Stock of The Week: Insurance Australia Group Limited (IAG)

Recommendations

Accumulate

Investment ratings

IAG is Australia's largest domestic general insurer. Although it owns heritage brands and has high market shares its products are commoditised and sustainable competitive advantages are elusive, hence the pressure on revenues and margins from competition. IAG has returned to focusing on underwriting discipline in the Australian and New Zealand businesses after a failed pursuit of scale for its own sake. General insurance is a high-risk business and investors should limit their portfolio weightings accordingly. The market is mature, premium rates are cyclical, large insured events occur without warning and claims trends are largely beyond the control of management in the short term. IAG's reinsurance protection and capital management mitigate the risk to some extent. Depending on price we recommend an investment in QBE, on quality grounds, rather than IAG.

Recent Analysis

According to the ABS the price of an unchanged basket of personal insurance policies rose by 10.3% on pcp in the March quarter. This was the fastest growth since June 2001 and above the five-year average of 4.5% pa. There are anecdotal reports the June quarter saw similar growth.

Previous close	52 week high	52 week low
$3.52	$4.32	$2.94
Sector
Insurance
Market cap
$7,291 Million

Total shareholder return (avg annual rate)
1yr	3yr	5yr	10yr
-6.9%	-7.6%	-1.5%	--

Earnings and dividends forecast (cents per share)
	2009	2010	2011
EPS (c)	7.7	14.5	27.3
PE Ratio (x)	45.7	24.3	12.9
DPS (c)	22.5	10.0	17.3
Div Yield (%)	6.4	2.8	4.9

Listen to What the Market is Telling You

Believe no one! Listen to what the market is telling you!

The action of the market is the truth everyone else is merely estimating or guessing. Let me let you in on a little secret that the financial news networks will never tell you: No one really knows what the market or stocks will do six months from now -- no one!

On up days, does volume increase or decrease?

On up days, you want volume to increase, and on down days you want volume to decrease. If the index such as the S&P 500 is just drifting sideways, the volume should be low. When the prices move up out of a sideways range, volume should increase. This is a sign of a healthy market. If the market breaks to the downside out of a sideways range on high volume, it could be a danger signal.

If you have several big down days on heavy volume over three to four weeks, the market could be in for trouble over the intermediate term. This is a very important lesson, because when the market is in a downtrend, it will take four out of five stocks with it.

Does the market open lower in the morning then close higher at the end of the day?

Markets that consistently open lower in the morning and close higher at the end of the day confirm a bullish trend. Institutions will usually make major buying and selling decisions in the last hour to hour and a half of the day. If they are buying at the end of the day on a consistent basis, it is positive for the market.

Markets that open higher in the morning and close lower at the end of the day are just the opposite and could be a sign that the market is overvalued or in a negative environment.

How does the market react to the news?

It is very important to watch how the market reacts to news. If the market is in a downtrend or a bear market and it no longer goes down on bad news, then you are possibly nearing a low. It is even more positive if you have plenty of bad news and the market goes up. The opposite is also true. When a market continues to drop when all the news is great, watch out!

Finally, here are key points to keep in mind:

1. You want the volume in general to be higher when the market moves up and lower when it moves down.

2. If the market is moving up on lower than normal volume, be careful.

3. If the market averages are trending sideways, then the volume, in general, should be low.

4. If the market breaks out to the upside, volume should increase.

5. If the market breaks out to the downside and the volume is high, it could be a warning signal.

6. If the market has several sell-offs on high volume during a three-to-four-week period, you should not be buying stocks.

7. If you already own stocks, be prepared to sell if your stocks start to do the exact same thing.

8. High-volume sell-offs, especially several of them in a short time frame, usually mean the end to an uptrend, whether in an index or stock.

9. If the market starts opening higher in the morning and closing lower at night, you should watch your stocks closely and prepare to protect your profits.

10. If the stocks that have been leading the market start to fail or break down, you should prepare for a correction.

11. If the market goes up on bad news, it a positive. If it goes down on good news, it is negative.

If you just follow the above rules it will dramatically improve your trading and investing in mere future.

7 Keys For Traders To Make Money Consistently

1. Deal with your trading as a business

If you think of your trading as a hobby, then you produce the results of the hobby and making money becomes secondary.

For your trading to be successful, it is imperative to create a proven process to make it a success.

2. Have a written plan that matches who you are

This is a very important step. We want to have a proven plan that succeeds. However, if it does not match who you are, you are setting yourself up for failure. It will work for a while, but because it goes against who you are, after awhile you find reasons not to follow it.

3. Have a money management system in place

When you have a system in place, it enables you to manage your risk better thus allowing you to preserve and grow your capital on a more consistent basis.

4. Create your own daily routine

Everything we do is a routine. If you think about it, when you get up, you follow certain routines. However, most of us are not conscious of our routines. So, create one that serves you and sets you up to make money consistently.

5. Be patient

I know that some traders love the excitement of trading and once the excitement is gone, they get bored and start sabotaging themselves. Does this sound familiar?

If you are looking for excitement, find a hobby that can provide you the excitement.

This is one of the most important skills of your trading success.

6. Don't focus on the money

By focusing on the money, you get hooked on the trade that you have placed in. Therefore, you are less likely to be in the zone and really noticing what is happening in the market.

You need to detach yourself from the result of your trade. This does not mean that you don't care. Of course you do, and that is why you have placed your trade. It means that you are not married to your position. You are free to be in the zone and really notice what is happening versus what you hope and wish to happen.

7. Develop your Mental Edge

This is a crucial step. Stephen Covey has a 90-10 principle. He mentions that 10% of your life is determined by what happens to you. 90% of life is decided by how you react.

Events happen to us. What differentiates the super stars is how they react!!!

"Any fact facing us is not as important as our attitude toward it, for that determines our success or failure."
- Norman Vincent Peale

Remember, this is a process. Any step in the right direction moves you closer to your goal.

"Continuous improvement is better than delayed perfection."
- Mark Twain

Here is to making trading success your habit!

What to Look for in an Online Stockbroker

An online stockbroker should provide you, the investor, with all the resources you need to make educated financial decisions and buy and sell investments using a variety of strategies. Some of these resources include educational materials, real–time charts, streaming news, various high–quality tools and a user–friendly trading platform.

.Below are the criteria used to evaluate online stock trading:

• Fees/Commissions – Fees and commissions can add up quickly and many services also require additional fees for all kinds of things from transfer fees to check request fees. We compared a variety of fees commonly charged by these types of services; however, some online brokers have a tiered commission schedule based on balance or trade volume.
• Investments Offered – Most online stock trading services offer the basics such as stock, options, mutual funds and exchange-traded funds. Many services also offer access to a variety of international markets as well as investment services or packages for retirement and education saving.
• Trading/Investment Tools – Online brokers that offer practical tools such as investment calculators, analyst reports, cell phone alerts and useful charts, chains or graphs can help investor make smart buying and selling choices. Since buying/selling stock can be daunting, we feel that good information is vital.
• Ease of Use – Investors come from all lifestyles; a superb service accommodates everyone regardless of their knowledge of computers, the Internet or trading online. Accommodations may include a navigational website, in–depth tutorials or one–on–one training.
• Support/Customer Service – Trading is complicated and risky, it is extremely important that online stock trading services provide good and immediate customer service by telephone, email, instant and chat and more.

Sales Tips and techniques

• Know your prospect: Find out as much as you possibly can about your prospect before your appointment. This will not only help you anticipate their needs ahead of time, but will also show them you've done your homework and have an interest in their business other than just selling your product. When talking with them, let them do most of the talking. People usually love talking about their businesses and its successes. For example, you might bring up the fact that you saw they won an award at a regional meeting then let them proceed to fill you in on the details. You might also compliment them on the efficiency of their production system or the quality of their products. This will also open the door to more conversation and the opportunity to learn more about their needs and how your product will fit those needs.

• Focus on why they should buy - not their objections: The idea here is that while you are building up the benefits associated with using your product, they will be minimizing their resistance to it. By focusing on what you know the prospect likes, you are building up the importance of the positive and reducing the importance of the negatives.

• Sell the benefits - not the product: You've heard this one before, but it is worth repeating. In most cases, you're not selling your product, you're selling the benefits the product will produce. In other words, you're not selling digital phones, you're selling the ability to communicate from anywhere. You are selling freedom to leave the confines of the office and still be accessible. You're selling the ability to have a more flexible work schedule. You're selling peace of mind for long trips. You're selling security. Get to the emotional or financial benefits and you're on to something!

• Never rush the sale or the customer: Remember the section about building a relationship with your customers? This is a very important step. It can help give the prospect the right perception of you and your company. Rushing them instead of letting them come to their own decision to buy can create hostilities that can't be overturned. It can make the difference between getting the sale and creating a loyal customer, and having to start over with another prospect. In the competitive climate of many markets, you definitely don't want to risk losing a qualified prospect who you know needs your product.

• Know your products, as well as the market - be a RESOURCE: In order to be seen as a valuable resource for your clients, you have to demonstrate that you not only know and understand your products and the market, but can assist them in making good decisions and provide them with tools to improve their business. If you don't have these skills and knowledge, get them. You'll be rewarded over and over by loyal clients who trust your opinions and advice, and buy from you frequently.

• Follow through with promises: If you do nothing else, do this. Always follow through with what you say you are going to do - DO IT! If you say you'll check with someone else in your company about an issue that's come up - DO IT! Don't forget. Use the technology available to you (even if it's a sticky note on your dash board!) and make sure you follow through with your promises. There is no surer way to lose the faith of a prospect (or existing client) than to forget to do something you tell them you will do. If something comes up that forces you to have to delay, call them and give them a heads up. They may have a meeting arranged to present the information you're supplying them with, and if they don't have it you'll both look bad.

• Focus on your client's success: Not to beat a dead horse, but there is tremendous value in being a resource for your client. If you can help them to succeed then they are more likely to help you succeed. Be a coach for your clients (at least in your areas of expertise). You have the unique perspective of seeing how many different businesses operate. Gather this knowledge and share it with your clients or prospects. Make sure they understand that you want to see them succeed, not just sell your products.
  Use explanations rather than excuses: If you do have to explain to a customer why there is a problem with their order, their repair, their service, etc. Explain why the problem is there in the first place, rather than using an excuse. For example, if you provide health care services and you're having difficulty meeting the scheduling needs of the customer, you might it explain it like this, "With this being a particularly bad allergy season we have had more emergency calls due to asthma (or whatever the case may be) and these patients can't wait for a scheduled appointment. Our staff is behind schedule, but we are addressing the problem now by bringing in temporary help for these critical need times. So we should be able to schedule your service on 'x' date." Understanding the problem may help alleviate some of their frustration. Verbalizing the cause may also keep you more aware of the potential problems so you can be more prepared the next time around.