I’m happy to see that there are still great worries about the future of both the Euro and those southern European countries that don’t work as hard as the Germans, or pay taxes as dutifully, either.
And why is this worry a good thing?
Because, as all experienced investors know, bull markets climb a wall of worry!
And that’s what this bull market is doing now!
As a result, I’m more optimistic than at any time in the past few months, about both the short- and long-term prospects of the market.
And I’ve got a great stock to recommend to you!
It’s in the insurance business, which seems appropriate following the previous section on dogs.
Its name is Reinsurance Group of America (RGA).
And Roy Ward, the editor of Cabot Benjamin Graham Value Letter, recently recommended it. He wrote:
“Reinsurance Group of America (RGA) is the second largest provider of life reinsurance in the U.S. Reinsurance Group also offers annuity, critical care and group reinsurance. The company guarantees insurance contracts for insurance and other financial companies and sells its products in 25 countries around the world. The company also sells life and disability insurance to consumers in the U.S., Canada, and abroad. It has over $2.6 trillion of life reinsurance in force backed by a strong balance sheet with conservative bond investments.
“Reinsurance Group is in position to capitalize on the significant growth opportunities in the U.S., Canada, India and China. Revenues increased 1% and EPS rose 19% during the last 12-month period, spurred by improved market conditions and higher prices. We believe strong growth from its international operations as well as a boost from recent purchases will drive EPS higher by 6% during the next 12 months.
“RGA’s shares are clearly undervalued at 6.8 times current EPS with a 1.4% dividend yield. RGA shares sell at a huge 42% discount to current book value. The balance sheet is strong, enabling RGA to take advantage of additional opportunities in the reinsurance industry. Higher interest rates could add significant income from RGA’s conservatively invested bond holdings. We fully expect RGA’s stock price to increase to our Minimum Sell Price of 77.52 during the next one to two years. RGA is low risk.”
Sounds good to me. And I can add a few more details.
First, Roy has added the stock to his Classic Value Portfolio. This portfolio, composed of eight select holdings, has gained 28.2% in the past 24 months, compared to 16.8% for the Dow. Longer-term, the portfolio is up 173% since inception in November, 2002, compared to just 35.4% for the Dow.
Second, RGA had been trading as high as 64 back in July, so getting it at the current price is like getting a 22% discount.
And third, financial stocks were among the hardest-hit sectors this year, so stocks like RGA have a lot of upside potential.
For conservative, patient investors, I recommend it highly.
Even better, I recommend that you consider a no-risk trial subscription to Cabot Benjamin Graham Value Letter, so that you can get updates on RGA and other undervalued stocks every week!
For more details, click here.