The Prudential (LSE: PRU) share price has been recovering from July’s dip, and is up 16% so far in 2021. It has picked up over the past week too. It’s gained 5%, while the market as a whole have been flat. The company’s first-half results released on 11 August will lie partly behind the current positive sentiment, but I can’t help wondering if there’s a wider trend here.
Prudential stock, despite being a bit erratic, has been one of the investing successes of the pandemic crisis. It’s up 30% now, over the past two years. And much of that, surely, was down to a flight to safety as investors dumped everything they thought risky.
Being in the otherwise hard hit financial sector wouldn’t have helped, but Prudential is well named — many investors see it as one of the best and most conservatively managed there is.
Now that things are slowly returning to normal, I can’t help feeling the sell off that led to the early summer slide was mostly a bit of profit taking.
But then the results pushed the insurance giant back up. Since that recent low in July, the Prudential share price has put on 20%. So was in that report? Well, the company reported a 19% rise in adjusted operating profit from continuing operations.
Asset restructuring
But the big issue for me is Prudential’s demerger of US subsidiary Jackson. It should be completed in September, subject to shareholder approval, as part of the firm’s restructuring. As an outcome of that, the Pru says it “continues to consider raising equity of around $2.5-3.0bn through global offering to institutions and Hong Kong retail investors, after the proposed Jackson demerger.” The new cash should “enhance financial flexibility and de-lever the balance sheet.”
On top of that, Prudential has been shedding other assets this year in its ongoing restructuring plans. And, as can be deduced from the mooted targeting of the potential equity issue, the firm is focusing on its Asian markets. Oh, and Africa too, with the two having strong growth potential. No wonder the Prudential share price has been having a good year.
Prudential share price valuation
One thing it does mean is that the company that ends 2021 should be significantly different to the one that started the year. That, for me, makes valuation a bit tricky right now. And I’d rate getting it wrong as one of the biggest risks. I have always liked Prudential as an investment, though, and I do think now could be a good time to strengthen my financial sector exposure.
But a time of rapid change is perhaps not ideal for buying into a company. So I’ll probably wait and see how the second half of the year works out. Then again, I do wonder if a time of uncertainty could make Prudential shares ripe for buying. I mean, it’s likely to be keeping other investors like me away.
Where will the Prudential share price be at the end the year? If I had to guess, I think higher than where it is today.
