Q. Should I hold my shares of Aflac Inc.?
P.D., via the Internet
A. Some shareholders are sounding off about weak returns from the firm’s risky portfolio, which resulted in a 35 percent decline in the insurer’s second-quarter profit.
A large portion of that portfolio is invested in preferred securities of European financial institutions, a strategy that worked for years until money problems increased their possibility of being nationalized. Its CIT Group Inc. holdings have especially been draining.
Nonetheless, Aflac operating earnings that excluded those losses were up, and overall financials have remained resilient despite the difficult economy.
Shares of Aflac (AFL) were down 13 percent this year through Monday after last year’s 27 percent drop.
Consensus rating on Aflac, which has a reputation for quality corporate governance and dedication to shareholder values, is between “buy” and “hold,” according to Thomson Reuters. It includes six “strong buys,” one “buy,” nine “holds” and two “underperforms.”
Earnings are expected to rise 18 percent this year versus the 5 percent decline forecast for the accident and health insurance industry.
Q. What do you think of Hennessy Focus 30 Fund?
W.R., via the Internet
A. It uses a basic screen to assemble a portfolio of 30 stocks, which it replaces each fall. This unusual process based on a limited portfolio and massive sector bets has not worked well lately.
The $168 million Hennessy Focus 30 Fund (HFTFX) was down 30 percent in the last 12 months through Aug. 14, to rank in the lowest 10 percent of mid-cap growth and value funds. Its three-year annualized decline of 5 percent put it in the lowest 40 percent.
“My impressions of this fund aren’t that positive because … its expense ratio is too high for such a passive strategy,” said Greg Brown, analyst with Morningstar Inc.
Fund manager Neil Hennessy, founder and chairman of Hennessy Funds, has 25 years of experience. His computers screen for firms with market capitalizations of $1 billion to $10 billion and higher earnings than the year before. It buys equal dollar amounts of 30 stocks with the strongest relative performance in the last 12 months and holds one year.
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Andrew Leckey answers questions only through the column. E-mail him at [email protected].
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