Investment Alert: Buy Chubb (CB) Under $205/share
Disclaimer: Investment Alerts have a medium to long-term time horizon. These do not constitute financial advice and you should contact a financial advisor before deciding whether it is appropriate for your individual circumstances.
Some stocks fly under the radar, and Chubb ranks among them. It provides insurance and re-insurance products worldwide so it’s not a household name like Apple or Netflix, but don’t let that stop you from looking under the hood.
Under The Chubb Hood
Chubb Limited (NYSE:CB), a leading global insurance company and has a long history of successfully navigating the unpredictable world of insurance. For those seeking stability during periods of market volatility, Chubb makes for an enticing choice because insurance is largely considered a defensive sector.
Catalysts that could drive Chubb’s share price higher include its continued focus on underwriting discipline and risk management. A well-managed insurance portfolio should lead to sustained profitability and growth, too.
Plus, the company’s global presence and diversification across various insurance lines, including property and casualty, should act as a buffer against localized economic downturns.
Chubb Has Massive Upside
When we ran a discounted cash flow forecast analysis, we arrived at 33% upside to fair value at $268 per share. That is in addition to a modest but attractive 1.70% dividend, which is even more compelling because the payout ratio is just 23% suggesting management has ample room to further increase the dividend over time.
For investors seeking stability, Chubb fits the bill. Over the past 5 years, the company has grown revenues each and every year. That includes the boom and bust cycles of the volatile 2020-22 period.
Another tailwind for the stock is a growing positive sentiment. Nine analysts have revised their estimates upward recently. And analysts as a whole have pegged a target of $238 per share on the stock.
The company also enjoys a robust competitive advantage. Chubb’s moat lies in its brand reputation, financial stability, and extensive network of agents and brokers. These factors make it challenging for new entrants to compete effectively in the insurance industry, contributing to Chubb’s competitive advantage.
Why Buy Chubb?
When we look to the technical trend, it’s not overly compelling. But this stock isn’t a fast-mover in general. Rather, it’s the type of position you hold for passive income and stick with for the total return over the long-term.
Other dividend stocks, like Verizon, have a much more compelling dividend, but if you examine its total return – share price appreciation plus dividends – over the past 5 years it’s nowhere near as compelling as Chubb.