MetLife (MET) sells at a low p/e ratio and is out of fashion. Veteran portfolio manager Norman H. Lehrer of Alpha Cubed Investments considers the life insurance giant for his value investing strategy, which focuses on individual securities, stocks and bonds that are out of favor in the eyes of the investment community.
“We tend to look at the published data and the predicted earnings of companies, and many times you can find an anomaly between what the stocks sell for if they are out of favor and what the expectation value is,” Lehrer said. “An example might be MetLife, which I think is selling in the high 30s, and yet they have predicted earnings of $5.00 to $6.00 a share.”
Lehrer says MET has had a few problems which have caused its price to fall, but expects it to gain some of it back later this year. He says companies with a disproportionately low p/e ratio can come back into fashion, and he says the fashion change in the industry has proven profitable in the long-run during his extended career.
“Now, for no apparent reason, they can come back into fashion — maybe later this year — and sell at more reasonable p/e ratios, maybe in the 10 to 12 range. I personally have done this over the past 60 years, and I have made a lot of money. Applying this philosophy to the management of clients’ portfolios is natural,” Lehrer said.
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