Hastings PLC

Hastings Group Holdings plc, formerly Hastings Group Holdings Limited, is a holding company. The Company provides general insurance. Its segments include Underwriting, Retail and Corporate. The Underwriting segment includes underwriting business based in Gibraltar. The Underwriting segment includes its subsidiaries, Advantage Insurance Company Limited (AICL), which is engaged in underwriting general insurance, primarily private car insurance in the United Kingdom, and Conquest House Limited, which owns property utilized by the Company. AICL also underwrites the United Kingdom home policies under a co-insurance arrangement. The Retail segment includes provision of insurance broking services to the private car, van, bike and home markets in the United Kingdom, and broking services provided on behalf of a panel of external third-party insurers. The Corporate segment includes the results of various head office companies, whose primary activities are as holding and finance companies.

I have written about Hastings many times in this blog with the share receiving a positive review last weekend. I have been holding the share for all of 2017 and the position is well into the money. Hastings is well regarded on the VectorVest program and fulfills the criteria of my “7 steps to success in trading and investing” concept. These steps have been fully discussed over the past two blog entries.

In particular the share is undervalued and growing earnings strongly. The earnings potential of the share over a window of three years into the future (RV) is 1.64. On a scale between 0 and 2 is excellent. Earnings safety is good at 1.17, also on a scale between o and 2.

The chart of Hastings is shown below using my standard notation. The share price in candlestick format is shown over the last year. The green line study above the price shows the VectorVest calculated valuation while the blue line study in the window below the price shows earnings per share (EPS). EPS is growing strongly and linearly and this is the engine that’s driving the share price advance.

The overall UK market is within a Confirmed Up signal and the Color Guard is showing 3 green lights. The advice on the front page of VectorVest is highly positive.

hastings

Over the past two months the share price has been drifting sideways with a slightly downward bias. This pattern is known by technical analysts as a “flag pattern”. The flag is invariably followed by a breakout in the direction of the trend and that’s what I have been waiting on in Hastings.

Over the last two days the share has broken upwards from the flag and in the process triggered a BUY signal on VectorVest. As discussed last week, I have added to my position in Hastings based on this market action. If I had not done this, I would not be following my trading rules and without those rules I have nothing. Please note that although I am adding to this position this action may not be suitable anyone reading.

Please note the vertical line on the chart. Chartists (like the author) believe in the concept of “measured moves”. This simply says that the previous trending move will be repeated after the breakout of a consolidation pattern such as the flag we have seen in Hastings. This would place the next technical objective at around 410.

I am writing this on Friday morning of the 4th August. As you probably are aware this is unemployment Friday, where highly paid analysts pour over the unemployment figures in the US to work out whether the economy there, is gaining or falling. Conservative investors will allow that to safely pass before adding or initiating any positions. Politics in the US make me think of the old Chinese curse. We are certainly living in interesting times.

As always keep a watchful eye on stops. The seasonality is not on our side at the moment but my rules (the 7 steps) mean I am fully invested in the UK market. The 7338 level on the FT100 that I spoke about last week seems to be strong with the blue chip index trading over 150 points above that level as I write. The portfolio has had an excellent run since the Brexit vote and I have no intentions of giving it back but at the same time wish to push for extra gains. I love this business.

David Paul

August 4th 2017

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