Prudential Financial: Huge growth potential
Appaloosa also initiated a position in Prudential Financial Inc (NYSE:PRU) worth over $50 million or 1.07% of its portfolio. The life insurance company’s core operations continued to make waves in 2012 by achieving a 69% increase in its net operating cash flow, bringing a value that is roughly 4 times the 2009 level. There are reasons to believe this is not short-lived. Recently, it has exceeded earnings estimates by a wide margin of 20% in the quarter ending March 2013. The current outlook also favors Prudential with its June 2013 earnings gaining 9 upward revisions and zero downward revisions. In terms of valuation, data at Nasdaq.com shows a P/E ratio of only 8.11 for 2013, lower than that for the industry with 15.5 (Yahoo!). Prudential Financial Inc (NYSE:PRU) has a price-to-book value of 0.79, which is below the industry’s 0.94. The bulk of the company’s business is international insurance and investments. Its individual life insurance business operates in countries with populations that are quickly aging like Korea and Japan. All these point to an impression that the stock has an undeniable buy and hold appeal.
MetLife: Towards a better financial position
The fund manager increased its holding in the life insurance company by 35%. Metlife Inc (NYSE:MET) had exceeded earnings estimates at least in the 4 recent quarters. Also, analysts expect more as 8 upward revisions have already been made on its June 2013 earnings and there is only one downward revision so far. What is interesting about MET is its debt position. The debt-equity ratio has been consistently declining. For instance, the ratio as of the end of March was 0.3416, way below that for the same period last year at 0.4548. It is also slashing a great deal of its long-term debt. It was able to cut it by 40% within 2 years – from $36.66 billion in March 2011 to $22.01 billion in March 2013. This is an indication of its ability to gain sound financial position. In terms of valuation, MET has a P/B ratio of 0.72, lower than the industry’s 0.94. However, it is trading at about 20 times its earnings, which is above the industry’s P/E ratio of 15.5 (Yahoo!).
It is not a wise decision to make an outright copying of the firm’s moves because of the lag in the filing. But by analyzing their 13F filing based on current metrics, one can pick some interesting insights. The stock prices of Comcast Corporation (NASDAQ:CMCSA), Metlife Inc (NYSE:MET), and Prudential Financial Inc (NYSE:PRU) have been moving up while that of Transocean LTD (NYSE:RIG) has been on a noisy trend. I believe that life insurance companies are the safe way to go in these times of an overall aging population and greater economic uncertainties.
The article Investment Ideas From Appaloosa Management’s 13F Filing originally appeared on Fool.com.
Aubrey 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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