Aflac's uptrend continues

Posted Dec 2nd 2009 3:00PM by Joseph Lazzaro
Filed under: AFLAC Inc (AFL), Stocks to Buy

Steady as she goes, with Aflac (AFL), to borrow a Star Trek phrase, and that's why I'm reiterating my buy rating for the company, first recommended on May 28, 2009 at a price of $36.07. If you bought AFL in May, you're up about 30%.

After a slow start, institutional investors in mid-2010 finally noticed that not every insurer would be wiped-out by collateralized debt obligations and bad bonds. Aflac boasts primarily high-quality corporate debt, Wall Street realized this in the spring, and it's been off to the races ever since. Aflac is one of the largest sellers of supplemental insurance in the U.S. and is a major cancer-insurance company in Japan (14 million policies).

Consider this about Aflac, a low-profile insurer until that duck came along: Aflac's shares traded at about $11 earlier this year. Now, good old AFL is up near $47. Was the $11 print an irrational over-sell? You might say.

Further, in FY2010, look for a 4-6% sales increases, supported by an agent recruitment effort, but weighed-down slightly by sluggish payroll account growth. The First Call FY2009/FY2010 EPS estimates for AFL are $4.82 to $5.31.

Technically, Aflac's stock chart is strong – an uptrend and a price that rarely touches the key, 50-day moving average - a sign that IIs are now taking advantage of dips to establish/add to their AFL positions. AFL will encounter psychological resistance at $50, but this will prove to be a pit stop. Aflac is headed north.

Finally, the Sell/Stop Loss has been raised to $38, or to just above cost, from $32. Hence, this is a zero-risk trade for your May-bought shares.

Stock Analysis: Aflac Incorporated is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in AFL now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your AFL position before February 2010. Revised Sell/Stop Loss if you bought shares in this company: $38.

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

Tags: afl