Aflac: A Valuation Conundrum?

Aflac (AFL) is a Dividend Aristocrat that has increased its dividend for 35 consecutive years.




True value investors are a rare breed, because it takes a special mindset and/or psyche to successfully implement a value investing strategy. This is especially true during major bull markets like we’ve experienced since the 1st quarter of 2009. Common sense would dictate that it is much harder to find attractively valued companies during strong bull markets. Consequently, value typically only manifests during bull markets when a specific company is facing a negative situation.The secret is to determine whether the situation the company is facing is temporary or permanent.

If temporary, low valuation can represent an extraordinary long-term opportunity.If the problem represents a permanent deterioration of fundamentals, then a value trap exists. Value investors attempt to exploit opportunities while avoiding value traps. During our most recent bear market Warren Buffett quipped that “we should be greedy when others are fearful and fearful when others are greedy.”When dealing with fundamentally strong companies, this is truly sage advice. On the other hand, when dealing with fundamentally weak companies, being greedy can lead to catastrophic long-term results. In other words, greed only works when it is applied to fundamentally strong businesses that the market is temporarily mis-appraising.




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