Category Archives: $AIG

Post Trump Opps: Financials could benefit…

If you are underweight financials – go equal or overweight to around 20%.

The Trump presidency could be the start of the end of low interest rates as growth and inflation picks up. The yield curve has already started to steepen (implying rates will start to rise).

Insurance companies will also benefit – they sit on a lot of cash – and usually invest it in long term assets.

US Banks have rallied – perhaps a bit too much – earnings estimates will be revised , so fair values below are conservative:

Px vs FV

$BAC  19 vs 19   Yield 1.6%

$JPM 76 vs 70 Yield 2.5%

$GS 204 vs 210 Yield 1.27%

$MS 38 vs 36 Yield 2.1%

$C 53 vs 58 Yield 1.2%

So C is the cheapest – it also one of the few banks trading below tangible Book Value.

2CentView has a core position in Morgan Stanley and may add $C (Citi).

$JPM is a great bank with a great CEO in Jamie Dimon but the stock has overrun a bit.

UK Based International Banks

$HSBC 617 vs 580 Yield 5%

$BARC 200 vs 200 Yield 1.49%

2CentView has a core position in $HSBC.

Also think Insurers will do well in a higher rate environment:

US Names:

$AIG $63 vs $62 Yield 2%

UK Names

$DLG 355 vs 400 Yield 6%

$LGEN 229 vs 251 Yield 6%

2CentView has a core position in $DLG and trading position added at 347.

No need to rush into any of the above – if you like $JPM for example, wait for a pull back to 70 before buying.

However, these stocks will benefit from less regulation and hedge you against rising rates – which could lead to higher mortgage costs and lower property prices…..