Prudential Financial: Keep Holding Through This Period Of Uncertainty

Mar. 30, 2020 10:09 AM ETPrudential Financial, Inc. (PRU)15 Comments
WG Investment Research profile picture
WG Investment Research


  • Prudential's stock has significantly underperformed the broader market so far in 2020.
  • There are reasons for the poor stock performance - recession fears and a low interest rate environment - but I believe that this insurer will make a comeback in 2020.
  • I am long Prudential, and I have plans to add to my position on pullbacks.

Prudential Financial's (NYSE:PRU) stock has taken a significant hit so far in 2020 due mainly to COVID-19 concerns (and the deteriorating interest rate environment). PRU shares have underperformed the broader market by over 20 percentage points on a year-to-date basis.

ChartData by YCharts

Investors should definitely be concerned about lower rates and the potential economic impact of COVID-19 but, in my opinion, this steep pullback will eventually turn out to be a great long-term buying opportunity. To this point, I believe that shareholders of this global insurer should use the current dip as an opportunity to add to their PRU positions.

The Concerns Are Valid But The Bank Is Well Positioned for 2020 And Beyond

It would be the understatement of the year to say that the insurance sector has felt the pain of the COVID-19 fallout.

Source: Fidelity

And, of course, the Fed's recent interest rate decisions are not helping either - i.e., the low interest rate environment was already negatively impacting Prudential's bottom-line.

Source: CNBC

But more importantly, the fallout from a slowdown in economic activity obviously has a significant impact on the insurers, so the downward trending stock prices should come as no surprise. To put this into context, Goldman Sachs expects major cutbacks in consumer activity almost across the board through at least April 2020 (I believe that this downturn will be a lot longer).

Source: Goldman Sachs

There is not a "direct" impact to Prudential's business but, indirectly, this is not great near-term news for the insurance industry. However, as I recently described here, Prudential has more going for it than just rising rates and I believe that the insurer is positioned to weather any near-term storms. For example, management previously disclosed that the insurer was positioned for a downturn.

Source: Investor Presentation, 11/2019


ChartData by YCharts

ChartData by YCharts

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long PRU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Recommended For You

Comments (15)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.