June 22, 2023

Munich Re: No more oil and gas

Munich Re: No more oil and gas

As we’ve recently been very busy bringing you updates and new analysis for all the stocks we cover, we have slightly fallen behind with our stock picks. This week though, we’re back on track and our experienced guest investors discussed reinsurance companies during the Obermatt Coffee Break Stock chat.

They chose Munich Re and here are the reasons we think it’s a good addition to our Europe Value Wikifolio.

PRO: The following three points speak for a buy:

  1. Obermatt 360° View of 77, which means that Munich Re has better overall performance than 77% of its European counterparts. Quite notable are the all-green Sentiment Ranks, showing us a quite positive and above average market sentiment and engagement for the company.
  2. They have recently announced that they are no longer insuring projects involving new oil or gas fields, or midstream oil infrastructure. They have withdrawn from a UN industry climate alliance due to antitrust concerns, but state that it is more effective to pursue their own climate goals.
  3. Investing in reinsurance helps reduce overall portfolio volatility, as their performance generally isn’t tied to the stock market’s performance.

CONTRA: The following three points argue against it:

  1. Low Dividend and Revenue Growth ranks, although Munich Re has been known to be paying a stable dividend over the years.
  2. A Value Rank of 41 means that Munich Re’s shares are more expensive than 59% of the competitors’ shares.
  3. Reinsurance market is currently in a hard cycle, as noted by Munich Re’s CFO, Christoph Jurecka. Higher returns in the fixed income market caused by increased interest rates make reinsurance less attractive for investors. The industry is unstable and it brought less profits in the last couple of years.

By analyzing Munich Re in depth, we are confident that it is a valid stock pick for the time being. We bought the shares for our Europe Value Wikifolio, which you can also invest in yourself. Join the Obermatt Coffee Break Stock chat for free on Zoom, help us share our portfolios and learn more about stock investing directly from our experienced investors.

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