In his investment classic, One Up On Wall Street,
Peter Lynch expounds on how he seeks out boring stocks with dull names
for superior returns. "A company that does boring things is almost as
good as a company that has a boring name, and both together is
terrific." His reasoning: The lack of glamour repels momentum chasers,
so the acute trader can buy at a discount.
Insurance provider Chubb Corporation (NYSE: CB) seems to fit Lynch's bill. It offers property and casualty insurance to individuals and businesses throughout the Americas and Asia -- not nearly as exciting as something like cloud computing. Chubb also passes one more Lynch criteria: It has excellent fundamentals.
Recently, the company reported a 30% increase in first-quarter profit, due to increased rates in the U.S. Chubb also announced record quarterly earnings of $2.14 per share, well ahead of the $1.74 per share analysts expected.According to Chubb 's Chairman, President and CEO, John Finnegan, "higher rates, strong underlying underwriting performance and low catastrophe losses" all contributed to the solid results.
The insurer -- which targets affluent individuals with enough disposable income to buy and insure luxury items like yachts -- saw first-quarter 2013 policy sales increase 4% from the year-ago period to $3.1 billion.
Over the remainder of the 2013 year, management anticipates strong renewal rate increases across business units will drive further growth.
To combat low interest rates -- which have negatively weighed on the company's investment portfolio -- Chubb will also likely increase premiums.
From a technical perspective, the stock is strong.
Forming a major uptrend line off the August 2011 $53.54 low, shares have risen 68% in less than two years.
In early 2013, the stock began an accelerated uptrend which is still intact.
Between mid-February and early March, the shares encountered resistance around $86, but were able to break through. The $86 range now acts as support.
For much of the spring, the stock has attempted to break round number resistance at $90. This round number is an important level psychological resistance and represents an all-time high level for the stock.
If shares can definitively break $90 resistance, they will bullishly complete a small ascending triangle, marked by the intersection of the accelerated uptrend line and $90 resistance.
According to the measuring principle for a triangle, calculated by adding the height of the pattern to the breakout level, the stock should then reach a minimum target of $106.38 ($90-$73.62=$16.38; $16.38+$90=$106.38). At current levels, this target represents an 18% return.
The bullish technical outlook is supported by strong fundamentals.
For the upcoming second quarter, scheduled to be reported on July 22, analysts expect increased rates will help push revenue up 3% to $3.2 billion from $3.1 billion in the comparable year-earlier period.
For the full 2013 year, analysts project revenue will rise 3.2% to $12.3 billion from $11.9 billion last year.
Insurance provider Chubb Corporation (NYSE: CB) seems to fit Lynch's bill. It offers property and casualty insurance to individuals and businesses throughout the Americas and Asia -- not nearly as exciting as something like cloud computing. Chubb also passes one more Lynch criteria: It has excellent fundamentals.
Recently, the company reported a 30% increase in first-quarter profit, due to increased rates in the U.S. Chubb also announced record quarterly earnings of $2.14 per share, well ahead of the $1.74 per share analysts expected.According to Chubb 's Chairman, President and CEO, John Finnegan, "higher rates, strong underlying underwriting performance and low catastrophe losses" all contributed to the solid results.
The insurer -- which targets affluent individuals with enough disposable income to buy and insure luxury items like yachts -- saw first-quarter 2013 policy sales increase 4% from the year-ago period to $3.1 billion.
Over the remainder of the 2013 year, management anticipates strong renewal rate increases across business units will drive further growth.
To combat low interest rates -- which have negatively weighed on the company's investment portfolio -- Chubb will also likely increase premiums.
From a technical perspective, the stock is strong.
In early 2013, the stock began an accelerated uptrend which is still intact.
Between mid-February and early March, the shares encountered resistance around $86, but were able to break through. The $86 range now acts as support.
For much of the spring, the stock has attempted to break round number resistance at $90. This round number is an important level psychological resistance and represents an all-time high level for the stock.
If shares can definitively break $90 resistance, they will bullishly complete a small ascending triangle, marked by the intersection of the accelerated uptrend line and $90 resistance.
According to the measuring principle for a triangle, calculated by adding the height of the pattern to the breakout level, the stock should then reach a minimum target of $106.38 ($90-$73.62=$16.38; $16.38+$90=$106.38). At current levels, this target represents an 18% return.
The bullish technical outlook is supported by strong fundamentals.
For the upcoming second quarter, scheduled to be reported on July 22, analysts expect increased rates will help push revenue up 3% to $3.2 billion from $3.1 billion in the comparable year-earlier period.
For the full 2013 year, analysts project revenue will rise 3.2% to $12.3 billion from $11.9 billion last year.
The earnings outlook is similar.Due
to increased premiums, analysts estimate second-quarter earnings will
rise 19% to $1.63 per share from $1.37 per share in the comparable
year-ago quarter.
For the full 2013 year, analysts suspect continued underwriting strength will cause earnings to surge about 36% to $7.12 from $5.23 last year.
In addition to an upbeat fundamental outlook, Chubb currently offers a forward annual dividend yield of about 2%, or $1.76 per share. This dividend is likely to rise in the future. Chubb is a Dividend Aristocrat; the company has rewarded shareholders with 31 consecutive years of annual dividend increases.
Risks to consider: In its most recent first quarter, Chubb reported that low interest rates caused the company's net investment income to fall 8% to $351 million. If interest rates continue to stay low, Chubb's investment income could continue to falter. However, to offset the low interest rate environment, management has stated it will push to raise premiums. Doing so should ensure Chubb's growth.
Recommended Trade Setup:
-- Buy CB at $90.19, above $90 round-number resistance
-- Set stop-loss at $85.89, slightly below current support at $86
-- Set initial price target at $106.38 for a potential 18% gain by the end of 2013
For the full 2013 year, analysts suspect continued underwriting strength will cause earnings to surge about 36% to $7.12 from $5.23 last year.
In addition to an upbeat fundamental outlook, Chubb currently offers a forward annual dividend yield of about 2%, or $1.76 per share. This dividend is likely to rise in the future. Chubb is a Dividend Aristocrat; the company has rewarded shareholders with 31 consecutive years of annual dividend increases.
Risks to consider: In its most recent first quarter, Chubb reported that low interest rates caused the company's net investment income to fall 8% to $351 million. If interest rates continue to stay low, Chubb's investment income could continue to falter. However, to offset the low interest rate environment, management has stated it will push to raise premiums. Doing so should ensure Chubb's growth.
Recommended Trade Setup:
-- Buy CB at $90.19, above $90 round-number resistance
-- Set stop-loss at $85.89, slightly below current support at $86
-- Set initial price target at $106.38 for a potential 18% gain by the end of 2013
No comments:
Post a Comment