Category Archives: Unum

Unum Corp. 10-Year Targets

Below are the valuation targets for Unum (UNM) for the next 10 years.

Coppock Curve: Unum Group

On May 12, 2018, we presented the Altimeter for Unum Group (UNM).  In this post we’ll present the Coppock Curve for UNM and the price of the stock one year after the buy indication is provided.

Unum Altimeter

We’ve said many things about Unum Group (UNM) in the past.  What matters the most for us is the practical application of theories that we have put forward, theories commonly found in the work of Charles H. Dow and Edson Gould.  Below is a latest Altimeter for UNM and our useful prior commentary on the stock.

Transaction Alert: Bought XEC at the Market

On July 17, 2012, we have bought Cimarex (XEC) at the market.

On June 8, 2012 (found here), we outlined our rational for buying XEC based on having good management and a consistent dividend policy.  Based on the Altimeter, XEC is considered worth purchasing at $72 and below.  At the current price of $56, XEC would have to increase +28% just to get back to the $72 level.

At the quarterly dividend rate of $0.12, we believe that XEC should be sold at a price of $123 or above. This will increase or decrease with the dividend policy.  Based on the previous Altimeter buy indications, investors should expect to hold XEC for 2 to 3 years before the next sell signal.

*NOTE: In our earlier transaction alert for UNM (found here), we indicated that we would allocate 10% of our portfolio to the stock.  Instead, we have reduced the allocation by half, to 5%, and bought XEC with the other 5%.  This allows us to take advantage of two opportunities which we fully expect to add to as the price declines.

Transaction Alert: Buying UNM at the market

On July 17, 2012, we will buy Unum Group (UNM) at the market.

On July 16, 2012, it was announced that Unum Group (UNM) is going to increase the quarterly dividend by +23.5%, from $0.10 to $0.13 (found here).  The increased dividend is payable to shareholders who hold the stock on or before July 26th. This increase of the quarterly dividend has brought UNM below the Altimeter level that would indicate that the stock should be bought.

On June 18, 2012, we pointed out the reasons why we like the dividend policy of UNM (found here).  Also, the Altimeter readings for UNM based on the new dividend indicates that, at the current price, the stock is relatively undervalued.

Those wishing to follow our strategy of buying UNM should understand that the stock is expected to decline from current levels.  This explains why we're only putting 10% of our portfolio into the stock at the present time.  Our goal is to accumulate more shares as the price declines.

At the quarterly dividend rate of $0.13, we believe that UNM should be sold at a price of $40.95 or above. This will increase or decrease with the dividend policy.  Based on the previous Altimeter buy indications, investors should expect to hold UNM for 3 to 6 years before the next sell signal.

Unum Group (UNM) is Closing in on New Low

The latest insurance stock that has caught our eye is Unum Group (UNM) which is closing in on a 3-year low.  Prior to 1998, Unum Group had a dividend increasing history of 11 years at a compounded annual growth rate of 17.66% according to Moody’s Handbook of Dividend Achievers.  After 1998, Unum was challenged significantly resulting in a deep reduction of the dividend.  Most important to investors is the fact that after the -50% reduction of the dividend in 2003, the annual dividend remained at $0.30 for six years until 2009.  Since 2009, UNM has increased the dividend each year thereafter.  The handling of the dividend policy is important for several reasons:

  1. Cutting the dividend in 2003 was an accurate move by management since the book value declined -31% from the 2002 high to the 2008 low.
  2. As a financial services company, keeping the dividend the same through the financial crisis of 2007 to 2009 meant that the management team believed that stability had returned to the company.
  3. Raising the dividend after the financial crisis means that the management team believed the prospects for the company were improving.  After 2008, the book value for UNM has increased +51% which supports management’s decision.

We welcome a dividend cut when appropriately applied, even if the conditions that brought on the cut were based on management’s prior “bad” decisions.  In our view, the true test of any management team is not always generating blowout earnings but handling errors in an appropriate fashion.  UNM’s management has done all the right things at all the right times relative to the economic backdrop that we’ve experienced.

However, while we favor the actions of the management at Unum Group, we also need a sense of perspective on the most opportune time to actually buy the stock.  Two things that never change regarding the historical information on a stock is the dividend paid and the stock price.  This is why we prefer to look at Edson Gould’s Altimeter which reflects the stock price relative to the dividend that is paid.

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From our perspective, the movements of Gould’s Altimeter indicate that the stock should be bought at or below 148 and sold above 315.  Each time UNM has traded below or above the respective range, the following increase or decline followed:

Date Altimeter stock price buy/sell % change
2/25/1997 431.69 39.5 sell -59.97%
2/10/2000 106.82 15.81 buy 52.12%
1/27/2006 320.67 24.05 sell -60.58%
11/20/2008 126.40 9.48 buy 178.59%
4/14/2010 318.19 26.41 sell ????????
????????? 148.00 15.54 buy  

While we can’t be certain that UNM will replicate prior declines, a decline to the projected level of $15.54 seems well within reach as the stock currently trades at $19.26.  This would only be a decline of -41%, which is far less than previous Altimeter lows of –59% and –60% in 1997 and 2006, respectively.

According to Dow Theory, UNM would reach the 50% level at a price of $17.33.  Typically, the 50% level is the “make or break” level in the stock’s price.  If the stock can manage to stay above $17.33, then a majority of the shareholders since the 2009 low would be satisfied enough not to abandon the stock.  However, if the stock falls materially below the $17.33 level (say $17 or $16.50) then it would mean that most “long-term” holders of the stock are experiencing a loss and are seriously contemplating selling the stock.  The Dow Theory downside targets are as follows:

  • $14.08
  • $10.84
  • $7.60

Although UNM could be bought at $15.54 based on Gould’s Altimeter, it should be understood that there are likely to be further declines.  Therefore, an investor should not become disenfranchised with Dow Theory downside targets.  Instead, investors need to allocate appropriate amounts of capital and break up the intended purchase into 2 or 3 transactions.