Notes from this week’s Barron’s.<\/p>\n
WHY AIG COULD DOUBLE IN FIVE YEARS<\/p>\n
World’s largest insurer by stock market value. Operations in property and casualty, life insurance, annuities and mortgage guaranty. Combined ratio last year was 101.3% down from 108.5%. Expecting 100.3% this year and 98.9% next year. Josh Stirling of Sanford Bernstein is looking for 93% next year and 90% within five years.<\/p>\n
Shifting to property policies from casualty which helps with pricing discipline. More like BRKA.<\/p>\n
With company priced less than book repurchases might be an option as cash becomes available. Book value is $69 now, stock is priced about $52, and BV could get to $80 in five years.<\/p>\n
ASSESSING PFIZER’S FUTURE<\/p>\n
Low p\/e, 3.4% dividend and a decent pipeline. P\/E less than 14x projected 2014 EPS, half the p\/e of BMY. Company might split three ways in 2017. $7b in dividends and $5b in buybacks this year.<\/p>\n
BIG MONEY POLL<\/p>\n
1. 56% Big Money respondents call themselves bullish or very bullish on US stocks, down from 68% six months ago.<\/p>\n
2. 35% are neutral, up from 24% six months ago and 19% one year ago.<\/p>\n
3. 73% says market is fully valued, 18% say it is overvalued.<\/p>\n
4. Big Money bulls see the Dow hitting 17,418 by year-end and 18.072 by June 30, 2015. SP500 to 2063 by mid-2015 and NASDAQ to 4855 by mid-2015.<\/p>\n
5. 60% say US will be best market, 23% think Europe and 14% like emerging markets.<\/p>\n
6. 66% are bearish on Gold.<\/p>\n
7. 90% are bearish on US Treasuries and 80% on US corporate bonds.<\/p>\n
8. Favorite stocks are GE, BAC, C. Tesla is most overvalued.<\/p>\n
PREPARING FOR THE BEAR’S RETURN – an interview with Doug Kass<\/p>\n
Kass is bearish (surprise). SP500 consensus earnings of $120 are inflated due to corporate profit margins at 60-year highs, normalized earnings are well below $120. Market p\/e of 16 is more like 19 using reasonable margin assumptions. Fair value for the SP500 is about 1650, 12% below recent prices.<\/p>\n
Kass is long closed-end municipals selling at about a 6% discount like VPV and NQU. Long OCN. Pairs trade – short TSLA and long GM. Short BAC. Long Monitise [MONLUK] – a London company that provides payments on mobile devices. Kass see it as a 5-bagger. Price is about 66 pence. MA and V have a stake in it. Leon Cooperman is the largest shareholder and owns 12%.<\/p>\n
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Notes from this week’s Barron’s. WHY AIG COULD DOUBLE IN FIVE YEARS World’s largest insurer by stock market value. Operations in property and casualty, life insurance, annuities and mortgage guaranty. Combined ratio last year was 101.3% down from 108.5%. Expecting … Continue reading