If the numbers are real, MetLife is a steal
The stock's valuation is so low that even if you doubled the figures, it would still be cheap.
There are plenty of reasons to be skeptical of Wall Street numbers, distrust insurance company propaganda and be disgusted at regulators of both. And given the economic challenges of recent years, as well as the current ones facing the global economy, it is easy to be filled with doubt even when sunshine breaks though the clouds.
These are the circumstances that flash caution as we move MetLife (MET) stock from our watch list to our investment pool. We have felt compelled to do so by data that indicate not just value, but dirt-cheap opportunity.
To start, MetLife trades at a price-to-earnings ratio of 5.35, about a third of the S&P 500 and lower than historic industry figures. The price-to-earnings-to-growth (PEG) ratio is 0.58, the price-to-sales ratio is 0.53, and the price-to-book ratio is 0.61. These figures are so ridiculously low that if you doubled them the stock would still be cheap.
MetLife is also paying a 2.1% dividend yield. While this is about average for the market, it beats bank rates and Treasurys while offering significant appreciation potential.
At Friday's closing price of $35.22, MET is trading at half its November 2007 high and at a discount to its 52-week high of $39.55. The current profit margin is over 10% and the return-on-equity is over 12%. This is happening while the company has had 108.6% year over year earnings growth.
This should all be viewed in the context of a current market cap of $38 billion. That is very large company, but for comparison, American International Group's (AIG) market cap is $60 billion.
MetLife does seem to have room to increase performance significantly on the global stage, and this is an act that we think investors should be following.
Sheldon D. Liber is the CEO/CIO of Chasing Value Asset Management, Inc., and General Partner of the Chasing Value Fund. You can follow him on Twitter @chasingvalue
Let me tell you a short story. There once was an insurance company named Peanuts. Peanuts existed for the “mutual”benefit of its customers, so everyone that purchased a policy was considered an owner. Policy holders were paid fairly in accordance with Peanuts’ commitments, and employees worked hard and were rewarded fairly for their efforts.
Then Peanuts hired Bob. Bob wanted to be paid more than any other Peanuts boss. Bob took Peanuts public in 2000, and then the policyholders no longer owned Peanuts. Peanuts began being sued almost overnight by its former “owners” for fraud, failure to pay death claims, breach of contract, etc. Bob succeeded in being paid more than any other Peanuts boss ever had. His job done, Bob retired and became the boss of another american insurance group. Now Bob’s even larger paycheck is paid by the US taxpayers.
Since Bob has left Peanuts, 3 other bosses have succeeded him (Rob, Steve & Bill). Rob, unwilling to earn less than Bob, laid off thousands of US workers. Rob moved the positions to
India for a third of the cost, and then Rob raised his own pay before retiring on an enlarged pension.
The new big boss, Steve, was unwilling to earn less than Rob had. So Steve mortgaged Peanuts heavily to purchase the international operations from another failed american insurance group (the same Company that Bob was now in charge of). After the purchase, Peanuts did not do so well during a stress test of its financial health. So Steve reorganized Peanuts so he would not have to be tested again.
Finally, Steve put Bill in charge of convincing the public that Peanuts was financially healthy. Bill wined and dined several influential hedge fund managers and investment “experts” so they would say how great Peanuts was. Maybe the author of this article had dinner with Bill. Bill was told if he did a good job that he would be the big boss when Steve retired (i.e. Bill wanted to earn at least as much as Steve had).
The moral of this story is simply this…..when you invest in Peanuts you may end up getting what you paid for.
He was replaced by Steve, somehow Henkel, Carr, Lipscomb, Fattori, Mullaney, Farrell, have all gone away.
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