By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 12/13/10 Sign up for free Cabot Wealth Advisory
The insurance industry suffered in the recession of 2008-2009, as asset values shrank all over, but insurance stocks look great again!
In fact, I’ve got an attractive insurance stock to tell you about today.
Aflac (AFL) is the first, well known for its commercials featuring a duck. The name is an acronym of American Family Life Assurance Company. The stock pays a dividend of 2.2%. Revenues have grown every year of the past decade and grew 10% in 2009. This year, growth has ramped up; it hit 19% in the third quarter, while earnings grew at 16%.
But it’s not growth that makes Aflac attractive, it’s valuation.
In fact, Roy Ward, editor of Cabot Benjamin Graham Value Letter, highlighted the stock back in August, when it was trading at 49.
Roy wrote, “Aflac is the world’s largest supplemental cancer insurance provider, deriving 75% of its business from Japan. Aflac’s U.S. sales are lagging, but the company’s focus on new products and successful promotions in Japan is producing strong performance. Sales increased 13% and EPS soared 80% during the past 12-month period. We forecast sales and earnings per share growth of 7% and 16% respectively during the next 12 months. Growth could receive an additional boost if U.S. sales improve noticeably. AFL shares now sell at 9.0 times our forward 12-month EPS forecast. We expect the stock price to increase to our Minimum Sell Price of 90.14 within two to three years.”
In the four months since then, AFL is up 13%, and Roy has raised his Minimum Sell Price to 108.85, which would be a fat 95% profit from here. But you don’t want to just jump in and buy at any time and price. A key concept of the Cabot Benjamin Graham Value Letter’s system is the concept of Margin of Safety. And how do you get Margin of Safety? By buying low! So you really need to know Roy’s Maximum Buy Price, and if you click HERE, you can learn more about that.
Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.
By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 10/21/10 Sign up for free Cabot Wealth Advisory e-newsletter
Aflac (AFL) is the world’s largest supplemental insurance provider. The company derives 75% of its business from Japan, where it also sells life and health insurance.
Sales have increased 10% to 12% per year during the past 10 years, and dividends have increased an impressive 22% per year. We forecast sales growth of 10% and earnings and dividend growth of 12 to 15% during the next five years. New products and an improving economy in Japan should produce considerable excess cash. AFL shares are undervalued at 9.6 times forward 12-month EPS.
Dividends have been paid since 1973 and currently provide a yield of 2.2%.
Editor's Note: You can find additional dividend-paying stocks selling at bargain prices in the Cabot Benjamin Graham Value Letter. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks.
Click here to get started today!
J. Royden WardEditor of
Cabot Benjamin Graham Value Letter A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of
Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the
Value Letter.