Some companies are primed for growth. Investors can get fantastic returns, but can get burned if that growth slows, or even on hints that the growth may slow.
Other companies offer investors a better value. While they tend to have lower volatility throughout the course of a year, there are times when markets are jittery and a slow-and-steady holding may be ideal. These companies tend to sell off less than the market, but in a big selloff, they could be solid long-term buys.
One standout slow-and-steady returning group is the insurance companies. They’re highly regulated, and don’t face the challenge of a potential collapse like a bank stock. Over time, growing earnings and book value make them attractive, especially to buy in correcting markets.
Cincinnati Financial (CINF) is one potential buy. Shares currently trade at just 10 times earnings, less than half the multiple for the overall market. Revenues have been down over the past year, but profit margins have been steady at 20%.
Action to take: Investors looking for a valuation play with some upside potential may like shares here as a long-term holding. Cincinnati Financial also pays a 2.3% dividend, which it has a history of increasing over time.
For traders, the insurance plays usually aren’t too exciting. But with a potential for a market rebound into summer, the August $155 calls, last trading for about $7.50, could see mid-double-digit returns before expiration.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.