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We’re all trying to cut costs – and that will only benefit investors in this stock

online shopping
online shopping

The share price may not be responding but at least our thesis on Moneysupermarket.com seems to be playing out.

The terrible trifecta of rising energy, food and mortgage bills means consumers will be looking to economise where they can as best they can. A price comparison website, therefore, comes into its own as hard‑pressed consumers shop around for the best deals on their insurance, broadband and mobile telecoms services and credit cards and loans.

Sure enough, Moneysupermarket’s third‑quarter trading statement last week flagged good growth at its banking, car and home insurance operations, as well as telecoms. Revenue growth accelerated to 33pc year on year from 31pc in the second quarter and 8pc in the first.

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However, it is not all sweetness and light for the company. A reduction in the number of providers and the introduction of price caps by the Government mean that the energy market is currently moribund as there is little or no scope for consumers to switch supplier. Nor does the chief executive, Peter Duffy, expect any change here in 2023.

Travel is showing some signs of slowing, presumably thanks to the combination of summer’s lost bags and cancelled flights, the plunging pound and the squeeze on consumers’ incomes.

All serve to reduce the appeal, and affordability, of a trip overseas, even if many of us would still like to flee Britain’s shores after the chaos of the past month.

Nor can competition be ignored. Amazon’s launch of a home insurance portal which offers third‑party services and customer reviews and ratings on insurers prompted the shares to shed the gains made in the immediate wake of the trading update.

But last week’s inflation figure of 10.1pc means search volumes are likely to remain strong as the Bank of England belatedly battles to rein in the cost of living (the current 2.25pc Bank Rate compares with the 12pc seen when inflation was last this high in the early 1980s).

Moneysupermarket’s first‑half profits, announced in July, easily exceeded analysts’ expectations and Duffy felt able to steer their forecasts towards the top of the consensus range after the third‑quarter commentary.

Further upgrades cannot be ruled out as the longer the cost-of-living crisis goes on the more value the business could add to its customers.

Meanwhile, the 6.8pc forecast dividend yield, on the assumption of an unchanged 11.71p payout, still looks attractive relative to rates on cash and gilt yields, even allowing for the recent sharp increases in both.

A forecast price-to-earnings ratio of less than 13 does not look unduly demanding either, while the balance sheet offers some support: a net debt position of £69m is no great burden, especially when shareholders’ funds come to £197m and operating earnings cover the interest bill many, many times over, so any further increases in headline borrowing costs can be met without undue fuss.

We could still be on the money with this one. Hold.

Questor says: hold

Ticker: MONY

Share price at close: 172.4p

Update: Lancashire

The luckless householders of Florida and North Carolina are starting to try to piece their lives back together after Hurricane Ian and specialist “catastrophe” insurers such as Lancashire are in the process of assessing – and footing – the bill.

Initial industry estimates put the cost at anywhere up to $70bn (£61bn) and Lloyd’s syndicates will take a hit.

This means damage to profits and net asset values for non‑life insurers and therefore less attractive valuations. Lancashire’s last stated net asset value per share was $5.67, or 502p at $1.13 to the pound. However, it is not all bad news.

Non‑life insurers hold substantial bond portfolios as they look to match potential payment liabilities with reliable income from coupons. Higher bond yields boost returns on investment.

In addition, a heavy year for catastrophe insurance (and reinsurance) claims can knock weaker players out of the market and could create scope for price increases in 2023. In the meantime, patient investors can continue to bank dividends of around 14p a share this year, enough for a yield of 3pc.

We’ll stay loyal to Lancashire. Hold.

Questor says: hold

Ticker: LRE

Share price at close: 465p


Russ Mould is investment director at AJ Bell, the stockbroker

Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 6am.

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