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One solid value item on my radar this month Prudential (LSE: PRU). In fact, I decided if I could free up some money this month, I would be buying shares of the things I own.
Here is the reason.
Current woes, but growth yet to come?
Financial services giant Prudential has an established brand name, a good track record to fall back on, and a wide presence.
However, it hasn't been a good time for Prudential shares of late due to volatility, but more on that later.
In the 12-month period, shares have fallen 37%, from 1,026p this time last year, to current levels of 637p. While this decline is a concern, I think the silver lining is an opportunity to buy a high-quality stock in a company that I see growing significantly in the coming years.
Pros and cons of buying stocks
It's not hard for me to understand why Prudential shares have fallen in recent months. In fact, many financial services businesses around the world have met the same fate. High interest rates and rising inflation created a cocktail of disaster. For Prudential, in particular, its strong presence in Asian markets has not helped recently. Concerns about economic problems in China have halted its progress. In addition, growth markets in the region also reported a decline. This is an ongoing issue that I will keep an eye on.
From a bullish point of view, I view the ongoing risks mentioned as a short-term issue. Prudential's strong brand strength and presence in one of the wealthiest regions could be a factor in boosting earnings, as well as returns. Also, I don't see its shares trading this low for a very long time. Asian countries experience an increase in wealth when Prudential is well established, and many consumers will want to take full advantage of Prudential's products, especially life insurance.
Next, the shares look good value for money after the dip. They trade at just over nine times their earnings.
In addition, the shares offer a dividend yield of 2.5%, which I can see growing in the future. However, I understand that benefits are not guaranteed. In addition to this, the company recently announced a share buyback plan worth $2bn, which is another positive sign.
Finally, over the past few months, insiders have been snapping up thousands of shares. This to me is usually a good thing, as those who manage the company's traffic flow invest their hard-earned money with them. Who better understands where the company is headed than those at the top.
Final thoughts
When dividing the investment case, the pros outweigh the cons by some margin. Prudential looks like the kind of stock that can really help me build wealth now, and for years to come.
What makes it even better is the attractive valuation and exciting growth prospects. However, I am wary that a global economic shock could mean the stock price recovery and performance could be a bit slow. As a naive investor who wants to buy and hold for the long term, I have no doubts about this.
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