American Equity Story Overview

AEL -- USA Stock  

USD 35.11  0.13  0.37%

Macroaxis News
  
By David Taylor

Our economy is expanding and I am bullish on America.  Some sectors in our economy will see larger growth prospects over others.  One sector is the financial sector.  I have been spending a lot of time looking through banks and insurance companies because I believe the growth potential is greatest for those companies.  

American Equity Investment Life Holding Company is an insurance company that specializes in fixed index and fixed rate annuities.  A fixed index and fixed rate annuity guarantees purchaser of those products increases in the index but shields the purchaser from any downside moves.  This allows for an interesting investment.  

Insurance
Fama & French Classification
Here is a financial stock that is lagging the overall market, but paying good returns.

Our economy is expanding and I am bullish on America.  Some sectors in our economy will see larger growth prospects over others.  One sector is the financial sector.  I have been spending a lot of time looking through banks and insurance companies because I believe the growth potential is greatest for those companies.  

American Equity Investment Life Holding Company is an insurance company that specializes in fixed index and fixed rate annuities.  A fixed index and fixed rate annuity guarantees purchaser of those products increases in the index but shields the purchaser from any downside moves.  This allows for an interesting investment.  




Our economy is expanding and I am bullish on America.  Some sectors in our economy will see larger growth prospects over others.  One sector is the financial sector.  I have been spending a lot of time looking through banks and insurance companies because I believe the growth potential is greatest for those companies.  

American Equity Investment Life Holding Company is an insurance company that specializes in fixed index and fixed rate annuities.  A fixed index and fixed rate annuity guarantees purchaser of those products increases in the index but shields the purchaser from any downside moves.  This allows for an interesting investment.  

Another key variable in an insurance company’s earnings is its ability to properly assess risk and what it will pay out to an individual. There are reams, and reams of books with data relating to payouts for insurance companies based upon predictability of human behavior.  AEL has done an aboveboard job in assessing these risks and creating premiums based upon that.  

Currently, AEL is trading at $23.60 per share and has a market cap of $2 billion, so a bit on the smaller side of equities.  I like the other numbers this company shows, specifically the total investments:

2012:  $27,537

2013:  $30,347

2014:  $35,982

2015:  $39,570

Investments continue to increase; a sign the company is growing with the economy.  Investments are how an insurance company pays out its policies.  The actuaries predict how much an insurance company pays out.  The objective of an insurance company is then to outperform the markets and the payouts that the company is obligated towards.  The spread of what the investments earn versus what the company is obligated to pay is its profits.  

Given that criteria the company has performed well.  Here are both the total sales for AEL as well as earnings-per-share, respectively:

2012:  $1,382 / $0.95

2013:  $1,567 / $3.86

2014:  $1,677 / $1.69

2015:  $1,855 / $2.78

Sales are very steadily increasing and so are earnings-per-share.  Keep in mind the significant downturn in the economy during 2014.  Despite the world coming to a screaming halt, the company was both still profitable and effectively kept a strong sales-to-earnings ratio.  However, the ratio of the two is increasing, favoring the company’s diligence with both investments and actuary fidelity.  

As the stock market continues to increase in value, especially at the rate it has been moving, the products that AEL has sold will outperform the obligations.  This elevated differential will ultimately make it simpler for AEL to increase its earnings per share regularly.  

But, what I see as the most compelling aspect of this company is its earnings-per-share ratio; the company’s stock is trading at $23.60 per share and its earnings are at $2.78 per share.  That puts the stock at less than 10-times earnings ratio.  You can buy this company and effectively get an 11% return on your investment.  

The financial stocks have been left behind as the entire stock market moves higher and higher.  The average EPS ratio for the entire market is sitting well over 25.  This is a huge opportunity if you are looking for bargain stocks with an excellent EPS ratio.  Eventually, as individuals lose interest in such rick stocks that have pushed the average so high, those individuals will be looking for more realistic ratios in a company.  AEL will see its stock price mover higher.  Much higher.  If the EPS ratio hit 15-times, the average for the stock market over the past 50 years, this stock would be sitting at $40 per share.  Reason enough to buy into this company. 

Story Momentum

This article from Macroaxis published on 02 of February contributed to the next trading period price escalation.The overall trading delta to the next next day price was 3.29% . The overall trading delta when the story was published to current price is 51.86% .

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Cash and Equivalents

Cash and Equivalents Comparative Analysis
  Cash and Equivalents 
      American Equity Comparables 
American Equity is rated below average in cash and equivalents category among related companies. Cash or Cash Equivalents are the most liquid of all assets found on company's balance sheet. It is used in calculating many of the firm's liquidity ratios and is a good indicator of overall financial health of a company. Companies with a lot of cash are usually attractive takeover targets. Cash Equivalents are balance sheet items that are typically reported using currency printed on notes.
Check also American Equity Hype Analysis, American Equity Correlation and American Equity Performance. Please also try Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..