After numerous world calamities, Buffett's focus on insurance companies, and the fact that many hedge funds seem to be heavily focused on banks and neglecting insurance companies -- with the exception of Bruce Berkowitz -- I decided to explore the possibilities.
Even though we can anticipate billions of dollars in claims there still are buying opportunites.
- Homeowners Choice Inc. (HCII): 4.9%
- Manulife Financial Corp. (MFC): 2.98%
- Allstate Corp. (ALL): 2.54%
- Chubb Corp. (CB): 2.46%
- Travelers Companies Inc. (TRV): 2.39%
- Aflac Inc. (AFL): 2.20%
- MetLife Inc. (MET): 1.64%
- Hartford Financial Services Group (HIG): 0.75%
When you consider that the average dividend paid by the S&P 500 stock is 1.7%, I find that most of these stocks are quite generous. Only Hartford is below that threshold, but I would not throw it out for this reason alone, as I expect it will raise the dividend to be inline with industry competitors as part of its recovery plan.
- Homeowners Choice Inc. (HCII): 25.80
- Aflac Inc. (AFL): 23.29
- Chubb Corp. (CB): 14.66
- Travelers Companies Inc. (TRV): 12.89
- Hartford Financial Services Group (HIG): 5.33
- Allstate Corp. (ALL): 5.15
- Manulife Financial Corp. (MFC): 1.83
- MetLife Inc. (MET): -7.09
In this area, I would hope to find high double-digit returns. That is the case for only two of these stocks: Homeowners and Aflac. The next two, Chubb and Travelers, provide a respectable return. The bottom four just don't make the grade in terms of providing much shareholder value expansion, which many consider a reflection of the caliber of management leading the way. If this was the sole criteria I would drop them from consideration right here.
Clearly, the real standout of the group today providing the most shareholder value is HCII. I came to this conclusion months ago when I included this small company as one of my picks for the year. For this reason I will be sticking with this micro-cap success story, based on what we already know and suggesting again investors give it a look. This leaves us with the remaining seven stocks for the next round.
Sheldon Liber is an architect and the CEO of Chasing Value™ Asset Management, Inc. He writes the columns Chasing Value™ and Serious Money and is on twitter: @ChasingValue. Disclosure: Mr. Liber currently owns shares of BRK.B, and HCII.