asset management
Hartford Financial Services Group Inc., $17.76, symbol HIG on New York (Shares outstanding: 445.3 million; Market cap: $7.9 billion; www.thehartford.com), is one of the leading providers of property and casualty insurance in the U.S. Hartford sells individual life insurance, annuities, asset-management services and employee benefits. Hartford has three main divisions: Commercial (which sells property and casualty insurance and employee benefits), accounts for 45% of the company’s revenue; Consumer Property & Casualty supplies 18% of revenue; and Wealth Management (life insurance, annuities, retirement accounts and mutual funds), provides 21% of revenue. The remaining 16% comes from the company’s investments and other activities. Hartford is paying higher claims due to severe tornadoes and storms in the U.S. Midwest and South this year: in the three months ended June 30, 2011, it paid $290 million in claims related to these disasters. That’s why its earnings fell 40.6% in the quarter, to $104 million, or $0.19 a share. A year earlier, it earned $175 million, or $0.34 a share....
We place a lot of importance on investment quality. We assign one of our six TSINetwork Investment Quality Ratings to every stock we recommend. We base these six ratings on a total of nine key factors. Many of the factors are widely recognized as investments quality hallmarks, such as a long-term record of earnings and a long-term record of dividends. Others are less widely followed, such as a company’s ability to profit from secular trends. Secular trends go far beyond mere business cycles. They reflect ongoing changes in the world. One key secular trend today is the fact that vast numbers of workers in emerging markets are pole-vaulting into the middle class. This opens up great opportunities for many of our recommendations in the consumer area, such as Tupperware, Kraft and many others. These companies can take the products and procedures they developed and perfected in the west, and put them to work in China, India and other emerging markets, with little additional development cost. Fertilizer companies can also profit from this secular trend. When poor people begin making more money, one of the first things they do is improve their diet. They want more and better food, and more meat in particular. This pattern will fuel growth in the fertilizer business for years if not decades to come....
PNC Financial Services, $61.33, symbol PNC on New York (Shares outstanding: 525.4 million; Market cap: $32.2 billion; www.pnc.com), is one of the largest bank holding companies in the U.S., based on assets. Its main markets include Delaware, Florida, Indiana, Kentucky, Massachusetts, New Jersey, Ohio and Pennsylvania. PNC’s businesses include regional and corporate banking, real-estate finance, asset-based lending, wealth and asset management. Its loan breakdown is as follows: commercial, 35%; consumer, 36%; residential mortgage, 12%; commercial real estate, 13%, and other 4%....
ING Group NV (ADR), $11.39, symbol ING on New York (ADRs outstanding: 3.8 billion; Market cap: $43.0 billion; www.ing.com), is a Netherlands-based global financial institution that offers banking, insurance and asset management to about 85 million clients in Europe, the U.S., Canada, Latin America, Asia and Australia. Before one-time items, ING earned 1.04 billion euros ($1.42 billion U.S.) in the third quarter of 2010. That’s up from 727 million euros a year earlier. Per-share earnings fell 8%, to 0.23 euros ($0.34 per ADR) from 0.25 euros on more shares outstanding. Results improved at ING’s banking and insurance operations in the latest quarter. Its banking business gained from higher demand for mortgages and savings accounts. As well, profit margins rose in retail banking. The global economic recovery helped push up revenue, and lowered bad loan charges....
ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009. The fiscal 2010 earnings figure includes a $116-million loss on the sale of one of the bank’s main holdings, U.S.-based Liberty Life Insurance Co. Without unusual items, such as the loss on Liberty Life, Royal would have earned $5.3 billion, up 9.9% from $4.9 billion a year earlier....
Canada’s big five banks have posted strong results since the 2007-2009 financial crisis. All five should have no trouble complying with new international regulations aimed at avoiding another crisis. As well, their strength is helping them buy other financial companies in the U.S. and other countries, often at bargain prices. ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009....
ENCANA CORP., $28.26, Toronto symbol ECA, fell 7% this week after the company reported lower-than-expected earnings. In the three months ended September 30, 2010, Encana earned $98 million, or $0.13 a share (all amounts except share price in U.S. dollars). These figures exclude a $331-million gain on hedging contracts that the company uses to lock in selling prices for its natural gas, and a $140-million foreign-exchange gain. On this basis, the latest earnings fell well short of the consensus estimate of $0.19 a share. They were also down 74.1% from the company’s year-earlier earnings of $378 million, or $0.50 a share. Cash flow per share fell 9.4%, to $1.54 from $1.70. (Note: The year-earlier figures assume that the breakup of the old EnCana Corp. into the new Encana and Cenovus Energy Inc. took place at the start of 2009 instead of December 1, 2009.)...
ALIMENTATION COUCHE-TARD INC., $22.47, symbol ATD.B on Toronto, has dropped its $2-billion U.S. hostile takeover bid for Casey’s General Stores (symbol CASY on Nasdaq). Couche-Tard allowed its tender offer for all of Casey’s outstanding shares to expire at 5:00 p.m. on September 30. Couche-Tard, which was offering $38.50 U.S. a share, decided not to compete with convenience-store chain 7-Eleven’s offer of $40 a share, or $2.1 billion. Casey’s now trades at $41.37, which suggests that investors expect a still higher offer, even though Couche-Tard has dropped out of the bidding. Even without the takeover, we still like Couche-Tard’s growth prospects. Meanwhile, the company has enhanced its reputation as a disciplined bidder that does not overpay for acquisitions....
Tata Motors (ADR), $24.04, symbol TTM on New York (Shares outstanding: 506.4 million; Market cap: $12.2 billion), designs, makes and sells vehicles, including cars, trucks and buses, mainly in India. It also makes and sells related parts and accessories. Tata is based in Mumbai, India. Tata Motors is part of the Tata Group, one of India’s leading business conglomerates. Tata Group has interests in a number of areas, including steel, software services, hotels, chemicals, insurance and asset management. Tata’s sales have grown along with the Indian economy. In 2003, its revenue was $3.2 billion. By 2006, revenue had more than doubled, to $7.7 billion. Earnings jumped 37.5%, to $1.10 a share from $0.80 a share. Cash flow per share rose 29.6%, to $1.49 from $1.15....
ING Group NV (ADR), $8.15, symbol ING on New York (ADRs outstanding: 3.8 billion; Market cap: $30.8 billion), is a Netherlands-based global financial institution that offers banking, insurance and asset management to about 85 million clients in Europe, the U.S., Canada, Latin America, Asia and Australia. In the first quarter of 2010, ING earned 1.33 billion euros ($1.69 billion U.S., or $0.45 per ADR). A year earlier, it lost 793 million euros. The latest earnings beat the consensus estimate of a profit of 930 million euros. The latest results included 306 million euros of gains on asset sales and special items. A year ago, the company recorded one-time losses of 558 million euros. Results improved at ING’s banking and insurance operations in the latest quarter. Its banking business gained from higher demand for mortgages and savings accounts, as well as improved profit margins in retail banking. The global economic recovery helped push up revenue, and lowered bad loan charges....