Recs

6

5-Star Stocks Poised to Pop: Unitrin

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, insurance company Unitrin (NYSE: UTR  ) has earned a top five-star ranking.

With that in mind, let's take a closer look at Unitrin's business and see what CAPS investors are saying about the stock right now.

Unitrin facts

Headquarters (founded) Chicago (1990)
Market Cap $1.5 billion
Industry Multiline insurance
Trailing-12-Month Revenue $2.78 billion
Management

CEO Donald Southwell (since 2006)

Chief Investment Officer John Boschelli (since 2009)

Return on Equity (average, past 3 years) 4.1%
Cash/Debt $554 million / $561.9 million
Dividend Yield 3.6%
Competitors

Chubb (NYSE: CB  )

Travelers Cos. (NYSE: TRV  )

W.R. Berkley (NYSE: WRB  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 90% of the 71 members who have rated Unitrin believe the stock will outperform the S&P 500 going forward. These bulls include WPThatcher and All-Star Staka, who is ranked in the top 2% of our community.

Earlier this week, WPThatcher summed up the Unitrin bull case with a few simple words: "Trading under book by a lot."

Unitrin's recent restructuring initiatives and bargain-like valuation support its five-star CAPS rating. Currently, Unitrin even trades at a price-to-book (0.7) discount to rivals Chubb (1.1), Travelers (0.9), and W.R. Berkley (1.0), as well as other highly rated insurers like Markel (NYSE: MKL  ) (1.1) and Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) (1.3).

At such a cheap price, CAPS All-Star Staka thinks Unitrin's positives far outweigh its negatives:

Positive:
- Below tangible book, makes for a good acquisition target
- Good dividend yield with a low payout ratio, could be increased
- Management is winding down unprofitable Fireside Bank (automobile finance subsidiary)
- Underperforming Unitrin Direct gets a fix
- Kemper and Unitrin Specialty are relatively consistent and profitable subsidiaries
- This is a value proposition waiting to be discovered by the market.

Negative:
- Slow to no growth
- Resignation of CFO might hint to internal divergences (pure speculation)

What do you think about Unitrin, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Markel and Berkshire are Motley Fool Inside Value picks. Berkshire is also a selection of Stock Advisor. The Fool owns shares of both Markel and Berkshire. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy always gets a perfect score.


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Brian Pacampara
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I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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