Prudential Financial (NYSE: PRU) cares so much about having a solid foundation that it uses the Rock of Gibraltar as its corporate logo. That foundation is provided by a balance sheet with over $ 400 billion in bonds and $ 21 billion in cash and cash equivalents, and a net position of over $ 65 billion. In terms of insurance, this means that a lot can go wrong beyond what she intended, and the business would always end well.
Like most insurers, Prudential earns its money from risk pricing. Ideally, premium inflows should be at least equal to claims outflows. Otherwise, the equity on its balance sheet may cover unforeseen costs. The COVID-19 pandemic has increased uncertainty, but Prudential’s track record should allow it to survive long enough to understand the new risks and price future policies accordingly.
Meanwhile, Prudential’s shares have fallen significantly this year due to the short-term risks it faces. This drop in the stock price recently pushed the dividend yield up to 6.8%. Before the pandemic, dividend payments were only about 60% of company earnings, leaving room for future dividend growth.
In August, management said, âWe remain on track to meet our target of $ 140 million in cost savings for the year and are making progress in transitioning our international revenue base to stronger markets. growth. Prudential deserves a closer look from income-seeking investors.
Ask the fool
Question: Can I move my money within my IRA, switching between different stocks and mutual funds? – BS, Norwalk, Connecticut
A: If your IRA is held by a brokerage, you should be able to buy and sell stocks within it, and also invest in mutual funds offered by that brokerage. You may be charged regular trading commissions for such trades, but you will not be taxed on any winnings as long as the money is in the account. (Learn more about the brokerage houses in our sister company, Ascent.com.)
If your IRA is owned by a mutual fund company, you should be able to switch between their funds, but you probably can’t invest in individual stocks.
Question: What is an ITU? – FR, Watertown, South Dakota
A: This is a mutual fund – a kind of investment company similar to a closed-end mutual fund (which sells a fixed number of shares initially).
An ITU raises funds from investors based on its investment strategy, usually through a single public offering of âunitsâ (which are like stocks). This money is invested in a portfolio of stocks, bonds and / or other securities that is not expected to change its composition over time – in other words, ITU commits to those securities. . This is an advantage for investors who wish to own these securities, but a disadvantage for those who prefer savvy fund managers to buy and sell over time based on company performance, changing trends and trends. the economy. Some ITU units can be sold back to the company, but others must be held until the investment is dissolved at a predetermined date when the proceeds are distributed among the unitholders.
You can learn more about UITs by searching for the term on sites such as SEC.gov and Google.
My dumbest investment
My dumbest investment was putting 40% of my wallet in the IPO of Snap, known for its hugely popular Snapchat app. I thought my reasoning was sound, but things didn’t work out the way I hoped or hoped. Experience has taught me the importance of diversification. Fortunately, my wallet was small at the time, and the lesson turned out to be very valuable. – TCB, online
The madman replies: It’s not a bad idea to avoid all initial public offerings, or IPOS, of newly opened companies, give their shares a few months or a year to settle – and wait for the companies to issue statements. financial statements for several quarters for review. Often, insiders and connected people are the ones who buy stocks at the IPO price, while others end up buying after an initial increase.
Snap shares erupted on their first trading day, closing at $ 24.48, 44% above their IPO price of $ 17. But only a few were able to buy at $ 17. Due to pent-up demand, stocks started trading at $ 24, leaving many early investors with gains closer to 2%. A little over a year later, the shares fell below $ 11. (New stocks are often volatile: Facebook stocks have gained less than 1% on the day they go public, while Twitter stocks have climbed more than 72%.) Today, bullish investors are enjoying the Snap’s continued popularity with young people and its growing revenues and users, while skeptics worry about its unprofitability and competition.