Do investors have a reason to worry?
- If Marsh & McLennan Companies, Inc. (NYSE:MMC)’s past four years are any indication, then probably not. Unless economic data in the U.S. takes a serious downturn, the company’s strategic advice is going to propel its revenue higher. At 15 times forward earnings, it’s not exactly cheap anymore, but it also isn’t at the point where it makes sense to bet against the company, especially with a recently upped 2.5% yield.
Why are short-sellers avoiding Chubb?
- Just like we saw with Loews, The Chubb Corporation (NYSE:CB) is a commercial and personal property and casualty insurer that has the ability to boost its premiums on an as-needed basis. Catastrophe losses, like those witnessed with Superstorm Sandy, gave insurers plenty of reason to hike rates and set themselves up for big gains in the future. Insurers will always encounter extraordinary hiccups, but they are cash flow machines when all is said and done.
Do investors have a reason to worry?
- Unless you have a crystal ball that can predict earthquakes, hurricanes, tornadoes, and other acts of God, then you’re probably safe investing in the insurance sector. The Chubb Corporation (NYSE:CB), for instance, saw its net income increase 36% to $2.48 in its most recent quarter, which is the highest level at any time in the company’s history. Furthermore, its combined ratio (the ratio that tells us how profitable it is to underwrite policies, with anything less than 100% being profitable) fell to 84.6% from 90.2% in 2012, proving my point that insurers can boost rates as needed to stay well in the black.
Why are short-sellers avoiding Hudson City Bancorp?
- This one is pretty much a no-brainer, as Hudson City Bancorp, Inc.(NASDAQ:HCBK) has already agreed to be acquired by
M&T Bank Corporation (NYSE:MTB) in a $3.7 billion deal announced last August. The reason I say it’s “pretty much” and not “absolutely” a no-brainer is that part of the deal will be in M&T Bank Corporation (NYSE:MTB) stock, which could fall between now and the completion of the deal and adversely affect Hudson City Bancorp, Inc.(NASDAQ:HCBK)’s buyout price.
Do investors have a reason to worry?
- While I admit to being disappointed with only a $3.7 billion buyout price, the move makes a lot of sense for both parties involved. M&T Bank will be able to boost its deposits by $25 billion in the blink of an eye and will expand its presence in the Mid-Atlantic region by purchasing Hudson City, while Hudson City shareholders will gain shares in the well-capitalized M&T Bank Corporation (NYSE:MTB), which sticks to basic but highly profitable banking services, including an emphasis on loan and deposit growth. In short, this isn’t a company that makes a lot of sense to bet against.
Do you see big downside potential in any of these five most loved S&P 500 (INDEXSP:.INX) companies? Share your thoughts in the comments section below.
The article The S&P 500’s 5 Most Loved Stocks originally appeared on Fool.com is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Berkshire Hathaway and Loews.
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