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Why Legal & General's Graph Looks Like a Stairway to Heaven

By Malcolm Stacey | Friday 14 July 2017

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Turners. As I’ve mentioned before, I’m a fan of insurance companies. They seem to be the one arm of the financial industry which is really coming along. Firms like RSA (RSA), even with its massive PE ratio, and Admiral (ADM) are paddling forward nicely in the river of capital returns and juicy dividends.

But my biggest holding, and most favoured share, is Legal & General (LGEN). In the few years I’ve held, when I admittedly bought at the bottom, I am approaching a three bagger. While the big divis keep piling in. The PE ratio I have is only 12.3, well below my ‘begin to get worried’ factor of 20.

L&G profits have not faltered in their steady march upwards, having piled on weight for at least five years now. Earnings per share have grown from about 13p to 21.2p over the same golden period. And the share price climbs slowly, but remorselessly, up. It’s improved over the last 12 months by nearly 40%.

Is it time to take profits, then? Well, I’m not going to sell, if only because that happy dividend keeps rolling in.

The group is into all the big money-making activities. They include mortgages, car and house insurance, medical cover, retirement packages, pensions, unit trusts and ISA’s. It appears to operate mostly in Blighty, but has interests elsewhere, including the USA and Holland.

The five year improving record of Legal & General is a tremendous asset. If it falters now, it will probably only do so because the world economy crashes. That is not to be ruled out, especially in these politically dangerous days. But if you think shares will not be decimated soon, then Legal & General seems a better investment opportunity than most.

That’s what we believe in the Punter’s Return.

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