Chubb is finally getting noticed

Posted Sep 23rd 2009 9:10AM by Joseph Lazzaro
Filed under: Chubb Corp (CB), Stocks to Buy

Other insurers' loss is Chubb Corp.'s (NYSE: CB) gain. Back in May, the case was made that given competitors' woes, and Chubb's demonstrated business model, superior personal lines, and diverse business mix, CB deserved a higher multiple than its May P/E of 9.

Well, the market finally took note of CB, boosting shares this summer, hence I'm Reiterating my Buy rating for Chubb, first recommended on May 29, 2009 at a price of $39.65. If you bought CB then, you're up about 23%.

Chubb is not as cheap as it was in May, but there's still an opportunity to earn an outsized gain from these levels. The First Call FY2009/FY2010 EPS estimates for CB are $5.39 to $5.34.

More-cautious investors should wait until CB closes above the $50 level, which represents psychological resistance, for three consecutive days.

Stock Analysis: Chubb is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CB now; then buy another 25% in three months, if U.S. and global conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CB position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.

- -

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: CB, Chubb