Are Your Investments Going to Fail You This Year?
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Hartford Financial Services Group Inc. (HIG)
By Andrew Houghton and Nick Atkeson
Only one movie can take home the coveted Best Picture award, and most movie critics believe the award will go to “Avatar” or “The Hurt Locker.” These
films are well-known and generally likeable; in some sense, there is very little upside for these two movies. Most regular moviegoers have seen both
films, and people expect one of them to win.Of the eight other films that have also been nominated, the one that is in the biggest win/win situation is “A Serious Man.” No one thinks this
film has chance of winning. Translation: There is no downside. And when people hear that a film they’ve never even heard of was considered good enough
to be nominated, they will go out and watch it.“A Serious Man” is somewhat like Hartford Financial Services Group Inc. (HIG).
This stock is completely out of favor — almost an unknown. HIG is trading at about six times its $4 earnings estimate. The company’s book value is
$46.64, and yet the stock is trading around $26, or about 0.6 times book value.The slightest whiff of good news or increased market notice could send HIG substantially higher. Recently, there was a rumor that Allianz (AZ)
may acquire the company, and we saw positive options flow. This could be the beginning of a broader recognition that this solid company is currently
completely under-appreciated, so considering purchasing some HIG call options.
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