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Telegraph
19-05-2025
- Business
- Telegraph
This dull-and-reliable investment offers stability amid stomach-churning volatility
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. We all crave fun and excitement. In the stock market, that means dull-and-reliable investments often get overlooked. But during periods of stomach-churning volatility, as we have experienced during 2025 so far, the virtues of the dull stuff suddenly become much clearer. Dull-and-reliable investments tend to make themselves known through two key attributes. One is relatively stable share prices. The other is attractive cash returns; what could be duller after all than a business with nothing more exciting to do with its cash than to dutifully hand it back to its owners. US employee benefits specialist Unum displays both these characteristics. This may help explain why top investors have been increasing their bets on its shares. Nine of the world's best fund managers, all among the top-performing 3pc of over 10,000 equity pros monitored by financial publisher Citywire, hold Unum's shares. And increased smart money interest has this month seen the company propelled to be among the 74 constituents that make up Citywire's Global Elite Companies Index, which represents the very best ideas from around 6,000 stocks held across the portfolios of the world's best money managers. Unum is an insurance company that specialises in selling a range of work-related financial protection and wellbeing services through employers and also directly to individuals. Its portfolio includes disability, life, accident, critical illness, cancer, dental and vision cover. Offering such a broad range of policies makes it attractive as a one-stop-shop to clients, especially as employers increasingly look to compete for staff based on the overall benefits they offer as opposed to just salary. Unum is more profitable than most of its peers. Its leadership in disability insurance is a particular advantage that underpins its competitive position. The complexities of disability insurance limits competition and differentiates Unum to customers. This is reflected a return on equity of over 20pc reported by Unum in 2024. Meanwhile, book value per share has grown at an annualised rate of 9pc over the last ten years. The company generates large amounts of cash from its business, too, which it returns through share buybacks as well as dividends. Buybacks have more than halved Unum's share count since 2007. Buybacks are only a real benefit to shareholders if the shares bought offer the prospect of a good return. Fortunately, in the case of Unum this looks like the case based on its shares' forecast free cash flow yield of over 10pc and a price equivalent to less than nine times forecast earnings for the year ahead. Unum has said it will aim to buy back between $500m (£376m) to $1bn of shares this year and is forecast to pay out over $300m in dividends. Taking buybacks at the proposed mid-point, that's equivalent to a hearty total shareholder yield (buybacks and dividends as proportion of market capitalisation) of 7.3pc. British buyers of the shares, which are available through all the UK's main brokerage platforms, need to fill out the correct paperwork to minimise withholding tax on dividends and should also check for any additional overseas dealing charges. The company looks particularly well set up for cash returns given there is $2.2bn of liquidity at the holding company level, which is expected to rise to $2.5bn by the year end. That's well above a target level of about $500m. The strong financial position has been helped by a reinsurance deal covering a $3.4bn chunk of Unum's closed book of long-term care insurance policies, equating to 20pc of the total. Closed books are made up of policies that have previously been sold and are still being serviced but are no longer being marketed. The deal reduces risk as well as freeing about $100m of capital. Business risks have also been reduced over the last several years by moving the investment portfolio into safer assets. However, taking on risk is what the insurance game is all about, which means the possibility for upsets always exists. One such recent worry for investors has been an uptick in disability claims in Unum's first quarter. Management believes this is nothing out of the ordinary, though, and consistent with long-term trends. More generally, sales growth and premiums are both strong and the company believes digital investments will continue to help it attract new customers while nudging up the persistency of policies that have already been taken out. There's plenty to take comfort from. During times of uncertainty, that's a valuable thing, especially when it is accompanied by large cash returns.
Telegraph
12-05-2025
- Business
- Telegraph
You've probably forgotten the value of the infrastructure this firm maintains
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Time was when people would use their mobile phones to make calls. Now, even a text – especially from one's offspring – can feel like a luxury. On the other hand, taking photographs, streaming films or music, shopping, consuming news, gaming and doing 'the socials' are all de rigeur for a modern mobile. Deutsche Telekom facilitates all these things and more across Europe. The Germany-based global group provides landlines, mobiles and broadband connections to consumers and businesses. It also provides IT, TV and digital connection services through its own networks, as well as cloud computing and data centres that it both owns and operates – and it is exposed to more of the same in the US through its 52pc stake in T-Mobile. In short, this self-styled 'digital telco' provides pretty much everything that anyone might need to operate in an internet-dependent world. The company also boasts strong smart money backing. Its shares are owned by 13 of the best-performing fund managers worldwide, each of them among the top 3pc of the more than 10,000 professional investors whose performance is tracked by financial publisher Citywire. Based on the strength of their conviction, Deutsche Telekom is AAA rated by Citywire as well as being a constituent of the Citywire Global Elite Companies index, which tracks 74 of the very best ideas from the 6,000 stocks held across top managers' portfolios. The shares, listed in Germany, have gained more than 40pc over the past year, but remain very affordable. The stock can be bought through the UK's main brokers, although buyers should be sure to fill in the forms minimising withholding tax and check with their provider for any additional overseas dealing charges. The picture wasn't always as rosy for the formerly state-owned group, which several decades ago was almost brought to its knees by the weight of its debt burden. Like peers across Europe, Deutsche Telekom had spent billions buying licences to operate 2G networks. When it was clear that its debt levels were unsustainable, the group was forced into a painful restructuring amid losses, write-downs and tens of thousands of job cuts. The Deutsche Telekom of today is still running up debts – it has had expensive 5G network infrastructure to build after all. But the big difference is that its borrowings are now much more manageable. Net debt equates to less than three times earnings before interest, tax, depreciation and amortisation (Ebitda). That's within the company's target parameters and comfortable given the reliable nature of demand. Financially, Deutsche Telekom set records last year, clocking up adjusted Debita of €43bn on net revenues of €16bn. The vast majority of its turnover comes from service revenue, which excludes product sales such as mobiles and landline phones. The group, which was privatised 30 years ago, remains a market leader in Germany and is the biggest telecom operator in Europe. It also has an IT provider, T-Systems, which essentially 'digitalises' businesses, including in the UK. But the jewel of Deutsche Telekom's crown for the past five years has been T-Mobile, the US group it has majority owned since 2023. T-Mobile operates the largest 5G network in America and has been riding high on demand among consumers and businesses for high-speed internet connections. It is the second-largest mobile operator in the country with 130 million customers and it is expecting customer numbers to continue to rise in the year ahead. This success has meant that the US has become an increasingly important part of the group, accounting for 46pc of shareholder profits last year. Given the strong momentum in the US telecoms market, and for T-Mobile in particular, the business is likely to underpin Deutsche Telekom's earnings in the years to come. Indeed, the group plans to use the surplus funds in part to increase its stake in T-Mobile, the value of which currently represents 82pc of market capitalisation and 45pc of enterprise value (market cap plus net debt). Deutsche Telekom shares carry a dividend yield of just over 3pc and cash returns are bolstered by share buy backs that should be worth up to €2bn in total this year. Meanwhile, the stock trades at a respectable multiple of around 15.4 times forecast earnings. Given T-Mobile's shares are valued at 21.4 times expected earnings, that means the group's market leading European operations are valued at an attractive 10.3 times forecasts. Miles Costello is a contributing journalist for Citywire Elite Companies.
Yahoo
08-05-2025
- Yahoo
Former Bournemouth student wins international award for investigative journalism
A FORMER Bournemouth University student has won a prestigious award for his journalistic work. Drazen Jorgic was among a group at Reuters awarded the Pulitzer Prize for Investigative Reporting for its coverage of the fentanyl crisis. He said: 'It's the honour of my life. It's a lifetime honour to be award a Pulitzer. 'It's something that I didn't even dream about when I studies journalism. It just seemed so far award. Even though my anticipation at Bournemouth University was investigative journalism, so it's always been a passion of mine. 'So, to win a Pulitzer, it's just bonkers.' (Image: Drazen Jorgic) The Pulitzer Prize is an annual award presented for outstanding work in journalism, literature, and music and is considered one of the highest honours in these fields. The investigative series revealed how Chinese fentanyl chemicals are transported to Mexico where they are processed into the drug and trafficked to the United States. As part of his reporting, Drazen met with drug traffickers and cartel members to tell the story of how fentanyl is produced. Of the award-winning series, Drazen said: 'It was probably the highlight of my career. 'It was the most challenging and most rewarding journalistic endeavour that I've been involved with." Drazen added without the work of a specialist team of reporters, photographers, visual journalists and working across borders the story would have been 'impossible'. Drazen studied journalism at Bournemouth University from 2005 to 2008 before being accepted on the Reuters graduation scheme, before establishing himself as an investigative journalist in Mexico and Central America. He said he still has fond memories of Bournemouth: 'Bournemouth has a great journalism course. I leaned a lot. The beaches were absolutely fantastic.' His former university lecturer, Tom Hill, said: 'Winning the Pulitzer Prize for Investigative Reporting is the stuff of dreams for any journalist and Drazen Jorgic is a truly worthy recipient. 'It was awarded to Drazen for his dedicated and courageous work in exposing the international trade in the deadly drug fentanyl. 'I first met him 20 years ago when he was 18 and applying for a place to study journalism at Bournemouth University. Looking back, he already possessed many of the hallmarks of a great journalist." After completing his degree, Drazen went on to work for Citywire before being accepted onto the Reuters graduate training scheme. 'I have nothing but fond memories of both the university and the journalism course," Drazen added.
Telegraph
05-05-2025
- Business
- Telegraph
IT meltdowns cost billions per year. This company is paid to avoid them
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. If you're going to develop software for a financial institution, you'd better make sure that it doesn't suffer glitches. The world of pain that awaits a bank or asset manager that experiences an IT meltdown can include customer fury, millions in fines and settlements and a blow to their reputation that can take years to rebuild – with no guarantee of fully recovering. For the technology firm responsible, the contract is unlikely to be renewed and their name in the industry will be mud. But get it right and the bond of trust can be financially rewarding. Just as well, then, that SS&C Technologies is good at this stuff. This US-based tech business provides a wide array of software and services to banks, hedge funds, private equity and asset managers, in areas such as funds accounting, investor reporting, risk analytics and regulatory compliance. It also offers administrative tech services in the healthcare sector and has been active in its field for nearly 40 years. SS&C Technologies has made extensive use of mergers and acquisitions to supplement its organic growth over the years. While this has made it a fast-growing business, it also led to a period of necessary restructuring and temporary slowdowns in momentum in both trading and the shares. For some investors, this represents an opportunity. Some of the world's most successful investors have bought into SS&C Technologies, each of them among the top 3pc of the more than 10,000 equity managers whose performance is tracked by financial publisher Citywire. Their level of conviction means that SS&C Technologies has been awarded a top AAA rating by Citywire. It is also a constituent of Citywire's Global Elite Companies index, which tracks about 80 of the very best ideas of the world's best fund managers from the 6,000 stocks held across their portfolios. There are 10 of these investors on the company's share register, including Evan Fox, whose holding sits in the Pzena Mid Cap Value Fund he manages. The analyst on Fox's team who covers the stock is Akhil Subramanian, who said the fund invested as the company consolidated its business following 'heavy M&A activity'. Subramanian says: 'We invested in late 2021 on the premise that the company's restructuring was nearing completion, and that organic growth would accelerate, which it has begun to do.' The shares are currently around the level when Fox's team first started buying over three years ago. Over the course of the past five years, SS&C Technologies has moved to simplify its internal structures and refinance debts. It has also been buying back shares, which it has in the past regularly issued to part-fund acquisitions. It has also launched a range of new products and upgrades, secured a string of additional institutional clients and continued to pursue takeover deals. Customers of SS&C Technologies include Federated Hermes, Aberdeen and Jupiter Asset Management. Subramanian noted that SS&C Technologies was a 'sticky business' that attracted strong customer loyalty, with a client retention rate in the high-90pc area. This helped it manage price increases during recent periods of inflationary pressure. Subramanian also pointed to the company's substantial cash flows that underpin its financial health and ability to return cash. Shares in SS&C Technologies, which are listed on the tech-heavy Nasdaq exchange, are available through the UK's main stockbrokers. Potential buyers should fill in the forms needed to minimise withholding taxes and check for any additional dealing charges. SS&C Technologies has a solid track record with adjusted earnings per share (EPS) growing at an annualised rate of 7.2pc over the last five years, while annualised growth is forecast to be 9.1pc over the next two. The company also boasts solid operating margins, which rose from 21.1pc to 22.8pc last year. Meanwhile, the balance sheet is strengthening. Net debt is expected to drop from 2.8 times earnings before interest, tax, depreciation and amortisation (Ebitda) last year to a much more comfortable 1.6 times by 2027. Despite these attractive characteristics, the valuation of the shares is far from challenging. SS&C Technologies stock trades for 12.8 times this year's forecast earnings, low for a tech business, and are expected to pay a dividend yield of 1.3pc. This is a quality player worth owning. Questor says buy Ticker: NYSE:SSNC Share price: $77.70 Miles Costello is a contributing journalist to Citywire Elite Companies
Telegraph
28-04-2025
- Business
- Telegraph
After seven years of tough Fed restrictions, this bank is about to be set free
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Banks can be incredibly accident-prone. Fat-fingered trades, compliance failures, loan-book blow-ups and run-ins with regulators seem to be par for the course across many of the world's big lenders. A case in point is Wells Fargo, the US-headquartered multinational financial services group. It has found itself mired in controversy several times over the years, including after it admitted levying insurance charges on people with car loans without them knowing about it. But its biggest snafu came in 2016, when staff were found to have created 1.5 million fake deposit accounts in order to meet aggressive sales targets. As well as public opprobrium and hundreds of millions in fines and settlements, the scandal led, in 2018, to the Federal Reserve imposing a $1.95 trillion asset cap on the bank. In essence, this limited the bank's ability to expand its balance sheet, substantially grow its loan book or power ahead with its trading business until America's central bank was happy it had put its house in order. Its rivals on Wall Street, including JP Morgan and Citigroup, were able to expand their market share, while Wells Fargo was limited in what it could do. The good news for the bank, and for its shareholders, is that the Fed is reportedly preparing to lift the cap during the course of this year after Wells Fargo managed to resolve a string of regulatory actions against it. While the bank's shares have gained ground in anticipation since Reuters first reported the likely move late last year, they remain attractive compared with peers. While there are now worries that a slowdown in the US economy could hit banks hard, and share prices in the sector have fallen to reflect this, Wells Fargo is nevertheless very popular with world's best-performing fund managers. It is backed by 28 of these investors who are each among the top 3pc of the more than 10,000 equity managers whose performance is tracked by financial publisher Citywire. The company is rated AAA by Citywire, based on the high level of smart money backing. Its shares are also a constituent of Citywire's Global Elite Companies index which tracks around 80 of the very best ideas from the around 6,000 stocks across top managers' portfolios. Wells Fargo's New York-listed shares are available through the UK's main stockbrokers but buyers should be sure to fill in forms for minimising withholding tax and check with their provider about any additional dealing charges. The potential for Wells Fargo to be free to grow is not the only reason to buy the shares. The group beat analysts' forecasts in the fourth quarter, driven by a stellar performance in investment banking, an area the bank has been prioritising given it can be very lucrative and is also 'asset light', which means it is not a drain on the constrained balance sheet. Wells Fargo is also forecasting an increase in net interest income – the balance of what it charges borrowers and the amount it pays out to savers and a closely watched measure of bank profitability. The picture is complicated by Trump's blizzard of tariffs earlier this month, which, if it plunges the US into a recession, will be bad for all banks. Yet, although this makes any bank a reasonably risky buy, Wells Fargo's relative weakness against bigger peers also means it potentially has less to lose and more to gain from swings in sentiment. During the market rout that followed Trump's tariffs announcement, shares in the bank fell less than those of Citigroup, for example, though admittedly on a par with JP Morgan. For now, Wells Fargo's various businesses are looking resilient. The consumer division, which would be expected to be vulnerable in a downturn, has been showing signs of growth, the bank said in January. Provisions for potential credit losses have been falling. The bank has been making progress in its wealth management arm and the surge in growth of its investment banking unit shows it can compete with the biggest players for deal fees. Wells Fargo's shares trade on 11 times next year's forecast earnings and carry a prospective dividend yield of 2.6pc. One for the longer term.
