There is a current shift to a bull market due to recovery amidst vaccination progress, incorporating pandemic (COVID-19) recovery. As a result, there is an empirical expectation of shifting from a growth investment strategy to value investing. Value stocks tend to outperform growth stocks in bullish markets empirically.
American National Group (ANAT). ANAT’s P/E ratio is less than 10, and its P/BV ratio is 0.41 – meaning its current trading price is undervalued relative to its assets and earnings (intrinsic value). Its compound annual growth rate over one year is 24.8%, and over three years is 13.6%. With a stated EBITDA growth, ANAT can maintain its current dividend payments with a dividend yield of 3.6%.
ANAT provides various insurance services from credit to pension, property, life, and annuities. Its exposure to the insurance sector is diversifiable not just by category. The company’s services have a strong offering in Puerto Rico and the District of Colombia. In the final quarter of 2020, emerging markets generally outperformed domestic North American markets. Hence, ANAT includes international exposure without the need to evaluate trading foreign currency risks.
Furthermore, ANAT’s involvement in the financial services industry falls within our alignment of investing according to a bullish recovery, as the shift will most likely induce a market trend of rotating from investing in stocks in defensive sectors to cyclical stocks. This is extrapolated by the fact that ANAT’s P/E was over 10 (arguably less undervalued) before the pandemic effects in 2019, and its current reduction in P/E seems to be relevant to the market’s shift to defensive stocks during the pandemic.
Finally, it is worth noting that ANAT’s market capitalization of around $2.5 billion means it is almost a medium-cap stock. It is not a large-cap, nor a small-cap. The growth opportunities of ANAT might not be recognized by the market immediately but has a chance to do so eventually in a short-to-medium time frame. There has been an increase in hedge fund activity into ANAT near the end of 2020 amidst recovery.