It was not a great week for my portfolio, but I still like my stocks. Is global growth slackening? I don’t think so. Are the financials that I own under threat? With the possible exception of Deerfield [DFR], no, not at all. Four quality US insurers, three quality European banks, and DFR. Hey, Deutsche Bank actually profited from the crisis. And Safety Insurance, unlike Commerce Group which missed estimates, beat estimates by a dime after the close. Bright management team there, and it trades at 97% of book, 5.7x 2007 earnings, and 6.8x 2008 earnings. (Did I mention that the reserves look conservative?)
Today’s action makes me think that there is some mindless “sell financials” program out there, and not caring about what is inside the financials. I will be adding to my names that were the worst hit recently, and perhaps, giving a higher weight to some of the insurers that I recently purchased. Assurant at 8.7x 2008 earnings, and Lincoln National at 9.2x 2008 earnings? It doesn’t make sense; these are two high quality companies with excellent growth prospects.
I am a value investor. Scanning my portfolio, I see a median 2008 P/E between 9-10x, and a median P/B in the 1.1x area. My portfolio will find support, even if the market falls further.
Full disclosure: long DFR DB AIZ LNC SAFT