Joshua Stirling of Sanford C. Bernstein & Co. debuts at No. 2. The former All-America Research Team Rising Star has “consistently provided clear and analytically supported views on the companies he covers,” cheers one advocate. Stirling says the industry’s operating fundamentals remain strong and forecasts that earnings should increase for another year. However, “the sector’s attraction for investors is waning,” he cautions, “as a recovering economy and rising rates are together leading the market to return to many more cyclical rate- and credit-sensitive financials.” Fears of slowing pricing momentum hang over the group, moreover, and climbing interest rates are making life insurers more attractive again. So the best buying opportunities are companies whose recoveries the market has yet to fully value, he explains, as well as those that sell both life and nonlife products. New York–based property/casualty insurer American International Group is an example of both. Stirling was “among the first analysts to pound the table on AIG,” one supporter insists, and he’s still recommending it. “This once-controversial and still-underowned name offers investors a self-help story with earnings momentum and leverage to capital returns — and, as a multiline insurer, exposure to the benefit of rising rates which lead to higher margins, lower risk and opportunities for growth in AIG’s life insurance business,” Stirling maintains. However, if the economy falters or rates reverse their recent course, he adds, such high-quality defensive stocks as New York’s Travelers Cos. and Warren, New Jersey–based Chubb Corp. will return to the fore. — Carolyn Koo |
The 2013 All-America Research Team: Insurance/Nonlife, No. 2: Joshua Stirling