CIF Stock Recommendation Report (Fall 2012)

Transcription

1 Section (A) Summary Date: 3/8/13 Analyst Name: Matthew Landen CIF Stock Recommendation Report (Fall 2012) Company Name and Ticker: Aflac Inc. (AFL) Recommendation Buy: Yes Target Price: $58.77 (+15%) Sector: Financials Current Price: Morningstar (MS) Fair Value Est.: $65.00 EPS (TTM): 6.11 Next Fiscal Yr. End Year : 2013 Month : December Forward P/E: 7.45 % Inst. Ownership: 65.60% Industry: Life & Health Insurance 52 WK Hi: $54.93 MS FV Uncertainty: High EPS (FY1): 6.38 Last Fiscal Qtr. End: Less Than 8 WK: Yes Mean LT Growth: 8.64 Inst. Ownership- Net Buy: Yes Market Cap (in Billions): $ WK Low: $38.13 MS Consider Buying: $32.50 EPS (FY2): 6.85 If Less Than 8 WK, next Earnings Ann. Date: 4/24/13 PEG: 0.86 Short Interest Ratio: 1.60 Stop- Loss Price: $45.99 (- 10%) # of Shrs. O/S (in Millions): EBO Valuation: $41.57 MS Consider Selling: $ MS Star Rating: 4 stars Ratio Analysis Company Industry Sector P/E (TTM) P/S (TTM) P/B (MRQ) P/CF (TTM) 1.60 (Morningstar) (Reuters) (Morningstar) Dividend Yield Total Debt/Equity (MRQ) Net Profit Margin (TTM) ROA (TTM) ROE (TTM) Analyst Consensus Recommendation: 2.41 Beta: 1.86 Short as % of Float: 1.40% 1

2 Investment Thesis Pros: The only reported CNBC analyst change was an upward revision Favorable Institutional Ownership Short Interest is at the lowest it has been in a year Unique first- mover position in Japan A switch from Japanese Government Bonds to U.S. securities should increase yield Continued de- risking of the European portion of their investment portfolio High customer retention in their major market Stand to gain from an aging Japanese population Their new distribution network (banks and postal offices) in Japan has led to higher revenue Constant, reliable dividends Cons: Fundamental valuation implies AFL is overvalued Unfavorable relative valuation metrics Analysts have been steadily decreasing their revenue and earnings estimates Continued exposure to the EU could adversely affect investment profit The deregulation in Japan opens up the AFL to intense competition from other firms Increased regulation in the U.S. has the potential to increase competition in the underpenetrated market they Summary Company Profile: AFL has operations in the U.S. (23%) and in Japan (77%). They are the leading provider of cancer and life insurance in Japan and have strong partnerships that have allowed them to increase revenues. Fundamental Valuation: Using a 2- year abnormal growth rate the fundamental value is $ The implied prices gradually decreased as the abnormal growth period increased. Sensitivity analysis showed little variation. Relative Valuation: 4 out of the 6 implied prices suggested AFL was overvalued. With the exception of P/CF, which is a relatively useless metric in this industry, each valuation metric gave a median price that was within the 52- week price range. Revenue and Earnings Estimates: There isn t any sort of trend with the revenue and earnings estimates. However, analysts have been decreasing their estimates from 3 months ago. Analyst Recommendations: Recommendations have stated pretty similar over time, with a slightly bullish rating of This is improved from 1 month ago when it was at 2.50 but worse than it was 3 months ago when it was at Institutional Ownership: Institutional ownership is at about 65% with only one firm owned more than 5%. That firm, Vanguard, is a relatively passive investor so there is limited risk in a significant portfolio rebalance that might lead to a rapid selloff. Short Interest: Short interest is currently at their yearly low of about 1.32 days to cover. At the moment, this is pretty typical of the industry where many of AFL s competitors are also experiencing extremely low short interest. 2

3 currently operate Any sort of slip back into a recessionary environment would hurt both their premiums and their investment portfolio The Japanese economic environment continues to stagnate which could hurt growth prospects and squeezes investment profits as yields in Japanese Government Bonds are at all time lows Conclusion: After weighing the Pros and Cons I believe the CIF should invest in Aflac. Aflac has been a strong company since its inception over 30 years ago and the recent sell off only presents an opportunity to buy it on sale. While important to look at, especially in relation to Aflac s U.S. business, the valuation methods are flawed because the companies used in comparison are not direct competitors. Which is why this investment ultimately comes down to Aflac s dominating position within the Japanese market and how they can continue leverage their distribution network and unique product offerings. Their investment portfolio, which has been the problem recently, will only benefit from the increased yield provided by a switch to U.S. securities as well as a decreasing exposure to Europe. The improved investment profits combined with the already low analyst estimates should make for a likely beat in upcoming earnings, which should result in an appreciating stock price. Stock Price Chart: The stock charts show recent underperformance but a longer- term view shows that Aflac as outperformed its competitors but still underperforms the sector and the S&P

4 Section (B) Company Profile (two pages maximum) Company Summary Aflac Inc. is general business holding company incorporated in 1973 that operates within the health and life insurance industry. Their subsidiary, American Family Life Assurance Company of Columbus (Aflac), has operations in both the U.S. and Japan. Aflac U.S. represented about 23% of total revenues in 2012, while Aflac Japan represented about 77% of total revenues. They offer group insurance products as well as voluntary insurance policies that provide a layer of protections against income and asset loss. Among other products, Aflac Japan offers voluntary supplemental insurance that includes cancer plans, general medical indemnity plans, care plans, and ordinary life insurance plans and annuities. Aflac U.S. offers voluntary supplemental insurance products that are designed to protect individuals from depletion of assets such as accident, cancer, fixed- benefit dental, and vision care plans as well as offering loss- of- income products like life and short- term disability plans. They are also consistently ranked as one of the worlds top companies. Forbes recently gave them the title of Worlds Most Admired Company. Business Model, Competition, Environment and Strategy The national health care system in Japan is having trouble keeping up with the increased costs associated with their aging population and have been shifting more of the costs onto the consumer. As a result, Aflac has increased resources and product availability in their Aflac Japan branch in order to service much of the population that needs additional insurance. They have also partnered with 90% of the banks in Japan to begin selling their products to their customers. This is significantly more than any of Aflac s competitors and has proven to be an important component of revenue as they contributed 45.6% of new annualized premium sales in 2012, up from 28.9% in 2011 and 14.6% in Aflac has been a leading provider of both life insurance policies and cancer policies since they were first granted an operating license in They are the largest life insurance provider with 22 million individual policies as well as the largest cancer policy provider with 14 million policies. The Japanese insurance market has gone through two deregulation stages, one in the early 1980s and the other in 2001, which has increased Aflac s competition. However, Aflac benefits from loyal Japanese customers where the average persistency (when a customer re- ups after renewal time) is 95% and they stay with Aflac for 20 years. Aflac U.S. primarily provides products that are individually written with premiums generally paid by the employee. They market this mostly at worksites where they can reach a larger number of prospective policyholders with lower distribution costs. However, in December of 2009 Aflac U.S. started offering their group insurance in order to build out their product 4

5 offering. Because Aflac s primary U.S. business is voluntary or supplemental insurance policies, they often can compete quite well with some of their competitors because this business remains secondary in their total revenues, as many of them focus on group insurance plans. The introduction of the Affordable Care Act could see increased opportunities for Aflac as consumers end up bearing some more of the cost and look for some of the solutions that Aflac provides. However, Aflac could see increased competition as many of their competitors, who compete with Aflac only on a secondary basis, could see profitability erosion and look to expand product offerings. As with other large multinational firms, Aflac faces a number of risks that could impact their business. The most apparent is the exchange rate risk they face with having 77% of total revenues come from Japan. Any sort of negative move in the dollar/yen exchange rate could greatly affect income. Aflac also faces the risk that increased regulation and a changing competitive environment in the U.S. could adversely affect their ability to perform as they have in the past. Much of their risk also lies with the chance that both the U.S. and Japan could slip back into a recession. While this would certainly reduce premiums, it would most visibly impact Aflac s investment portfolio. Historically, Aflac would invest much of their premiums into Japanese government bonds, but because of Japan s slow growth and weakened outlook, this is no longer a viable way to capture yield. Instead, Aflac has begun investing much of their investment portfolio in U.S. securities and then hedging it back to yen. They only began doing this in Q3 of 2012 and face significant decline in investment profits if the market performs poorly. Despite Aflac s new investment philosophy, they still have a sizable position in numerous yen- denominated securities of European banks. As of December 31 st, 2012, 4.1% of their investment portfolio was tied up in the PIIGS countries of Europe. We have seen the European crisis play out over the past few years and if things were to worsen Aflac could face significant write- downs in their portfolio. Revenue and Earnings History Discuss any pattern in revenue and earnings (e.g., increasing year over year; seasonal; etc.) Revenue Earnings Per Share Periods Periods March $5,065 $5,117 $6,240 March $1.35 $0.83 $1.68 June $4,980 $5,088 $5,902 June $1.23 $0.58 $1.03 September $5,394 $5,987 $6,847 September $1.46 $1.57 $2.16 December $5,294 $5,979 $6,375 December $0.92 $1.15 $1.24 Total $20,733 $22,171 $25,364 Total $4.96 $4.13 $6.11 Revenues have consistently gone up year over year while earnings stumbled in 2011 but picked it back up in There seems to be a slight seasonality to the business as revenues are 5

6 slightly greater in the last two quarters of the year. The same can be said for 2011 and 2012 earnings. Both revenue and earnings seem to peak around Q3 each year and then taper off during Q4. Despite Aflac exceeding estimated top line growth, they missed on their earnings, reporting $1.24 per share when analysts estimated $1.48. This shot their stock down but has since recovered slightly. Management cites the volatile dollar/yen exchange rate that skews their reported results. Despite the weaker yen, which caused earnings in dollars to appear lower, it has no material impact on their business. Aflac keeps the majority of profits from their Aflac Japan branch in Japan, rarely needing to repatriate funds. The requirement to report their earnings in dollars forces Aflac to report earnings that isn t indicative of their actual performance. If the yen were to become stronger for instance, they would have reported earnings that were much higher, despite nothing changing in their business. Section (C) Fundamental Valuation (EBO) Inputs (provide below input values used in your analysis) EPS forecasts (FY1 & FY2): 6.38 and 6.85 Long- term growth rate: 8.64% 6

7 Book value /share (along with book value and number of shares outstanding): Book value: 15,978 # of shares outstanding: Book value / share: Dividend payout ratio: Next fiscal year end: 2013 Current fiscal month: 3 Target ROE: 3.71% Output Above normal growth period chosen: 2 years EBO valuation (Implied price from the spreadsheet): $41.57 Sensitivity Analysis EBO valuation would be (you can include more than one scenario in each of the following): $38.29 if changing above normal growth period to 5 years $41.57 if changing growth rate from mean (consensus) to the highest estimate 15% $41.57 if changing growth rate from mean (consensus) to the lowest estimate 4.84% $65.13 if changing discount rate to 10% $41.57 if changing target ROE to 19.82% In the sensitivity analysis I changed the discount rate from 15.3% to 10% in order to counteract the impact of the seemingly high beta of 1.86, which drove the original discount rate. I also changed the ROE to Aflac s ROE because it differs so much from the industry average. However, changing these numbers did almost nothing to change the fundamental share price. 7

8 Section (D) Relative Valuation MetLife, Inc: MetLife is very similar to Aflac in terms of the products provided. They offer many of the same things including group life insurance products, employee paid supplemental life products, and whole life products. They operate in the U.S., Japan, Latin America, Asia Pacific, Europe, and the Middle East. This is the type of company Aflac has the leg up in Japan in terms of distribution and product offering, but has a larger presence here in the U.S. that could see direct competition with Aflac if regulations were to change. Prudential Financial, Inc.: Prudential provides various financial products and services through their three main business operations: The U.S. Retirement Solutions and Investment Management, The U.S. Individual Life and Group Insurance, and The International Insurance and Investments. Similar to MetLife, Prudential competes most directly with Aflac with their U.S. life insurance and group policies. Principal Financial Group: Principal Financial Group has a more diversified product line with retirement savings, investment, as well as insurance products. They compete directly with Aflac primarily in their U.S. product line of individual life insurance policies and specialty benefits consisting of group dental and vision insurance. 8

9 Lincoln National Corporation: Lincoln engages in multiple insurance and retirement businesses in the U.S. and sells a range of wealth protection, accumulation, and retirement income products and solutions. They compete with Aflac primarily on their annuity and life insurance policies as well as their disability and dental products. From the top panel Discuss whether your stock and its competitors have very different multiples. Point out if any of the five stocks have multiple that is far off from the others. Make an attempt to explain why (you would want to read analyst research report in Morningstar Direct; you should also look for comments from other financial sites). The discussions should address all of the following valuation metrics: forward P/E, PEG, P/B (MRQ), P/S (TTM), and P/CF (TTM). Compare the implied prices derived from various valuation metrics. Also compare those implied price to the stock s current price, and 52- week high and low. The forward P/E s of each company are relatively similar, with no one company having a very high or very low multiple. The PEG of Aflac is slightly higher than its competitors, which is primarily because Aflac s LT growth rate is lower than 3 out of 4 competitors. This could just be because only 4 analysts gave estimates on this number and each gave very different numbers, or because all four of these competitors primarily operate within the U.S. where growth is expected to be higher than in Japan, where Aflac does most of its business. The P/S ratio doesn t show any outliers, with Aflac s ratio landing in the middle. The P/CF has significant deviation among the five companies, ranging from Aflac s low of 1.6, to Prudential s high of These numbers were hard to come by, with many coming from sources other than Reuters (ie. Morningstar). This could explain some of the deviation. Four of the six valuation metrics gave implied prices that were below the current stock price. Two of these four were within the 52- week range, while two, P/B and P/S, were below the 52- week low. The other two metrics gave implied prices that were well above the 52- week high. From the bottom panel Discuss the various implied prices of your stock derived from competitors ( comparables ) multiples. How different are the prices derived from the various valuation metrics? Note any valuation metrics that seem to yield outlier prices and explain why (HINT: is that because that particular valuation metrics is not very relevant for the industry? Do you best to provide convincing arguments). 9

10 For each valuation metrics, Compare the current price and 52- week high /low of your stock to the High- low range derived from multiples of its competitors. Among the valuation metrics analyzed, which ones do you think are most relevant as a valuation tool for your stock? Forward P/E gave a high range that was roughly $6 above the 52- week range and a low range that was roughly $6 above the 52- week low, giving a median price that was lower than the stock s current price. The PEG also gave a median price that was below the current stock price, but had a high range that didn t exceed the 52- week lows and a low range that does dip below the 52- week low. The P/B gave high, low, and median prices that were all below the 52- week low. On the other hand, the value ratio gave high, low, and median prices that were all well above the 52- week high. This can mostly be explained by Aflac s significantly higher ROE. The P/S was mixed, with a high price that exceeds the 52- week high, a low price that is below the 52- week low, and a median price that is also below the 52- week low. Similarly to the value ratio, the P/CF ratio gives implied prices that are higher than the 52- week high. In fact, they are nowhere near the current price primarily because of the inconsistent P/CF numbers discussed earlier. In an insurance provider like Aflac, no one statistic stands out as a definitive measure of the company. In cases like this I think using the Forward P/E and PEG ratios are most applicable as a way to measure the relative valuation. Out of the others, P/B is the valuation metric I would choose, as P/B is generally a good measure of financial stocks. It is also worth noting that the competitors used are primarily U.S. based corporations and their implied valuations should be taken with a grain of salt, as competition is limited between they and Aflac. Section (E) Revenue and Earnings Estimates Copy/Paste the Historical Surprises Table from Reuters.com, Analysts tab (include both revenue and earnings; make note that revenues might be in millions ) Review recent trends in company s reported revenue and earnings, and discuss whether (1) the company has a pattern of surprising the market with numbers different from analysts estimates; (2) Were they positive(actual greater than estimate) or negative (actual less than estimate) surprises? (3) Were surprises more notable for revenue or earnings? (4) Look up the stock chart to see how the stock price reacted to the surprises. NOTE: Reuters does not put the sign on the surprise. You need to put a negative sign when it is a negative surprise. 10

11 Estimates vs Actual Estimate Actual Difference Surprise % SALES (in millions) Quarter Ending Dec-12 6, , Quarter Ending Sep-12 6, , Quarter Ending Jun-12 6, , Quarter Ending Mar-12 6, , Quarter Ending Dec-11 6, , Earnings (per share) Quarter Ending Dec Quarter Ending Sep Quarter Ending Jun Quarter Ending Mar Quarter Ending Dec There is not much of a trend that would indicate Aflac surprises or disappoints on a regular basis. The revenues are very scattered while the earnings have a more consistent positive trend. However, this doesn t take into account the most recent earnings they reported in February, which missed analyst estimates. The only significant reaction investors had had been in relation to the most recent earnings miss, where the stock dumped about $2. Copy/paste the Consensus Estimates Analysis Table from Reuters.com, Analysts tab (include both revenue and earnings) Review the range and the consensus of analysts estimates. (1) Calculate the % difference of the high estimate from the consensus (mean); (2) Calculate the % (negative) difference of the low estimate from the consensus; (3) Are the divergent more notable for the current or out- quarter, FY1 or FY2, revenue or earnings? (4) Note the number of analysts providing LT growth rate estimate. It that roughly the same as the number of analysts providing revenue and earnings estimates? 11

12 # of Estimates Mean High Low 1 Year Ago SALES (in millions) Quarter Ending Mar , , % 5, % 6, Quarter Ending Jun , , % 6, % 6, Year Ending Dec , , % 24, % 26, Year Ending Dec , , % 25, % 27, Earnings (per share) Quarter Ending Mar % % 1.75 Quarter Ending Jun % % 1.75 Year Ending Dec % % 7.06 Year Ending Dec % % 7.59 LT Growth Rate (%) % % The amount of divergence is remarkably similar between quarters, fiscal years, and revenue and earnings. The only difference is that earnings, on average, have a lower divergence in the high range but a higher divergence in the low range. The number of analysts reporting for the LT growth rate is significantly lower than the number of analysts reporting for revenue and earnings, with only 4 compared to about 11 for revenue and 20 for earnings. Copy/paste the Consensus Estimates Trend Table from Reuters.com, Analysts tab (include both revenue and earnings) Review recent trend of analysts consensus (mean) estimates on revenue and earnings. (1) Are the consensus estimates trending up, down, or stay the same? (2) Is the trend more notable for the near- or out- quarter, FY1 or FY2, revenue or earnings? Current 1 Week Ago 1 Month Ago 2 Month Ago 1 Year Ago SALES (in millions) Quarter Ending Mar-13 6, , , , , Quarter Ending Jun-13 6, , , , , Year Ending Dec-13 25, , , , , Year Ending Dec-14 26, , , , , Earnings (per share) Quarter Ending Mar Quarter Ending Jun Quarter Ending Dec Quarter Ending Dec

13 There is a consistent downward trend in the analysts consensus estimates for both revenue and earnings. There is relatively little difference between the near and out quarters, fiscal years, and between revenue and earnings. Copy/paste the Estimates Revisions Summary Table from Reuters.com, Analysts tab (include both revenue and earnings) Review the number of analysts revising up or down their estimates (both revenue and earnings) in the last and last four weeks. (1) Note whether there are more up or down revisions; (2) are the revisions predominantly one directional? (3) Any notable difference last week versus last four weeks, revenue versus earnings? Last Week Last 4 Weeks Number Of Revisions: Up Down Up Down Revenue Quarter Ending Mar Quarter Ending Jun Year Ending Dec Year Ending Dec Earnings Quarter Ending Mar Quarter Ending Jun Year Ending Dec Year Ending Dec While the last week has seen no revisions for revenue and only 4 downward revisions for earnings, the last 4 weeks has seen significant downward revisions for both revenue and earnings. Earnings had more downward revisions, and only 2 upward revisions, than revenues. You will need to incorporate what you see here with Morningstar s analyst research report (you can access Morningstar Direct at the Financial Markets Lab.) and other readings/analysis you found from various on- line financial sites. Discuss whether you think the company has a good chance of making or beating analyst consensus estimate, and why. Based on how the stock has been trading lately, do you think market has already anticipated strong or lackluster financial outlook from the company? I think it is more likely than not that Aflac will meet or exceed these estimates come their next earnings call. Analysts have already lowered their estimates, which should make it easier to at least meet. However, much of the results hinge on the dollar/yen exchange rate, however superficial an unhelpful that may be. Although they don t actually repatriate all of their 13

14 earnings back into the U.S. they must still convert them on paper to adhere to reporting guidelines. This has no affect on their actual business but could significantly change their reported results. If the Yen were to strengthen, their results would strengthen too, making it highly likely they beat estimates. On the other hand, if the Yen weakens, as it did before their last earnings report, their results will weaken as well, making an earnings beat all the more unlikely. I think the recent selloff because of the missed earnings has set up for a bounce back next earnings call even if Aflac only meets expectations. Section (F) Analysts Recommendations Copy/paste the Analyst Recommendations and Revisions Table from Reuters.com, Analysts tab. NOTE: Make sure you copy the entire table including the Mean Rating at the bottom of the table. 1-5 Linear Scale Current 1 Month Ago 2 Month Ago (1) BUY (2) OUTPERFORM (3) HOLD (4) UNDERPERFORM (5) SELL No Opinion Month Ago Mean Rating Revision Upgrade or Current Previous Firm Last Date Downgrade Recommendation Recommendation Revision 3/1/13 Upgrade BUY HOLD Everco 1 year ago Review the trend of analyst recommendations over the last three months. Is there a notable change of analyst opinions, turning more bullish or bearish? How many different ratings out of the five possible ones did the company receive currently, one, two, and three months ago? Is there a notable trend of opinion convergence or divergence? Is what you see here consistent to comments in Morningstar analyst s research report as well as various online financial sites you had researched on? 14

15 There is little change in analyst opinion over the past 3 months. While it is slightly more bearish compared to 3 months ago, it is also slightly more bullish compared to a month ago. All analyst opinions were either a Buy, Outperform, or Hold, with the majority being a hold. The only difference between the current opinion and 3 months ago is that some of those that suggested an outperform switched to a hold. These opinion are somewhat bearish when compared to other sources. Morningstar rates is a 4 star stock and other analysts, including the one from Everco as seen in the CNBC table, seem to be a bit more bullish on the stock. They love Aflac and see the recent dip in share price as an opportunity to buy the stock on sale. 15

16 Section (G) Institutional Ownership Copy/paste the completed CIF Institutional Ownership spreadsheet here. AFL Ownership Activity # of Holders % Beg. Holders Shares % Shares Shares Outstanding 467,709, % # of Holders/Tot Shares Held % 306,817, % # New Positions % # Closed Positions % # Increased Positions % # Decreased Positions % Beg. Total Inst. Positions % 295,904, % # Net Buyers/3 Mo. Net Chg % 10,912, % Ownership Information % Outstanding Top 10 Institutions % Ownership 25.80% Mutual Fund % Ownership 1.03% Float % 96.44% > 5% Ownership Holder Name % Outstanding Report Date The Vanguard Group, Inc /31/

17 Combine information provided in all three sections to discuss whether (1) institutions, on net basis, have been increasing or decreasing ownership and how significant, (2) the stock has sizable institution interests and support, (3) the extent of the (> 5%) owners, and (4) this could be a bullish or bearish indication of future stock price movement. Institutional ownership has been increasing despite a decrease in position. This implies that those institutions that are buying Aflac shares are doing so in an amount greater than those who are decreasing their position. The stock has significant institutional ownership at about 65%, but isn t all that high compared to some other stocks in the financial sector. Vanguard is the only group who owns greater than a 5% stake in the company. This is little to worry about as Vanguard is mostly mutual funds, ETFs, and other passive investment strategies that aren t prone to rebalance. 17

18 Section (H) Short Interest (two pages) AFL Short Interest: 18

19 MET Short Interest: 19

20 PRU Short Interest: 20

21 Complete the following table with information from the share statistics table. Avg Vol Avg Vol Shares (3 month) (10 day) Outstanding Float 3,427,720 3,855, m m Shares Short Short Ratio Short % of Float Shares Short (Most recent date) (Most recent date) (Most recent date) (2 weeks prior) 6.53m % 8.69m Based on the short interest statistics and its recent trend, how is the market sentiment on the stock? Has the sentiment turned more bullish or bearish over the last year? How about in more recent month and why? The sentiment has gotten more bullish over the last year. Aflac has a day to cover ratio that is at its lowest all year. This is similar in both competitors as well, with MetLife having a days to cover ratio that is, on average, slightly higher than Aflac, while Prudential has consistently had a days to cover that is slightly lower than Aflac. This is most likely because of the bullish sentiment that permeates the sector and the industry. 21

22 Section (I) Stock Charts A three months price chart A one year price chart 22

23 A five year price chart Additional price chart 6 month technical analysis chart: 23

24 2 year technical analysis chart: Discuss what you observe from the stock charts. This should include comparing your stock to competitors, sector, and SP500 over the three different time horizons. The 3- month chart shows that Aflac has underperformed its competitors, the financial sector, and the S&P 500. They begin to underperform right around the New Year, presumably because of a combination of less than stellar earnings and their huge operations in Japan as opposed to the U.S., which prevented a rally based on fiscal cliff avoidance. However, if we look at the 1- year price chart we can see Aflac outperforms its two competitors and only slightly underperforms that financial sector and the S&P 500. This could be attributed to the fact that they were less affected by the U.S. macroeconomic events that dragged down stocks last summer. The 5- year chart shows that Aflac has still yet to recover from the global meltdown in 2008 and 2009 and has thus underperformed both the financial sector and the S&P 500. However, they have outperformed MetLife and are almost identical to Prudential. The 6- month technical analysis chart shows a death cross in February, which is likely the result of missed earnings. However, it has started to recover since then. The 2- year technical analysis chart shows two death crosses, with the notable one being in May of This is because of two pretty poor earnings results that caused the stock to selloff. The RSI indicator is pretty neutral at almost exactly

25 References aflac- and- japan?source=yahoo investors- get- a- second- bite- at- aflac article/ aflac- named- a- fortune- world- s- most- admired- company- for- 12th- time Morningstar Yahoo! Finance Aflac 10- K 25