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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week


February 19th 2010 Metlife
NYSE Symbol: MET
Industry: Insurance
Price as of 2/19: $35.03

The earnings keep flooding in better than expected. Not only are companies beating estimates, but companies are raising guidance and also boosting their dividends once again. In the last year, a number of blue chips have raised their dividends including AT&T, Verizon, Chevron, Exxon Mobil, Altria, Philip Morris, Texas Instruments, Boeing, McDonalds, P&G, United Tech, Walmart, Intel, IBM, Abbott Labs, J&J, Pfizer, Coke, General Mills, Waste Management, and Moodys. Many of these companies are in the Dow Jones Industrial Average which makes that index a good investment. One of the best ways to invest in the Dow is through an ETF with the symbol DIA with a yield of 2.6%. Not bad. One sector within the Dow not raising their dividends are the banks and insurance stocks. It may be another year before they are able or feel comfortable in raising their dividends. Last week we featured an insurance stock, Hartford. This week we'll feature another insurance, Metlife. Since we featured Metlife last July the stock has rallied 30% including a 2% dividend in November. The good news is even though the stock has performed well, the stock remains cheap because earnings keep getting adjusted higher. The company is in the middle of negotiations to buy a division of the government owned AIG. The stock has pulled back since this announcement providing another good buying opportunity.
On February 2nd, Metlife reported operating earnings, excluded net realized investment gains and losses, of $793 million, or 96 cents a share, beating estimates by a penny. Premiums, fees and other revenues were $9.3 billion in the quarter, up 14% from the fourth quarter of 2008. MetLife also unveiled a detailed outlook for 2010 including cost cuts and improved returns that should boost full-year 2010 operating earnings by 50% to between $3.3 billion and $3.6 billion, or $4 to $4.40 per share. The analyst at Morningstar stated that MetLife had a good year and handled the credit crisis better than a lot of their peers. Regarding the pending AIG purchase, Metlife believes they are in a financially strong position with a deep management team to pursue acquisitions that are strategic and would accelerate their long-term growth.
Back when we featured Metlife in July, the stock was around $27 a share trading for 10 times earning and 7 times next years earnings. Now with the stock around $35 a share, the stock is trading for 8 times this years earnings and 7 times next years earnings. The stock also trades for 0.7 times sales and less than its' book value of $40.44 a share. This is one of those rare opportunities when the stock gets cheaper even as they move higher. I wish all stocks were like this. The analysts have also warmed up to Metlife with some recent upgrades with price targets in the mid $40 range. The weakness in the stock is due in part to concerns of possible dilution with the purchase of the AIG division. But long term Metlife remains a very attractive stock.