How might I play Russia aggression in Ukraine? How might I hedge against conventional wisdom that ongoing deflation in food prices is a certainty? I would consider picking up shares of iPath Grains Total Return (JJG) with its near-term technical uptrend. I would also minimize downside risk with a stop-limit loss order.
Investing in Japan with the country’s endless loop of failure seems nuts, of course. The same holds true for buying an inflationary asset like grains in the midst of global deflation. Here, then, is a seemingly crazy idea – one based on the notion that fundamental value may once again matter.The SPDR S&P Insurance ETF (KIE) has been decidedly weak relative to the S&P 500 throughout the year. Moreover, judging by the KIE:S&P 500 price ratio, there may be little reason to look favorably upon big insurers like Travelers, Chubb or Allstate.
Still, what if you have patience as well as a long-term time horizon? Might the mouthwatering price-to-book of 1.0 and highly reasonable price-to-earnings of 11.5 give you pause? Putting these numbers into perspective, the S&P 500’s trailing 12-month P/E equivalent of 18.7 implies that one would be paying nearly 40% less for the privilege of owning the big insurers as opposed to the broader market. Granted, it may not be a fair comparison, since investors will always pay more for growth-oriented segments like technology and industrials. Still, a 40% relative price discount?