The top holding in my Stocks and Shares ISA

I hold most of my investments in a Stocks and Shares ISA. With an allowance of £20,000 a year and substantial tax benefits, these accounts are the perfect vehicle to hold equities, in my opinion. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

And there is one company in my ISA with a higher allocation than any other, reflecting my belief in the business and its prospects. 

Stocks and Shares ISA champion

The top holding in my ISA is the insurance giant Admiral (LSE: ADM). 

I initially bought this company as an income investment. At the time of my initial acquisition, the stock offered a dividend yield of around 7%.

However, since my first purchase, I have been able to get to know the business a lot better. As my understanding of the enterprise has developed, I have started to view it not only as an income investment but also as a growth play. 

Admiral is one of the largest car insurance providers in the UK. This is a very competitive market, which is already pretty saturated. 

To help drive growth, the enterprise has been investing heavily in its overseas divisions. It has also been expanding into new markets here in the UK. This changing growth outlook is the reason why I have been adding to the holding in my Stocks and Shares ISA. 

Growth potential

After several years of losses, these initiatives are now starting to yield results. The international businesses have started to break even. And the company’s relatively new loan business in the UK is tantalisingly close to earning a profit. 

The group is also making headway in expanding into other insurance markets in the UK, such as pet and home insurance. It is using its existing presence in the market to entice customers to the brand by offering discounts on different products.

Unfortunately, the factors that drove the company to look for other growth avenues in the first place still exist. The UK insurance market is incredibly competitive. Admiral cannot take its position in the market for granted.

What’s more, the cost of repairing vehicles is increasing at a faster rate than insurance prices. This could become a headache for the company if the trend persists. 

Ticks all the boxes

Still, despite these challenges, I think Admiral has fantastic potential over the next couple of years as its growth initiatives start to pay off. At the same time, the company remains an income champion.

At the time of writing, analysts have pencilled in a prospective dividend yield of 5.8% for 2022. This income potential remains the primary reason I hold it in my Stocks and Shares ISA and would be happy to buy more of the stock.