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Tim Steer: why i'm still shorting Admiral
Markets
by Emma Dunkley on Mar 29, 2012 at 14:56
Tim Steer, manager of the £425 million Artemis UK Growth fund , says increasing claims and lower margins are the big factors behind his decision to keep his short on motor insurance firm Admiral
Steer believes Admiral's has grown its business ‘aggressively’ over the last few years, which is part of the reason the firm has produced lower margins recently.
Steer said: ‘One recent shorting success is Admiral, the fast-growing motor insurance group. It has started to insure more risky clients, so there have been more claims such as whiplash. We’ve made a reasonable amount of money in 2011 shorting this stock.'
As a result of an increase in claims due taking on riskier clients, this has meant there is less money flowing into company earnings.
The share price of Admiral has dropped from highs of around £18 in March 2011 down to a little more than £8 just before March this year. Shares have since staged a revival and now stand at £11.57.
The fund, which can have a maximum of 10% of NAV in shorts, currently has a total short position of 4%.
Steer uses a ‘Market’ screening tool to identify the top stocks, but also the stocks to avoid with the shorting opportunities presenting themselves in the form of stocks which fall t to the bottom of the list.
‘It differentiates us from the people we compete with,’ said Steer. ‘We short because there is something odd, different or unusual about accounting.’
Steer’s growth strategy tends to target stocks which have big overseas earnings potential, with some of his top overweights in the fund including Elementis, Aggreko and Croda International.
He said these stocks exhibited growth rates of 8%, 6% and 8% respectively in 2012, and are forecset to achieve rates of 6%, 16%, 10% in 2013, although analysts have yet to upgrade these latter numbers.
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