Insurance stock market is about to open, this year’s peace is very safe!How much is the increase?

2022-07-12 0 By

Last year, my friends who followed me to reduce the growth sector and move to the low valuation value sector should be sleeping soundless at the beginning of this year, the bloody storm outside basically has nothing to do with us!One of the low-valuation sectors is insurance.At that time, many friends were still hesitant, thinking that insurance should be hopeless.Others found insurance too damn resistant in January, even with occasional spikes.Only then did they dare to buy.In fact, as a value investor, must see the rise before buying, this is wrong.The result is often short or too light a position, make a little money.After the adjustment that passes a month, of insurance rise anticipate more and more strong, rise time also is closer and closer, estimate a bit more optimistic, 3 April can usher in market, a bit more pessimistic be left and right sides in June.Why do you say that?Start with a strong indicator!Now the average dividend rate of the insurance industry has reached a historical high of 3.51%, and the historical percentile is above 99%!Some insurance companies have dividend yields above 4%!A lot of people don’t care about dividend yields because they’re mostly short-term traders and they don’t look at the steady cash flow, they just look at spreads.What does this dividend yield mean for the insurance industry?First, you’re better off buying bonds than insurance stocks. We’re now at 2.71% on the 10-year Treasury note, as you can see in the chart below.Think about it, if it were you, would you want to buy treasuries?Or buy insurance stocks and eat dividends?Anyone in their right mind would know to eat dividends.And this dividend will continue to increase with the performance of the insurance company, while the long-term trend of Treasury interest rates is falling!This is like saying that the current dividend yield of banks is higher than 4%, but ordinary people still put money in the bank to earn the interest rate of less than 3%, and do not want to buy bank stocks.This is the result of cognitive limitations.Since the dividend is so attractive, many institutions have a need to allocate bonds in the first place, and could easily substitute insurance company shares.Are you worried about the entire insurance industry disappearing?With the participation of these institutions, the rise of insurance has been emboldened.Second, an ultra-high dividend yield is an ultra-high margin of safety. We should first think of the worst outcome when we invest, for example, the stock price does not rise for ten years. What should we do?At the current dividend yield, it is estimated that the money will be paid back in ten years.It should be noted that China’s insurance penetration rate is still lower than the world average. This is an incremental market, and it is only a matter of time before the performance of insurance companies improves.When performance improves, the dividend gets bigger and bigger each year.Such cash cows, retail investors do not like, but a lot of institutions like very much.This can be seen in the flow of funds in January.Both banks and non-banks saw far more capital inflows than other sectors in January, despite the market plunge.Jilted do not know how many streets!Not only that, northbound capital inflows in December last year were 16.7 billion, the highest of all industries!Third, high dividends are often a precursor to rising insurance indices and as you can see from the chart below, once dividend yields remain high for a period of time, usually six to nine months, stock prices tend to rise.And the bigger the gap between share prices and dividend yields, the stronger the rebound.So this rally is at least 30%!Second, extreme pessimism has to many partners will find a variety of reasons to attack the insurance industry.What real estate enterprise debt thunder, agent loss, cheating, pulling head, performance continues to shrink and so on.Any reason can be interpreted as negative.This is precisely the moment of extreme pessimism, when the opportunity is greatest.In fact, the profits of banks and insurance are very easy to estimate, each institution can calculate a picture casually, so the current valuation in the end is not reasonable, attractive, they know better than anyone.There are two reasons why they did not buy before: 1. In the first two years, compared with the track of high business, the rise of value stocks was limited, by contrast, they would definitely chase hot; 2.2. A-shares are A place where retail investors gather, and the characteristic is to stomp on things that are undervalued to the death. Therefore, institutions are well aware of the character of retail investors and will not pick them up when everyone hits the market.But it is also because of this that value shares on the A-share market are often extremely cheap.Such extremely low valuations are rare in the US, where there are fewer retail investors and the market is more rational and efficient.In other words, this is the big opportunity that retail investors are creating for us.Some friends said, insurance performance will decline, can not participate.This kind of thinking just stays in the first level of thinking.You know, whether a company’s stock price rises or not depends not on whether its profits grow, but on whether profits grow in line with expectations.For example, if you only want your child to get a 60 on a test, you’ll be happy if he gives you a 65.But if you ask him to get a 100, then he won’t make you happy no matter how he takes it.That’s why we see the profit growth rate of pharmaceutical, semiconductor and military sectors is much higher than that of banks and insurance, but they have fallen so sharply, because institutions predict that their future performance will be significantly lower than expected, unable to support the current valuation!How extreme is this insurance pessimism?The percentage of insurance companies that fail is at an all-time high of 26 percent.In the 2018 bear market, it didn’t even reach 15%!Isn’t that like $8 for $10 worth of stuff?Don’t you pick up this bargain?In addition, the valuation of insurance industry is not the price-to-book ratio, but the enterprise value multiple (PEV).PEV is now at an all-time low, even 0.6 for many companies.I’ll give you $6 for $10!Thus, the insurance’s share price has been overly pessimistic, well below its value line.Three, as long as the sun can be bright we do investment, need to observe the market at all times where the people?When both the ‘to buy’ and the ‘not to buy’ are bought, a slump is not far off.On the other hand, when both should and shouldn’t be sold, then with a little money, it will go up.How do you tell?Let’s look at the proportion of positions held by public funds.1. The insurance sector holdings of all funds are at the lowest level in history and have been stabilized. As can be seen from the figure below, insurance accounts for only 0.4% of funds’ holdings now, but more than 5% in 2019.This shows that institutional holdings of insurance have been substantially reduced.And in the fourth quarter of last year, the fund has no longer reduced holdings, but increased holdings, the first quarter of this year is also increasing holdings.As a result, the insurance sector rose nearly four points in December and fell less than 2% in January, even after a broad sell-off.2. Active fund holdings have been reduced to the extreme, and there are signs of recovery as can be seen from the figure below, active fund positions, insurance only accounted for 0.07%.This is the extreme of extremes, as low as it gets.Active funds are managed by fund managers, so their positions are more flexible, and once they take their money out of the hot sectors and buy insurance, they can quickly drive up prices.These institutions are well aware that insurance is now overrated and that even if profits are not pretty this year, they will still be good value.And before the hot plate, the price has overdrawn the value, even if this year’s performance growth, but it is difficult to maintain the current valuation.Otherwise the beginning of the year will not be so drastic reduction, who ran late who unlucky!Because of the insurance industry, there is very little money in it, so as soon as a little money flows in, the stock price can go up very quickly.The insurance business has Been picking up. These are the most pessimistic scenarios. Let’s take a look at the insurance industry’s recent performance.After more than a year of darkness, life insurance premiums for several insurers have made a marked difference.See below.Property insurance has also shown relatively good signs of stabilisation.See below.Since insurance has been oversold, even if earnings have not surged, there will be mean reversion, an opportunity for stocks to overshoot.Insurers also earn a chunk of their income from foreign investment.The main one is bond investment.Then, the market interest rate is high, the insurance company’s investment income is high.As I said, the 10-year Treasury bond is at 2.7%, which is pretty low.Have a friend to listen to wonder, interest rate is low, that doesn’t mean that insurance company’s investment profit is low?How else can the stock go up?It’s important to understand that the stock market reflects expectations, not current conditions.In other words, low interest rates now mean higher investment income for insurance companies.Profits will increase in the future.As long as people see future performance will increase, they will buy insurance company shares.When the interest rate is really near the top, you want to invest in insurance stocks, that is to be a trader.As you can see from the chart below, the share prices of insurance companies have risen and fallen in tandem with interest rates.Here to explain more, for insurance company business income is also the same truth.Insurance revenue is freezing now, so the future will only get better and better, with this expectation, how do you think the stock price will go?So we must not rely on their own feelings to invest, and to think of the future will be how, otherwise you can only go to when the pan xia.For example, this time chasing high new energy, semiconductor and other hot plate friends.Remember, when you feel the economy is booming, don’t buy stocks.Smart investors have been gradually reducing their positions!Sum up the insurance industry this year is the probability of rising market.The reasons are as follows: 1. The stock price has been overtrodden, the price is seriously below the value, give some sunshine can be brilliant;2. The dividend yield far exceeds the bond interest rate, insurance stocks are better than bonds, institutions know very well;3. Business revenue and investment income are expected to get better and better, and stock prices will rise ahead of profits;4. In the last two months, institutions have invested heavily in the insurance industry, indicating that the upward momentum is gathering strength.When will it rise?I’d say in March or April, maybe June or so pessimistically.The neutral estimate is that the increase could reach 30%.Why?First, according to the performance of previous insurance stocks, each pull is not less than 30%;Second, even if performance does not improve and valuations rise by 30 per cent, they are still below average.Third, the insurance is usually pulled in three months to six months after the opening of the credit, the credit was opened in December, according to this time, almost in March and April.Reward voluntary, 1 cent is silent support, ha ha!Like my article friends welcome to my namesake public number: Rui Zhi Rui see!The content above is richer still made classification, see finance and economics together, learn to invest