Robert Duval's  Instablog

Robert Duval
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Professional Independent Trader, 15 years. Started as a equity index futures floor trader, now day and swing trade, stocks, treasury futures, index futures and commodities. Believe in correlation of markets, must undertand all markets to trade one well. (aka Jim Rogers) Self taught by... More
  • The Right Time To Consider Insurance Company Stocks 2 comments
    Jan 3, 2013 5:19 PM | about stocks: AIG, MFC, HIG

    This is my very first Article of any kind; so I will make it Short; Simple and (hopefully) sweet.

    The thesis is on considering insurance stocks as an investment at this time. Being a Macro - Themed investor; I will spend little time on individual companies and most on the Macro theme underlying this investment idea.

    In one sentence; this investment idea is a way to play a potential theme for 2013; that is higher long - term interest rates; leading to a steeper yield curve.

    This is a theme I believe will likely occur in 2013; is a rotation from investors from safety trades like long - term treasuries to a greater allocation into stocks and growth assets. I believe we are starting to see this play out in the early days of 2013.

    This theme is bullish for all financials for the reasons outlined below; but particularly insurance stocks.

    Insurance company stocks; as a group; have been crushed in recent years by suppressed long term interest rates; which they depend on for an income flow to pay out claims and previous annuities sold to policy holders.

    They are an extremely distressed and out of favour group; and valuations are cheap, IMO. (from a macro view).

    For safety reasons; because they have payment obligations; Insurance companies must invest premiums recieved extremely conservatively; in bond or bond - like investments.

    Higher long - term interest rates benefit these companies through increased investment income.

    As Financials continue to lead the broader market; I believe if longer term interest rates continue to increase at a measured pace; Insurance Stocks will benefit.

    Ideas to research would include AIG, MFC, HIG. I am long AIG and MFC.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HIG over the next 72 hours.

    Additional disclosure: Positions may change at any time. Do your own due diligence before investing.

    Stocks: AIG, MFC, HIG
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