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Two Kinds of Insurance

10/13/2006 12:00 am EST


Neil George

Editor, Profitable Investing

As we approach the flu season, veteran advisor Neil George, recommends a company that offers some potential flu “insurance” for investors. Additionally, he uncovers a more conventional insurance investment, with exciting growth prospects in a special niche…

“There are two bits of news that should get more attention focused on Embrex (EMBX NASDAQ), our poultry and egg handling and vaccination company. First, there's a rumor of a pending, new drug treatment that forestalls the expansion of the H5N1 virus once it's inside a flock or general area. It's a treatment—not a cure. But it would go far to make it potentially possible to keep the strain from racing across poultry-producing markets. This would be a great product that would work nicely within Embrex's current handling services.

“Second, while I was in London, the local media was all over news of a flu vaccine shortage already in this local market. The United Kingdom (UK) is one of the major flu vaccine producers, not just for its local market, but for the entire world. If the United Kingdom has a local issue already, it won't take long for this shortage to show up on the quick throughout Europe and in the United States. This means we should expect a renewed round of discussions over vaccine production, which demands more eggs, and the processing of those eggs to produce the vaccines. This is exactly what Embrex is up to, and it's why we own it.

”There's one more bit of news that should help drive up the stock price of Embrex. The United Nations has announced that Indonesia continues to have expanding—not contracting—trouble with the H5N1 virus. With much of the nation maintaining birds as pets, along with the poultry industry and wild bird populations, the virus keeps flourishing and expanding. The United Nations warns that if we don't start to focus on Indonesia, the threat of mutation will only grow worse. This means expanding processing and diagnostics. Again, that's what Embrex does. We're looking for our target of 15. Buy Embrex.

We are buying UnumProvident (UNM NYSE) for two reasons: The underlying business of supplemental insurance coverage is entering its big season with plenty of US companies rolling out their cafeteria plans to their employees, resulting in new business and increased press; and the bond portfolio is still gaining nicely, which will be reflected in pending financial releases in the coming weeks. Look for better quarterlies with the balance sheet strength backed up by a better-performing portfolio and improved revenues. Our target is 30. Buy UnumProvident.”

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