How long have you held company Austbrokers?
We have held it since our Small Companies Fund inception back in October 2010.
What do you like about it?
Austbrokers has a unique “owner driver” model whereby it takes stakes in insurance brokers. The brokers receive the benefits of scale, along with administrative and strategic support. Austbrokers receives revenue primarily from insurance commissions and fees. The company is well run, having delivered strong growth for investors since it listed on the stock market.
How is it better than its competitors?
The company is one of the largest broking networks in Australia with a strong regional presence. Austbrokers has been very successful at consolidating broking firms, though growth has been achieved both organically and via acquisitions.
What do you like about its management?
Management has a track record of delivering strong earnings growth in excess of market consensus. At its most recent results, full year guidance was once again upgraded. The dividend was also increased.
At what point would you sell it?
On valuation grounds and/or other compelling investment ideas, which could displace the stock in the portfolio. For example, deterioration in the SME sector could hurt earnings and an increase in competition for acquisitions could also crimp growth.
Stock Chart for Austbrokers (AUS)
How much has it added to your overall portfolio over the last 12 months?
The stock is up in the vicinity of 50% over the last 12 months. As one of our larger positions, Austbrokers has provided a strong contribution to our portfolio’s return over this period.
Where do you see the value?
The premium rate cycle is ‘hardening’, which is a positive for Austbrokers, though the company notes that some segments, such as property, are stronger than others. Cross-selling opportunities, growth in other business lines, along with further acquisition opportunities are positive drivers of earnings and supportive of the share price.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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- Penny Pryor: Residential property – Top 20 city areas set for growth
- Margaret Lomas: Things to watch out for when buying off-the-plan
- James Dunn: Four tips for an SMSF property strategy
- Roger Montgomery: Some smaller targets to consider – TRS, CCV and SIV
- Tony Negline: Question of the week – Investment properties and SMSFs
