One value stock firmly on my radar this month is Prudential (LSE: PRU). In fact, I’ve decided if I can free up some funds this month, I’ll be buying some shares for my holdings.
Here’s why.
Current woes, but growth ahead?
Financial services giant Prudential has an established brand name, as well as a decent track record to fall back on, and a wide presence.
However, it hasn’t been a great time for Prudential shares of late due to volatility, but more on that later.
Over a 12-month period, the shares have slipped 37%, from 1,026p at this time last year, to current levels of 637p. Although this drop is a concern, I reckon the silver lining is an opportunity to buy quality shares in a firm I can see growing exponentially in years to come.
Pros and cons of buying shares
For me it’s not hard to understand why Prudential shares have declined in recent months. In fact, many financial services businesses across the globe have suffered a similar fate. Higher interest rates and soaring inflation have created a cocktail for disaster. For Prudential, specifically, its strong presence in Asian markets hasn’t helped recently. Worries of economic issues in China have halted its progress. Plus, growth markets in the region have also reported a slow down. These are ongoing issues I’ll keep an eye on.
From a bullish view, I view the ongoing risk mentioned as a short-term issue. Prudential’s strong brand power and presence in one of the wealthiest regions could be the catalyst to grow earnings, as well as returns. Plus, I can’t see its shares trading this low for too long. A spike in wealth is tipped for Asian countries in which Prudential is well established, and many consumers will be looking to make the most of Prudential’s products, especially life insurance.
Next, the shares look good value for money after the dip. They trade on a price-to-earnings ratio of just over nine.
Furthermore, the shares offer a dividend yield of 2.5%, which I can see growing in the future. However, I do understand that dividends are never guaranteed. In addition to this, the firm recently announced a share buyback scheme worth $2bn, which is another positive sign.
Finally, over the past few months, insiders have been snapping up thousands of shares. This for me is usually a positive, as those in charge of the direction of travel of the firm are putting their hard-earned cash at stake too. Who better to understand where the firm is headed than those in senior positions.
Final thoughts
When breaking down the investment case, the pros outweigh the cons by some distance. Prudential looks like the type of stock that could really help me build wealth now, and for years to come.
What makes it even better is the enticing valuation and exciting growth prospects. However, I am wary that global economic shocks could mean the share price recovery and performance could be a slow burn. As a Foolish investor looking to buy and hold for a long period, I have no qualms with this.
