Sunday, February 15, 2009
Buying insurance as a less risky investment
Posted By: Tsu-Han (Ina) Chang
Written By: David Serchuk
Insurance is not a bad place to wait out this recession, says the Forbes.com Investor Team.
Insurance firms are considered dowdy, boring and safe. Or at least they had been before American International Group helped push the American financial system to the brink of collapse.
So, investors can be excused for wanting to pass on the whole sector. But if you did you might miss out on some investment opportunities that, if nothing else, pay healthy dividends and in some cases have done so while outperforming the stock market.
Humana (nyse: HUM - news - people ), for example, has had a stellar 2009, up 15%, as compared with the Standard & Poor's 500, which is down 7.7%. Over the past year it's down 41%, a bit worse than the market, down 37.7%. Over five years, however, it's paid off handsomely, up 91% versus the S&P, which is down 27%. It has a price-to-earnings ratio of 11.2, lower than the market's, and has a market capitalization of $7.5 billion. It pays no dividend, but as a straight investment you could do a lot worse.
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