A: The second-largest U.S. life insurer, behind only MetLife, has a strong brand identity. Backing that up is $2 trillion worth of policies in force and $5 billion in cash. First-quarter earnings increased more than 50 percent from a year earlier, thanks to fees generated from assets under management.
IN THIS PACKAGE
- Personality traits influence investing, for better or worse
- Fees, sales charges eat into even good funds' returns
- Credit card disclosures put under fed's microscope
- Financial stakes can be higher for older newlyweds
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Can they do that?
- Taking stock
- Hedge-like funds may reduce risk, experts say
- The week ahead
- Andrew Leckey
Jan. 13: Mattel's offerings are playing well in overseas markets
Jan. 6: Sun Microsystems remains a work in progress
- Prudential Financial Incorporated
See more topics »
Shares of Prudential Financial (PRU) are up 18 percent this year, following gains of 17 percent last year, 33 percent in 2005, 32 percent in 2004 and 32 percent in 2003. It intends to buy back $3 billion worth of its shares this year.
Standard & Poor's, citing Prudential Financial's strong operating performance, risk management and competitive position, has raised the insurer's counterparty credit rating to A+ from A. That reflects how well a company can meet financial obligations to customers, trading partners and other parties.
"The group maintains solid U.S. market-share positions in individual annuities, group benefits and the defined-contribution and asset-management segments," S&P said in a statement.
The consensus rating on shares of Prudential Financial is currently a "buy," according to Thomson Financial. That consists of six "strong buys," five "buys," six "holds" and one "sell."
Already selling insurance in more than 30 countries and with especially strong positions in Japan and South Korea, Prudential Financial continues to grow internationally. It recently became the largest individual shareholder in a new venture to acquire the leading insurer in Saudi Arabia, a market with significant potential. It is awaiting Chinese government approval to invest in China's local-currency stocks so it can set up a fund aimed at Asia's retail investors.
Earnings are expected to increase 17 percent this year, versus the 10 percent predicted for the life insurance industry, according to Thomson. Next year's projected 12 percent is in line with its peers. The firm's five-year annualized growth rate is estimated to be 14 percent compared to 12 percent industrywide.
In light of Wachovia Corp.'s $6.8 billion deal to acquire retail broker A.G. Edwards Inc., Prudential Financial must re-examine its brokerage joint-venture arrangement with Wachovia to determine whether it wants to retain its ownership share, have a reduced share, or sell altogether.
Q: Is Buffalo Mid Cap Fund worth investing in? --R.R., via the Internet
A: Mid-cap stocks are popular overachievers these days. This fund, which defines mid-cap as between $1.5 billion and $10 billion at the time of purchase, has done a good job of playing the trends likely to influence companies. It wants to find the big winners over the next three to five years.
Due to the effects of aging Baby Boomers, for example, it has more than one-fourth of its assets in health-care stocks. Dade Behring, a maker of diagnostic equipment for laboratories and hospitals, is the type of stock being added to its portfolio.
The $442 million Buffalo Mid Cap Fund (BUFMX) is up 24 percent over the past 12 months and has a three-year annualized return of 14 percent. Both of those results rank in the lower half of its mid-cap growth peers.
The fund currently has 56 holdings in its low-turnover portfolio.
It may work best as a supporting player in an individual's portfolio due to volatility and the risk associated with emphasizing just a few sectors such as consumer services, technology hardware, consumer goods and software. It shies away from commodity-related stocks, which has hurt recent performance because it hasn't been able to benefit from energy and metals prices.
Experienced portfolio managers Kent Gasaway and Robert Male have run the fund since its December 2001 inception and Grant Sarris joined them in 2003. They seek growth at a reasonable price, preferring firms with solid earnings potential and little debt that are trading at reasonable valuations.
"They have a sound strategy and they've executed it well at this and other funds," said Reginald Laing, analyst with Morningstar Inc. in Chicago. "They've had good returns without exposure to the hottest sectors."
It should be noted that Buffalo Mid Cap owns shares of Morningstar.
Other large holdings include Red Hat Inc., Hewitt Associates Inc., Amylin Pharmaceuticals Inc., Shire PLC, Charles River Laboratories Inc., IMS Health Inc., F5 Networks Inc., Novellus Systems Inc. and Medicis Pharmaceutical Corp. This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has a low annual expense ratio of 1.02 percent.
Q: I wish to donate some of my appreciated stock to a charity. What kind of deduction can I get? --T.G., via the Internet
A: The amount of the deduction you receive depends on how long you have owned the stock.
When donating appreciated stock to a qualified charity, you can claim short-term stock (one held a year or less) as a contribution and deduct the fair market value, minus the amount it has appreciated since you've owned it.
But if you held the shares long-term (more than one year) you can deduct the full fair market value of the donated shares at the time you donate them.
Your broker can arrange to transfer the shares to the charity for you. It is important that you do not first sell the stock and donate the proceeds, or you will owe capital gains taxes.
"There are limitations because you can't deduct more than 30 percent of your adjusted gross income in any one year, or you would have to carry forward some of the deduction to the following year," said Jackie Perlman, senior tax research coordinator with H&R Block in Kansas City, Mo.
"The carry-forward is limited to five years and, after that, you can't take advantage of it anymore."
Andrew Leckey is a Tribune Media Services columnist. E-mail him at firstname.lastname@example.org.