By J. Royden Ward, Cabot Benjamin Graham Value Letter

MetLife (MET) failed its Federal Reserve stress test. The Fed stated that the minimum total risk-based capital ratio should be 8% to withstand the two-year stress scenario, but MetLife's ratio would be 6%.

But in my view, the Fed did not consider several important factors when evaluating MetLife. As a result, we think the recent weakness in the stock had made the shares a buy.

MetLife is primarily an insurance company and did not participate in the Troubled Asset Relief Program, but because it owns MetLife Bank, MET is considered a bank holding company.

The company was therefore required to participate in the 2012 stress test and submit its capital plan to the Fed.

Last December, MetLife reached an agreement with General Electric (GE) to sell its online banking operations and is also winding down MetLife Bank's forward mortgage business. By mid-2012, the company will cease to be considered a bank.

MetLife had excess capital of $3.5 billion at the end of 2011 and management expects that to grow to $6 billion-$7 billion by the end of 2012.

The company wants to return excess capital to its shareholders, but its plan for $2 billion in stock repurchases and a dividend increase from $0.74 per share to $1.10 per share was rejected by the Fed.

In my opinion, MetLife has been treated unfairly, and the dip in the stock price presents an excellent buying opportunity. Buy at $42.42 or below. Our minimum sell price is $66.16 per share.

Related  articles:

• Buyback bets in the insurance sector
• Graham & Buffett: A trio of buys
• Buffett's Berkshire: The 'all-weather' stock