GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Bill Nygren Comments on Principal Financial Group

October 08, 2012 | About:
Holly LaFon

Principal Financial Group (PFG-$27)Principal Financial is a leader in providing administration services and asset management for small to mid-sized corporate retirement plans. Additionally, just over a third of its income comes from various life, annuity and dental insurance operations. Despite the overwhelming majority of income coming from the asset management business, the stock is priced like a less attractive insurer. In 2007, before the financial collapse, Principal stock surpassed $70 when operating earnings were $3.93 and book value was $26.55. So, the P/E ratio was 18x, and the stock sold for about 265% of its book value. Today, the stock sells at about 85% of expected year-end book value and at less than 9x expected 2013 earnings. Assets under management have been growing nicely; inflows alone account for a mid-single-digit growth rate. Because of Principal’s strength in asset accumulation in emerging markets, we believe that growth rate is sustainable. Further, the company is repurchasing about 3% of its shares each year, and it recently raised its dividend to a current yield of more than 3%. We believe that investors’ distaste for owning financial services stocks has given us a very attractive entry price for this investment.

From Oakmark Funds' third-quarter letter to shareholders.


Rating: 2.9/5 (8 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK