Research Report ►(comments)

Baldwin & Lyons, Inc. markets and underwrites property and casualty insurance in the U.S., Canada, and Bermuda. It sells its products through its independent agent network. The company provides fleet trucking insurance products to customers in the motor carrier industry. Baldwin & Lyons also offers various services, including risk surveys and analyses, government compliance assistance, and research, development, and consultation.

Investment Impacts (help)

USA Country Analysis ► (edit / improve) The United States (US) has a highly productive, capitalist economy and is the largest and most diverse market in the world. Currency: the US dollar (USD) has the potential to increase in value especially versus the Australian and Canadian dollar because of the significant potential of undervalued companies. Investor Survey: the economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade: China, Japan, Mexico, and Canada are the top US trading partners, while the leading export and import are electrical machinery and vehicles, respectively. Commodity: The US produces a significant amount of coal and wheat for use at home and as an export. However, the US consumes a larger amount of oil, which contributes to their trade deficit. SWOT Analysis: The leading US strength is its entrepreneurial culture, while the main weakness is high health care cost. Energy independence has the opportunity to propel growth, while the major threat is the housing crisis, which will lower growth. Trading Strategy: An undervalued currency, high investment flow potential and favorable business environment lead to a positive outlook for US investments, which will also benefit from positive international actions.

Baldwin & Lyons, Inc., through its subsidiaries, engages… ► (edit / improve)

Financial Industry Analysis ► (edit / improve)

Description: The financial services industry includes companies whose sales come from the management of money for individuals and institutions. Financial services companies include banks, insurance companies, brokerage, wealth management, and credit card companies… Read More.

Profit Analysis: The best way to profit from financial service stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street on left side), and have high Main Street Common Sense investment ratings (see Main Street on right side). Interest rates are also lowest during this time period, which decreases the cost of borrowing money for financial service companies.

When an economic recovery occurs, financial stocks tend to outperform the general stock market, because consumers and businesses quickly resume spending on items such as cars or business loans they wanted, but resisted obtaining during tougher economic times. Eventually financial stocks become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to sell financial stocks, because they are likely to decrease in price. Interest rates are highest at the end of recessions to fight inflation by making money for banks more expensive. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments.

Trading Strategy: During economic recessions, consumers and businesses tend to cut back on expenses and investments to save money during tough economic times. Bank loans, equity or debt raising, general spending and many other financial activities slow during recessions. Less spending decreases business revenue and eventually decreases the stock prices of financial services companies. During economic recoveries, consumers have a greater desire to spend money and make business investments. Higher spending increases business revenue and eventually increases stock prices. During longer economic expansions, financial services may actually increase faster than the general market due to large investments by companies and mergers and acquisitions between companies. Consumers have more confidence in the stock market and increase stock investments and private business investments. Over-investment leads to higher inflation and higher interest rates, which make it harder to obtain money.

The return on money lent minus the expense of borrowing money equals the profits for many financial services companies. When interest rates increase, this raises the expense of borrowing money. Generally, interest rates increase near the end of the expansion phase of the business cycle to slow the potential for inflation. Interest rates are generally lowest during recessions, because inflation risk is lowest and the government wants to encourage business investments by making money relatively cheap to obtain.

¹ Investment potential (margin of safety) is a weighted average of the discounted cash flow (DCF), the enterprise value (EV) market multiple, and the Warren Buffett investment method.
² The weighted average cost of capital (WACC) for the industry is a broad representation of the WACC for each individual company. A sub-industry WACC offers both stability and accuracy for each individual company.

SWOT Analysis - Baldwin & Lyons ► Add Your Input Below

WACC Discount Rate Analysis - Baldwin & Lyons ► Experiment with BWINB's Analysis ►

Discounted Cash Flow Analysis - Baldwin & Lyons ► Experiment with BWINB's Analysis ►

Comparative Value Multiple Analysis - Baldwin & Lyons ► Experiment with BWINB's Analysis ►

Warren Buffett Intrinsic Value Analysis - Baldwin & Lyons ► Experiment with BWINB's Analysis ►

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