Here it did jolly well, with returns up 4.7% to $513m year to date amid increased exposure to equities and high-yield credit. Overall, investments and cash rose 15% to $11.43bn, soothing concerns over flat renewals.

When I looked at Beazley in July, I was impressed by a 155% jump in full-year 2023 pre-tax profit to a record $1.25bn. 

Time to scope out this FTSE 100 stock

Half-year results published on 8 August showed profit at a record $728.9m, nearly double the previous year’s $366.4m. Beazley’s shares spiked on the day but have since idled (along with the rest of the FTSE 100).

Now here’s the thing. The Beazley share price may have grown more than four times faster than the FTSE 100 as a whole over the year, but it still looks great value to me, trading at just 4.83 times earnings. A price-to-revenue ratio of 1.1 also suggests good value. It means I’ll pay £1.10 for each £1 of sales.

The 13 analysts offering one-year price forecasts are really optimistic. They’ve set a median target of 930.5p per share. That’s up an impressive 25.84% from today.

There’s a spot of income on offer, with a trailing yield of 1.92%. Post-pandemic growth has been steady. Let’s see what the chart says.

Chart by TradingView

Risk is Beazley’s business, and a surge in climate-related claims could knock it, of course. Perhaps I shouldn’t get too excited by its low valuation either. It’s been cheap for a while and it may just be that type of stock.

Last year, Beazley suffered an embarrassing blow when the Financial Times spotted an error in its annual report. Let’s hope it’s tightened up procedures since.

Today I’m fully invested, otherwise I’d buy Beazley. I’m keeping it on my watchlist until I get some cash. It still looks like a hidden bargain to me.

The post Despite rocketing 33% this hidden FTSE 100 gem is still dirt cheap with a P/E under 5! appeared first on The Motley Fool UK.

That’s what chartered financial analyst Edward Sheldon discovered recently after carrying out research and writing about it on The Motley Fool. Sheldon reckons those average annual gains delivered an overall return of 241% over the 20-year period.

A Footsie index tracker fund would have beaten cash in the bank. But Sheldon’s unimpressed. He suggests at least diversifying over other indices, such as America’s S&P 500. But he also thinks it may be a good idea to pick individual company shares from the FTSE 100 with the aim of beating the index.

This one looks cheap

That got me thinking. What would I pick right now? Well, I’d research and consider insurance company Beazley (LSE: BEZ). The business is a potential value investment because its cheap on the numbers.

For example, with the share price near 790p, the forward-looking price-to-earnings (P/E) ratio is just over seven for 2025. That compares to a rating of about 13.5 for the FTSE 100 as a whole.

But the stock comes with plenty of risk. Earnings can be cyclical in the industry and insurance companies never know when they’re going to be hit by a tsunami of claims because of some disaster.

The share price chart reveals some of the volatility.

One thing makes me a bit nervous about the shares — City analysts predict flat-lining earnings this year and next. Perhaps the business is near the top of an earnings cycle. After all, earnings progression has been robust for several years now.

Nevertheless, August’s first-half results report’s impressive and has a positive outlook statement. With the goal of beating the performance of the FTSE 100 index, I’d definitely consider this one.

Is growth about to reboot for this business?

However, I’d also run the calculator over global omnichannel sports fashion brands retailer JD Sports Fashion (LSE: JD). To me, this business scores well as a quality and growth proposition.

For example, the dividend’s notched up a compound annual growth rate of just over 92% over the past few years. I reckon a company’s dividend performance can speak volumes about the strength of an underlying business.

That said, with the share price near 130p, the forward-looking dividend yield’s only about 0.8% for next year. So income’s unlikely to provide the greatest gains available on the market today.

But when companies pay modest dividends, it can often be because their directors see plenty of opportunity to reinvest cash flow for further growth. Indeed, City analysts predict an uplift in earnings of just over 15% for next year.

One of the risks though, is that retailing is a cyclical sector. So any half-decent downturn in the economy could torpedo earnings and the share price causing shareholders to lose money. The stock’s suffered much volatility over recent years, as if to prove the point! 

Nevertheless, I’m bullish about the forward-looking prospects for retailers and this company has good form as a fast-growing enterprise. So I’d consider it now.

The post 2 select FTSE 100 shares aimed at beating the long-term return of the index appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

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.

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.

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