Admiral (LSE:ADM) is one of my best shares to buy now. Here’s why I’m looking to add the shares to my holdings at current levels and hold on to them.
Insurance giant
Admiral, set up in 1993, is one of the UK’s leading insurance providers. It is best known for its low cost car insurance for drivers of all ages and abilities as well as higher performance vehicles. It also provides home, travel, and pet insurance products. In recent times, it has played a major part in bringing multi-car products, where policies can cover multiple cars in the same household, to the market.
As I write, Admiral shares are trading for 3,052p. At this time last year, the shares were trading for 2,982p, which is a modest 2% return over a 12-month period.
The best shares to buy now have risks too
Admiral is in a very competitive market. The rise of insurance comparison platforms in recent years has provided consumers with many alternative providers of insurance products. Despite its catchy advertisements, and being one of the best known, there is a threat of losing market share to other players. This could hurt Admiral’s financials, performance, and growth.
One other risk associated with Admiral is its balance sheet, which is linked to an extensive investment portfolio. It uses this portfolio to help support claims. If the value of the portfolio were to decline or take a significant hit, this could severely hurt financials, operations, and returns.
Why I like Admiral shares
Admiral has defensive capabilities. Car insurance here in the UK is a legal requirement, meaning if there were economic issues or a market downturn, consumers would still need to purchase car insurance. In addition to this, car ownership is one the rise throughout the world, which should help boost Admiral and other insurance providers.
Admiral is a good dividend stock too. It currently possesses a dividend yield of over 5%. This is above the FTSE 100 average of 3.2%. Most of my best shares to buy now make a passive income. It also has a good track record of dividend payment and growth. I do understand that if performance levels dropped, or a market crash occurred or a similar significant market event, dividends could be cancelled.
Admiral has a good track record of performance, although I do understand past performance is not a guarantee of the future. Looking back I can see it has achieved revenue of over £1.2bn for the past three years. Coming up to date, Admiral’s last update was in August. This was a half-year report. Admiral reported turnover and profit increased and this led to an interim dividend, which was higher than the interim dividend last year. Full-year results are due next month.
Overall I think Admiral is an excellent stock with some really good attributes. At current levels, the shares look cheap with a price-to-earnings of 13. It has a good track record of performance and dividend payment history and growth too. Admiral is also expanding into international territories, which should support further growth. It is definitely on my best shares to buy now list and I would add the shares to my holdings now.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Admiral Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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