Introduction:
In light of the growing worries about a potential economic downturn and its impact on financial markets, even experienced investors are proceeding with caution. Cliff Asness, the co-founder and CIO of AQR Capital Management, has expressed concerns about the disparity between stock and bond markets. While bond prices indicate the possibility of a recession, stock prices remain optimistic. Asness warns that if a recession were to occur, equities could be at risk. Nevertheless, Asness has strategically increased his holdings in specific stocks that he believes can endure economic challenges. This article examines two of Asness’s stock selections and evaluates the sentiment among Wall Street analysts.
Cigna Group (CI):
Cigna Group is a global healthcare services organization that is well-positioned to withstand an economic downturn due to the resilience of the healthcare sector during challenging times. With a market capitalization exceeding $72 billion, Cigna offers a wide range of healthcare solutions to individuals, employers, and government entities. The company operates through two primary divisions: Evernorth and Cigna Healthcare. Evernorth provides comprehensive services in benefits management, care management, intelligence, and pharmacy, while Cigna Healthcare focuses on localized medical solutions.
Cigna reported strong financial results in the first quarter of 2023, surpassing expectations. Revenues reached $46.5 billion, and adjusted earnings per share (EPS) stood at $5.41, outperforming consensus estimates. Despite this positive performance, Cigna’s stock has faced challenges in 2023 due to the market’s shift from value names to tech stocks. However, Asness recognized an opportunity and increased his stake in Cigna by 95% during the first quarter, now holding over 1.1 million shares.
Truist analyst David S. MacDonald shares Asness’s positive outlook, citing balanced growth across segments, favorable financial performance, and improved guidance. MacDonald maintains a Buy rating on Cigna stock, setting a price target of $375, indicating a potential upside of approximately 52%. The broader consensus among analysts leans towards a Moderate Buy, with 4 Buy ratings and 8 Holds. The average target price is $317.69, suggesting a potential upside of around 28%.
American International Group (AIG):
As one of the world’s largest insurance and financial services organizations, AIG offers a diverse range of insurance products and services in 80 countries. AIG’s strong underwriting gains contributed to robust financial results in the first quarter of 2023. General insurance underwriting income increased by 13%, and adjusted EPS exceeded analysts’ estimates.
AIG’s decision to raise its quarterly dividend for the first time since 2016 reflects the company’s confidence in its continued success. Asness, sharing this sentiment, increased his holdings in AIG by 79% during the first quarter, indicating his belief in the company’s potential. As of now, he holds nearly 5.8 million shares.
Analysts have also expressed positive views on AIG. Goldman Sachs analyst Alex Scott highlighted favorable growth, improved loss ratios, and positive reserve development as factors contributing to AIG’s strong earnings. Scott rates AIG shares as a Buy, with a price target of $79, implying a potential upside of approximately 50%. Overall, analysts’ consensus leans towards a Moderate Buy, with 8 Buy ratings and 5 Holds. The average target price stands at $67.69, suggesting a potential upside of around 28%.
Conclusion:
Cliff Asness, a prominent investor, has expressed concerns about the disparity between stock and bond markets, emphasizing the vulnerability of equities in the event of a recession. However, Asness has strategically increased his holdings in selected stocks that he believes can withstand economic challenges. Two such stocks are Cigna Group and American International Group (AIG). Both companies operate in resilient sectors and have demonstrated strong financial performance. Analyst sentiment aligns with Asness’s optimism, with price targets indicating potential upsides for investors. While market conditions remain uncertain, Asness’s stock picks provide insights into his investment strategy and may offer opportunities for investors seeking resilience in uncertain times.
Goldman Sachs analyst Alex Scott praised AIG’s earnings report, citing favorable growth, improved loss ratios, and positive reserve development. Scott rates AIG as a Buy, with a price target of $79, implying a potential upside of approximately 50%.
Among analysts covering AIG, the consensus leans towards a Moderate Buy, with 8 Buy ratings and 5 Holds. The average target price of $67.69 suggests a potential upside of around 28%.
Conclusion:
Concerns are mounting on Wall Street regarding a potential economic downturn and its implications for the financial markets. The disparity between stock and bond markets has heightened investor unease. However, billionaire investor Cliff Asness remains strategic in his approach, increasing his holdings in selected stocks. Cigna Group and American International Group (AIG) are two companies that have attracted Asness’s attention. While these stock picks hold promise, the overall consensus among analysts remains cautiously optimistic. Investors will closely monitor these stocks as the market continues to navigate uncertain economic conditions.
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