Wednesday 24 January 2018 ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares

Higher Hopes for the Man from the Pru

By Malcolm Stacey | Thursday 20 April 2017

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Troopers. I’ve long been a fan of British insurance giants. They are a chance to invest in the fast-moving financial world without too much fear of heavy fines and compensation payments for mis-selling and so on. Though, of course, there is an element of that.

I’ve commended to you previously RSA (RSA), which I still call Royal Insurance, and Legal & General (LGEN). Both these companies make up a sizeable portion of my big cap portfolio.

I don’t hold shares in the Prudential (PRU), though. And that might change soon because its P/E ratio is rather encouraging. I have it at 21.7. Ok, that doesn’t sound too promising - until you compare it with other UK insurers, who often have higher numbers.

The share price has shown a strong upward trend over the last five years, but it has been down all the way over the last month. The fall doesn’t seem entirely justified to me and so could be a buying opportunity.

Prudential has been held back in the share price stakes because of various irritants, like financial restrictions in China and slower sales of some policies in the USA. But the share price doesn’t yet seem to reflect the poorly pound and a lot of Prudential's income comes in foreign currencies. Most British insurers are benefitting from sterling’s low value.

But a word of caution. Buying stock in insurance companies is, at first blush, one of the safer investments. We tend to think of insurance as ‘safer’  because to insure things is to feel personally more secure. But we should never forget that big insurers operate in a global financial environment which at the moment is far from predictable. Having said that, I see Prudential as a buy in relation to many other similar companies.

Now why not join me in the Punter’s Return?

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