Two financials caught investor attention this week: Bank of Georgia (LSE: BGEO) and Hiscox (LSE: HSX). While BGEO saw a dramatic 9% increase in share price in a single day, HSX saw the opposite reaction with a 10% price plunge. With these price changes, the investor in me had to dig further and see in which of these stocks value truly lies.
Great results, inconsistent share price
First, let’s consider retail bank BGEO, which posted an impressive 30% increase in profit for the first nine months of 2019. This is a great endorsement for the share, which is still far from the highs it last saw before it split from its investments arm, Georgia Capital, last year. In the two weeks from mid-May to the beginning of June last year, the share price almost halved.
Nevertheless, the bank itself is optimistic of future performance, particularly as it’s linked to the health of the Georgian economy. Robust growth and an upgrade in its credit rating by S&P are pointed out in the earnings release as positives for the economy.
The fact remains, though, that Georgia is a small, growing economy and a slowdown can potentially hit banks there more than they would in more developed markets. Its share price movements over time don’t give me confidence that it will necessarily give capital gains for a long-term investor either. Still, it’s worth keeping on the radar for developments over time.
Poor results, dependable share price
If BGEO’s share price has seen its ups and downs, investing giant Hiscox has seen a pretty much smooth increase in price over the long term, though the past year has been a challenge. A disastrous results announcement earlier this week worsened the share price situation, with an almost 15% decline by Thursday, before recovering somewhat by the end of the week.
Still, over the longer term, there’s much to like in HSX. First, its highly diversified operations across markets like the UK, Europe, US, and Asia gives it immunity to any Brexit-related discomfort investors might be feeling these days.
Second, not always but often enough, the best indicator of the future is the past. And if this insurer’s share price is anything to go by, long-term investors can breathe easy. Over the past five years, the share price has more than doubled and investors who bought the share 10 years ago are sitting on a cool 350% appreciation of their capital today. I’d strongly consider buying it today.
If both BGOE and HSX share price hadn’t gyrated so sharply in the same week I doubt I would have ended up talking about them in the same breath. But now that we are here, it’s a precious investing lesson in refraining from getting carried away with a single set of results. It’s better to look at the longer-term patterns instead.
