Financials 827

Financials had just been finding their feet when the coronavirus struck. But these companies look strong and should bounce back in the rebound to come.

Brookfield Asset Management Inc. (BAM) | Daily Alert March 6

In his State of the Union Address, President Trump emphasized the need to rebuild our infrastructure, a topic that drew applause from both sides of the aisle. That’s why we are investing in Brookfield Asset Management Inc. (BAM).

The company announced strong investor demand for its Brookfield Infrastructure Fund IV, with total equity commitments of $20 billion, exceeding the original fundraising target by 18%.
Sam Pollock, head of Brookfield’s Infrastructure Group, said, “The strong level of support we have received from investors reflects the growing global demand for infrastructure investments and their attractive characteristics. We have already deployed a meaningful amount of the fund into a number of high-quality investments and are pleased with the opportunities we continue to see across our target markets and sectors.”

BAM last month posted an outstanding 2019 report. CEO Bruce Flatt stated, “2019 was a successful year on many fronts. Fundraising was excellent with more than $30 billion raised during the year and now over $50 billion raised for this round of flagship funds. We invested over $30 billion into new opportunities during the year but continue to build liquidity, with approximately $65 billion of capital to deploy into investments globally.”

BAM also announced a three-for-two stock split in the form of a special dividend payable on April 1 to improve liquidity. It will not dilute shareholder equity.

Mark Skousen, Forecasts &, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, March 25, 2020


Equitable Holdings, Inc. (EQH) | Daily Alert February 26

Today’s business headlines announced a big financial merger, with global investment manager Franklin Resources (Ben) buying Legg Mason (LM), a retail investment firm. I was thrilled by the news. I bought LM for several family members in recent months, but I wasn’t surprised, because there are far more investment and insurance companies on my buy list right now than any other industry.

Since I screen stocks, first and foremost, for strong earnings growth, it makes sense to me that a bigger company would want to own a smaller, very profitable company.

You’re in luck! There are many additional small- and mid-cap financial firms that warrant attention right now, including Equitable Holdings, Inc. (EQH), a leading U.S. provider of financial advice, asset management and protection solutions. The company has $701 billion in assets under management through two principal franchises: Equitable Life Insurance Co. and a majority stake in AllianceBernstein Holdings L.P. (AB), an investment management firm.

French insurer AXA S.A. (AXAHY) had held a 39.1% stake in AXA Equitable Holdings (EQH) until last month. At that time, AXA S.A. sold 144 million shares of EQH in a secondary stock offering in order to raise cash to fund last year’s $15 billion purchase of XL Group (XL). (XL Group was featured in Cabot Undervalued Stocks Advisor when they received the buyout offer from AXA in March 2018.) AXA S.A.’s ownership in EQH is now down to about 10%. Equitable subsequently changed their name from AXA Equitable Holdings to Equitable Holdings.

This year, Equitable announced an agreement to sell U.S. Financial Life Insurance Company and MONY Life Insurance Company of the Americas, Ltd. to Heritage Life Insurance Company. The transaction is expected to close in early 2020.

“This transaction simplifies our balance sheet and is aligned with our strategy to improve the return on capital of our Protection Solutions segment,” said Anders Malmstrom, Chief Financial Officer of AXA Equitable Holdings.

Last week, AllianceBernstein reported a huge fourth-quarter revenue and profit beat. Net income was $0.85 per unit vs. the analysts’ consensus estimate of $0.70, and revenue was $817 million vs. the $769.8 million estimate. The good news propelled both AllianceBernstein’s and Equitable’s stocks higher. After a great 2019, the AB shares are up another 16% so far this year. AllianceBernstein’s bullish results are great news for Equitable, because as a majority shareholder, Equitable’s value is also enhanced. Wall Street is expecting AllianceBernstein’s profits to rise another 17% in 2020.

Next up: Equitable’s fourth-quarter results, due out on the afternoon of February 26. Per the third-quarter report, the company is successfully increasing both insurance premiums and net inflows in all business divisions, which include Individual Retirement, Group Retirement, Investment Management & Research and Protection Solutions. The market’s expecting fourth-quarter earnings per share (EPS) of $1.17, within a range of $1.10-$1.25, and $3.4 billion revenue, within a range of $3.2-$3.5 billion. Full-year 2019 profits are expected to finish the year up 20%.

With so many of its insurance and investment peers outperforming expectations this earnings season, and guiding analysts’ 2020 forecasts upward, I naturally expect Equitable to follow suit. Amazingly, Equitable’s 2020 price/earnings ratio (P/E) is only 5.5. For comparison, Legg Mason’s 2020 P/E was 10.9 before the buyout offer was announced, and 13.4 at the $50 buyout price. Equitable has additional insurance and investment peers with much higher valuations: Ameriprise Financial (AMP) with a 9.7 P/E and Voya Financial (VOYA) with a 12.9 P/E. So, there’s room for Equitable to rack up serious capital gains without even coming close to their peers’ valuations.

Share repurchases and dividend payouts are a priority for Equitable. The current dividend yield is 2.2%; it was most recently increased in May 2019.

The company’s IPO was issued in May 2018. EQH rose to a new all-time high this month, and the price chart remains bullish. Barring a downturn in the broader stock market, I expect continued capital gains from EQH this year.

Timothy Lutts, Cabot Stock of the, 978-745-5532, February 18, 2020


*Ally Financial Inc. (ALLY)

We emphasize gradually buy so you can buy more quality into further panic and volatility. Ally Financial is on our starting list of companies to accumulate, depending on your risk tolerance and time horizon. The U.S. banking system is so much stronger than the last time valuations in the financial sector plunged 12 1⁄2 years ago.

ALLY is a leader in electronic banking, which reduces costs and improves margins. A growing yield annually will outpace fixed income during this lower interest rate environment.

Alan B. Lancz, The Lancz Letter,, 419-536-5200, March 2020


*Hercules Capital, Inc. (HTGC)

Hercules Capital gave the very positive surprise of an eight cent supplemental dividend on top of the regular $0.32 per share payout. For fourth quarter results, net investment income was up 31.1% compared to a year earlier. This BDC gives us exposure to the tech and IPO markets.

Tim Plaehn, The Dividend Hunter,, February 2020


*Bank of America Corporation (BAC)

We should be looking at your stocks that have gotten slammed in this rout. Bank of America is hovering around $20. It’s worth way more. The markets turn and BAC is back up to $30 or higher. I’m buying BAC under $22.50. One thing I’m not doing is selling stocks that have already taken the hit. I’m confident in the long-term future of every company in my personal portfolio and our model portfolio. And right now, the losses are on paper, but they’re not real. Once I sell, they’re real and I can never reverse them.

But if I’m patient, if I’m bold, if I stick it out I’m going to be positioned to win big and maybe retire earlier than I’d hoped. And isn’t that why we’re all here anyway?

Historically, this is when people make the most money.

Jason Williams, The Wealth Advisory,, March 9, 2020



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