By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 12/23/10 Sign up for free Cabot Wealth Advisory e-newsletter
Prudential Financial (PRU), founded way back in 1875 with headquarters in Newark, N.J, is one of the largest financial services companies in the U.S. The company provides a wide range of insurance, investment management and other financial products and services. The Prudential name and “Rock” logo are among the most widely recognized in the U.S. and abroad. The company operates throughout most of the world, but is currently focusing on Japanese and Korean markets as well as retirement-oriented financial products in the U.S.
Revenues increased 11% and EPS soared 150% during the 12 months ended 9/30/10. Stronger growth in Japan and increased demand for annuities in the U.S. contributed to Prudential’s outstanding sales and earnings results. Total sales will likely increase by 5% and EPS will increase 8% during the next 12-month period. Prudential will purchase Star Life and Edison Life from American International Group (AIG) during the first quarter of 2011. The acquisition will add significant revenues in 2011 and provide rapid earnings growth in 2012 derived from the rapidly growing insurance markets in Japan.
PRU shares are clearly undervalued at 0.76 times book value and 9.1 times latest 12-month earnings per share (EPS). Strong demand in Japan coupled with the two acquisitions will enable PRU to expand rapidly during the next several years. The recently increased dividend, paid annually, provides a yield of 2.0%. PRU is medium risk. The company’s leading position, wide array of financial products and services, and global reach offer an investment opportunity too good to pass up.
I will continue to follow Prudential Financial and other blue-chip, high-quality companies in my Cabot Benjamin Graham Value Letter. My next issue, coming soon, will focus on undervalued stocks with low price to earnings and low price to book value ratios.
Editor's Note: You can find additional 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 Ward
Editor 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.
By Michael Cintolo, Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Report
From Cabot Wealth Advisory, 5/28/09 Sign up for free Cabot Wealth Advisory e-newsletter
Prudential Financial (PRU) is not a stock that attracts me fundamentally. However, the stock zoomed from 30 to 46 over three days in early May on gigantic volume after its earnings report. Since then, the stock has pulled back to 37 or so, but volume has begun to dry up and the stock's movements are getting tighter. Chartwise, PRU likely won't fall below 35 or so, if it even gets that low.
If you're game, I think you can nibble at PRU right here and add to your position should it break out above its resistance level at 46.
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Michael Cintolo
Vice President of Investments and Editor of
Cabot Market Letter and
Cabot Top Ten Weekly
A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Weekly. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.