Metlife Inc (MET), Hartford Financial Services Group Inc (HIG), Travelers Companies Inc (TRV) – Insurance Stocks Rally: Two To Buy, Two To Avoid

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The reason why I am negative on these companies has little to due with their business prospects, but rather their valuations. As shown by the chart below, both Chubb and Travelers Companies Inc (NYSE:TRV) are trading well above book value and close to historic high valuations. Given this, I believe it will be difficult for either name to make a sharp move higher anytime soon. Simply put, both Chubb and Travelers Companies Inc (NYSE:TRV) are too expensive.



TRV Price / Book Value data by YCharts

Diversion

As shown by the chart below, over the past three months, as the stock market as a whole has rallied, we have already started to see a divergence between MetLife/Hartford versus Chubb/Travelers Companies Inc (NYSE:TRV). I expect this divergence to continue.



TRV data by YCharts

Conclusion

As the bull market in insurance stocks continues, I would look to go long with MetLife or Hartford and avoid Chubb and Travelers. My main reason for this view is valuation. Metlife Inc (NYSE:MET) and Hartford Financial Services Group Inc (NYSE:HIG) trade well below book value, while Chubb and Travelers trade well above book value. Specifically, I am not looking for a big sell off in Chubb or Travelers Companies Inc (NYSE:TRV), but rather a failure to keep pace with the move higher in names such as Hartford and MetLife. In addition to the attractive valuations, MetLife’s 2.5% dividend yield and Hartford’s progress on its transformation strategy make both companies solid investments.

The article Insurance Stocks Rally: 2 To Buy, 2 To Avoid originally appeared on Fool.com and is written by Sammy Pollack.

Sammy Pollack has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sammy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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