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Will Buffett Find Takeover Targets in Insurance Stocks

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During the recent stock market downturn, investors sold shares of any company that has a connection to the life insurance industry, because they’re likely assuming that this market downturn is similar to the one in 2008, suggests Crista Huff, editor of Cabot Undervalued Stocks Advisor.

However, this market downturn bears no similarity in causation. Companies that sell life insurance — wholesale and retail — are in far stronger financial positions than they were in 2008. And fortunately, their stocks have shown a willingness to begin recovering from the market drop.

More from Crista Huff: Is the Bottom in for Apple?

Research any of these stocks as potential additions to your portfolio: Ameriprise Financial (AMP), Athene (ATH), Brighthouse Financial (BHF), Equitable Holdings (EQH), Lincoln National (LNC) and/or Voya Financial (VOYA).

Investors should also be aware that Warren Buffett of Berkshire Hathaway (BRK.B) has long held the intention of buying another company. Berkshire has accumulated $125 billion in cash, up to $105 billion of which is available for M&A activity.

Knowing that Mr. Buffett is already quite experienced with owning insurance companies, there’s a decent chance that his next buyout could be focused on the cheap valuations in this industry.

Ameriprise Financial just issued $500 million in senior 3.00% notes due April 2025. The company already had an impressive amount of excess capital, so the question becomes, “What does Ameriprise plan to do with this new influx of capital?”

The two answers that quickly come to mind are (1) repurchase their own stock or (2) attempt to acquire an industry peer in the area of life insurance, annuities, retirement benefits and/or investments. A large financial company — possibly including a major bank or Berkshire Hathaway — could swoop in and buy Ameriprise.

See also: Plug in to These 2 Utilities

Additionally, there’s been significant M&A activity among investment and insurance companies this year. Morgan Stanley (MS) announced an agreement to purchase E*TRADE (ETFC), and Franklin Resources (BEN) announced that they’ll buy Legg Mason (LM).

If there’s any additional M&A activity within this investment/insurance space in 2020, it’s my assessment that the companies I mentioned herein are the most attractive potential buyout targets.