Simon Conn is senior portfolio manager at Investors Mutual.
How long have you held Steadfast Group (SDF)?
We have held the stock for over a year.
What do you like about it?
Steadfast is an industry leader in insurance broking and underwriting agencies, representing over 300 broker businesses and 22 underwriting agencies, with combined billings of over $5 billion in premium.
The strength of the franchise lies in the scale of distribution and close relationships with insurers. Steadfast brokers generate recurring earnings. Brokers have low customer churn; they sell an essential product, help clients tailor insurance coverage and assist in lodging claims. Unlike insurance companies themselves, Steadfast’s broking and underwriting businesses take no insurance risk on their balance sheet.
Underwriting agencies represent a complementary part of the business, sitting between brokers and insurers and underwriting specialised or niche lines of business on behalf of insurers.
How is it better than its competitors?
Steadfast has opportunities for organic and inorganic growth. Network premiums have grown at approximately 10% per annum for the last five years. Steadfast has outperformed peers and grown earnings through increased market share, cost savings and acquisitions.
Acquired businesses remain independently managed and require minimal integration, so they can be viewed as low risk.
What do you like about its management?
CEO Robert Kelly established the company in 1996. He has over 45 years experience in the industry and his relationships within the network provide the company with potential bolt-on acquisition opportunities. Having spoken to the company at length, we have confidence in their acquisition discipline and due diligence processes.
What is your target price?
All things being equal, we would expect the share price to reach $1.90 within the next year or two.
Is it a liquid stock?
Steadfast is reasonably liquid as it is a top 200 stock.
Steadfast (SDF)
Source: Yahoo!7 Finance, 24 September 2015
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