SIF Portfolio: Cyclical turn could make insurer Jardine Lloyd Thompson too cheap to ignore

Tuesday, Apr 17 2018 by
SIF Portfolio Cyclical turn could make insurer Jardine Lloyd Thompson too cheap to ignore

Last week I wrote about the restricted choice of stocks on offer in the Stock in Focus screen. This week the choice has shrunk even further.

Of the 16 stocks which qualify for my screen at the time of writing on Monday, two are Russian and six are already in the SIF portfolio. A further five are sector duplicates I won’t buy for diversification reasons. And one (Hogg Robinson) has received a takeover bid, so is ruled out.

That leaves just two stocks:

The portfolio rules say that the stock with the highest StockRank should be considered next. So Jardine Lloyd Thompson is the stock I’ll be considering this week.

Jardine Lloyd Triple-bagger

FTSE 250 financial stock Jardine Lloyd Thompson may not be a company you’re familiar with. But savvy investors have snaffled a 50% gain since February 2016. Longer term investors have tripled their money over the last 10 years.

The group’s business has two divisions. The larger one is known as Risk & Insurance and provides specialty insurance, reinsurance and broking services. This includes providing cover for airliners, energy industry assets, shipping cargo, buildings and much more.

The smaller half of JLT’s business deals with providing outsourced Employee Benefits. This includes pension administration, healthcare and life insurance and other services with a finance tilt.

The group has a market cap of £2.7bn and trades in the FTSE 250. It was formed when Jardine Insurance Brokers merged with Lloyds Thompson Group in 1997. But as the name suggests, Jardine Insurance was originally spun out Hong Kong-based trading company Jardine Matheson, whose history can be traced back to 1832.

The Stockopedia graphic shows that Jardine Lloyd Thompson’s free float is just 54.8%.


The reason for this is that Jardine Matheson holds a 40% stake in the firm. This probably means that a takeover bid is unlikely here, but I don’t see that as a big problem.

The company comments that Jardine Matheson’s “reputation and local knowledge are of great value” when dealing in Asia. Having a dominant shareholder doesn’t seem to have held back growth or shareholder returns, either:



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Jardine Lloyd Thompson Group plc (JLT) is a provider of insurance, reinsurance and employee benefits related advice, brokerage and associated services. The Company operates through three segments: Risk & Insurance, Employee Benefits, and Head Office & Other operations. The Risk & Insurance segment consists of JLT's global specialist, wholesale, reinsurance broking, personal lines, and small and medium-sized enterprises (SME) activities. The Employee Benefits segment consists of pension administration, outsourcing and employee benefits consultancy, healthcare and wealth management activities. The Head Office & Other segment consists mainly of holding companies, central administration functions and investments in associates. It provides a range of services to clients and insurance market counterparties in areas, such as captive management, claims management and administration, and capital raising and corporate insurance advice. more »

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17 Comments on this Article show/hide all

Nick Ray 17th Apr '18 1 of 17

After reading your analysis of the figures I wondered why Jardine Lloyd Thompson (LON:JLT) had not appeared on any of my screens since it seemed to be well within the kind of values that I typically screen for.

The answer was for reasons like this:

  • 1y Volatility -- recorded as N/A
  • Beneish M score -- N/A
  • Gross profits to assets -- N/A

It is slightly frustrating that otherwise interesting stocks can fail a screen because data for a particular rule is not available. I have no idea why the Volatility is not available since Jardine Lloyd Thompson (LON:JLT) has definitely got more than enough price history to compute it.

An option to specify how to treat N/A (i.e. as a pass or fail) for each rule would be quite handy.

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cafcash49 17th Apr '18 2 of 17

Thanks Roland, really interesting. Can you help me? Where do you find the Value, Quality and Momentum components on the Stock Reports? I am a regular user of Stockopedia but you are pulling out slightly different data to the normal reports.
A response here when you can would be useful. Keep up the great work.

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herbie47 17th Apr '18 3 of 17

I think it's important to point out that Jardine Lloyd Thompson (LON:JLT) is a broker, it's not an insurer or underwriter, so if there is huge catosphere it will not produce losses, in fact it will gain as premiums shot up, mind you as it places a lot of reinsurance then it will have a lot more work. Yes rates of exchange are important, most insurance business is in US$s, so if the £ goes up it's not good news, probably why the share price has slipped back this year. I suggested this share after Brexit. The other issue is profits, from some classes of insurance brokers can really benefit from Wars, the war rates shot right up as in the Iran/Iraq gulf conflicts. So yes it could be a god time to buy some.

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leishylegs 17th Apr '18 4 of 17

In reply to post #354088

Hi Charles,

There may be an alternative way to see the individual components but I view them via the Folio screen view.

If there is a stock I am interested in delving into further then I add it into my Watchlist portfolio. Under the portfolio view you see a range of headings along the top for the stock rank and tabs for the the individual ranks such such as growth, value and momentum.

Click on any of those and you see a different screen relevant to the tab you clicked on. On this screen you will see the circle/bob containing the particular ranking score - click on the circle itself and a pop up screen giving the individual scoring components is then shown.

Hope that helps - I have only been able to find the components by going through the folio view route but someone else may be able to add to that/correct me/show a quicker route.



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cafcash49 17th Apr '18 5 of 17

In reply to post #354143

Thanks Richard for taking the time to help. I have got it now. I think it was the way Roland showed the data which is a different view I had not seen before. I must look at those views in more detail for future share research. Roland also helped by pointing out comparing the stock report of some time ago. I have done this before but he made the point of using the data to compare with a view to if it is still good value. I don't think I have explained that very well but I'm sure you know what I mean.
Good investing, are you going to Mello? I am.

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Nick Ray 17th Apr '18 6 of 17

In reply to post #354143

There is also a "back-door" way in which shows the numbers but not the coloured "rank" info:

You just change the stock at the end of the URL to see the stock you want.

Usually the nice way in is the best approach but it does require you to put it into a folio first which is sometimes a pain.

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Roland Head 17th Apr '18 7 of 17

In reply to post #354053

Hi Nick,

Thanks for your comments. In answer to your questions:

Volatility: I've noticed that all the RiskRating volatility classifications are missing today (e.g. Jardine Lloyd Thompson (LON:JLT) was shown as "Conservative" when I wrote the article on Monday, but today it's showing nothing). Your comment about 1y volatility being n/a might be linked to this. I've raised the question with the Stockopedia team.

Beneish M-score: This doesn't apply to financial stocks.

Gross profit to assets: JLT doesn't report gross profit in its accounts, so this isn't available. Gross profit isn't always relevant -- it's mostly of interest for companies which sell physical products, so the gross margin on the product can be measured separately from the company's overall operating margin.

Hope this makes sense. I find that sometimes my screening rules need to be tweaked for financial stocks, to avoid false positives/negatives.



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Roland Head 17th Apr '18 8 of 17

In reply to post #354088

Hi Charles,

Thanks for your question. I should include a reminder of how to find the QVM components in my articles more often than I do!

The easiest way to view the component breakdowns of the QVM ranks is on the sector pages -- just click on any of the rank numbers to see its components. Doing it this way means you don't have to put it into a Folio.



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Roland Head 17th Apr '18 9 of 17

In reply to post #354103

Hi Herbie,

Thanks for pointing this out, I should have made it clear that Jardine Lloyd Thompson (LON:JLT) is a broker only, not an insurer.

As you say, JLT won't face the potential impact of catastrophe losses. Even so, I think the group should benefit if market conditions harden and premiums rise.

It was certainly a good post-Brexit buy!

Regards, Roland

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Roland Head 17th Apr '18 10 of 17

In reply to post #354218

Just an update on this re. missing RiskRating volatility scores

These were missing due to a technical issue, but are now back on the StockReports and should be available for screening again tomorrow (Wednesday).


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cafcash49 17th Apr '18 11 of 17

In reply to post #354223

Thanks Roland and Nick Ray, I have got it now and have found the info as you displayed it in the article. I have to say you are some great guys and gals out there as there are always people who come back with useful tips and answers. Not only is Stockopedia fantastic but the community who use it are great as well. The beauty of investing is it is not a competitive sport so helping each other is good. Thanks one and all. Hope to meet some of you at Mello. Charles

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Nick Ray 17th Apr '18 12 of 17

In reply to post #354218

OK - thanks for the info about volatility. I han't noticed that it was missing for all stocks.

As for Beneish etc, you might think that if the metric was not applicable that it would be a PASS rather than a FAIL really. I suppose it depends what you are trying to ask with any given screen.

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Hot Socks 17th Apr '18 13 of 17

Excellent article thank you. The comparison between the 2018 and 2013 metrics particularly interesting as a way of showing how valuations have or haven't changed over time although it needs an understanding of how cyclical the stock is to understand it properly.

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coniston 17th Apr '18 14 of 17

Thanks Roland, would appreciate your thoughts on how you calculate the earnings yield.On a net profit after interest &tax has been paid the EY comes in around 6%,on a EV/EBITDA close to 9%.

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Roland Head 17th Apr '18 15 of 17

In reply to post #354343

Hi coniston,

The earnings yield is calculated as EBIT/EV (so more or less operating profit/EV).

This provides a measure of profitability and valuation that's independent of capital structure and tax, but which does include the essential costs of depreciation and amortisation.



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leishylegs 18th Apr '18 16 of 17

In reply to post #354178

Happy to help Charles, and I see Nick and Roland have also offered alternative routes to view the figures.

Would've loved to be attending Mello but can't this year due to commitments - maybe next year !



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Keith Olds 23rd Apr '18 17 of 17

As I am a new subscriber still feeling my way, found the article quite helpful, as well as the questions and answers that accompany it. Still have a bit to get my head around, but am quite liking what I am seeing, think it will be a great help for the future.

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About Roland Head

Roland Head

I'm a private investor and writer on stock markets, with a particular fondness for free cash flow, dividends and value. I also have a lingering interest in commodity stocks. In earlier life, I worked as an engineer in telecoms and IT. The rules-based approach required for this kind of work undoubtedly influenced my investing style. I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a large and now defunct Canadian firm.  My investment focus is increasingly on developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. more »


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