Market indexes fell on the back of hotter-than-expected inflation data for June on Wednesday morning. The Bureau of Labor Statistics reported the consumer price index, which measures the average change in prices for goods and services, soared 9.1% from a year ago. This was above the Dow Jones’ estimate of 8.8%.
Following the report, the Dow Jones Industrial Average sank 0.8%, the S&P 500 fell 0.5% and the Nasdaq Composite declined 0.09%.
Based on these developments, investors may be searching for value opportunities among stocks that have performed well so far this year.
While the financial services sector has posted a negative return for the year so far at -3.58%, it has still outperformed the S&P 500’s return of roughly -20% despite the uncertainty surrounding inflation and interest rates.
The GuruFocus All-in-One Screener, a Premium feature, found several stocks that had a higher return relative to the benchmark index for the period. It also looked for companies with a predictability rank of at least three out of five stars.
Financial services stocks that met these criteria as of July 13 included W.R. Berkley Corp. (WRB, Financial), Assurant Inc. (AIZ, Financial), Allstate Corp. (ALL, Financial), Globe Life Inc. (GL, Financial) and The Travelers Companies Inc. (TRV, Financial).
W.R. Berkley
Outperforming the benchmark index by approximately 40.59% year to date, W.R. Berkley (WRB, Financial) has a $17.48 billion market cap; its shares were trading around $65.91 on Wednesday with a price-earnings ratio of 13.29, a price-book ratio of 2.55 and a price-sales ratio of 1.81.
The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past financial performance and future earnings projections.
The Greenwich, Connecticut-based company offers commercial lines property and casualty insurance.
GuruFocus rated W.R. Berkley’s financial strength 6 out of 10. Despite the company issuing new long-term debt over the past several years, it is manageable due to adequate interest coverage. Assets are building up at a faster rate than revenue is growing, however, indicating it may be becoming less efficient. The return on invested capital is also overshadowed by the weighted average cost of capital, meaning the company is struggling to create value as it grows.
The company’s profitability scored a 7 out of 10 rating on the back of strong margins and returns on equity, assets and capital that top a majority of competitors. W.R. Berkley is also supported by a high Piotroski F-Score of 8 out of 9, meaning conditions are healthy, while consistent earnings and revenue growth contributed to a three-star predictability rank. According to GuruFocus research, companies with this rank return an average of 8.2% annually over a 10-year period.
Of the gurus invested in W.R. Berkley, First Eagle Investment (Trades, Portfolio) has the largest stake with 2.17% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Steven Cohen (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also have positions in the stock.
Assurant
Topping the S&P 500 by roughly 31.17% so far this year, Assurant (AIZ, Financial) has a market cap of $9.43 billion; its shares were trading around $174.80 on Wednesday with a price-earnings ratio of 7.6, a price-book ratio of 1.89 and a price-sales ratio of 0.99.
According to the GF Value Line, the stock is modestly overvalued currently.
The insurance company headquartered in New York City provides a diverse set of specialty products in the property, casualty, extended device protection and preneed insurance sectors.
Assurant’s financial strength was rated 5 out of 10 by GuruFocus. Despite having sufficient interest coverage, the WACC eclipses the ROIC, so the company is struggling to create value.
The company’s profitability fared better with a 7 out of 10 rating, driven by margins and returns that outperform over half of its industry peers. Assurant also has a high Piotroski F-Score of 7, while steady earnings and revenue growth contributed to a three-star predictability rank.
With 0.13% of outstanding shares, Simons’ firm is Assurant’s largest guru shareholder. Greenblatt and Dalio also own the stock.
Allstate
Having beaten the index by about 29.49% year to date, Allstate (ALL, Financial) has a $35 billion market cap; its shares were trading around $127.32 on Wednesday with a price-earnings ratio of 10.67, a price-book ratio of 1.51 and a price-sales ratio of 0.74.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The Northfield Township, Illinois-based company provides property and casualty insurance products in North America.
GuruFocus rated Allstate’s financial strength 5 out of 10 on the back of adequate interest coverage. However, it is struggling to create value as the WACC exceeds the ROIC.
The company’s profitability fared better, scoring an 8 out of 10 rating as a result of strong margins and returns that top over half of its competitors. Allstate is also supported by a moderate Piotroski F-Score of 6, meaning conditions are typical for a stable company. Despite reporting consistent earnings and revenue growth, the five-star predictability rank is on watch. GuruFocus data shows companies with this rank return an average of 12.1% annually.
Barrow, Hanley, Mewhinney & Strauss has the largest stake in Allstate with 1.88% of outstanding shares. Other top guru investors include Robert Bruce (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Gayner, Dalio, Gabelli and John Hussman (Trades, Portfolio).
Globe Life
Beating the S&P 500 by around 26.72% so far this year, Globe Life (GL, Financial) has a market cap of $9.68 billion; its shares were trading around $98.07 on Wednesday with a price-earnings ratio of 13.72, a price-book ratio of 1.41 and a price-sales ratio of 1.94.
The GF Value Line suggests the stock is modestly undervalued currently.
The company headquartered in McKinney, Texas provides life and health insurance products.
Globe Life’s financial strength was rated 4 out of 10 by GuruFocus. Although the company has issued new long-term debt in recent years, it is at a manageable level due to sufficient interest coverage. The WACC also surpasses the ROIC, so the company is struggling to create value.
The company’s profitability scored an 8 out of 10 rating as its margins and returns are outperforming versus industry peers. Globe Life also has a moderate Piotroski F-Score of 5, while steady earnings and revenue growth contributed to a five-star predictability rank.
The largest guru shareholder of the company is Warren Buffett (Trades, Portfolio) with a 6.44% stake. Richard Pzena (Trades, Portfolio), Ken Heebner (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jones and Dalio also have positions in Globe Life.
Travelers Companies
Trouncing the benchmark by 26.03% year to date, Travelers Companies (TRV, Financial) has a $39.28 billion market cap; its shares were trading around $164.04 on Wednesday with a price-earnings ratio of 10.36, a price-book ratio of 1.53 and a price-sales ratio of 1.14.
According to the GF Value Line, the stock is fairly valued currently.
The New York-based company offers commercial and personal insurance products.
GuruFocus rated Travelers’ financial strength 5 out of 10. While the company has solid interest coverage, it is struggling to create value since the ROIC is below the WACC.
The company’s profitability scored a 7 out of 10 rating, driven by margins and returns that top over half of its competitors. Travelers also has a high Piotroski F-Score of 7. Consistent earnings and revenue contributed to its three-star predictability rank.
First Eagle is Travelers’ largest guru shareholder with a 1.30% stake. Other top guru investors include Hotchkis & Wiley, Dodge & Cox, Mairs and Power (Trades, Portfolio), Dalio, Jeff Auxier (Trades, Portfolio), Cohen and Simons’ firm.
Other potential opportunities
Additional stocks that qualified for the screener were insurers Cincinnati Financial Corp. (CINF, Financial) and Aflac Inc. (AFL, Financial) as well as Prosperity Bancshares Inc. (PB, Financial), a bank holding company.
