Source: Barron's Chinese Author: Nicholas Jaskinski Evan Greenberg, CEO of Chubb Ltd, has a highly influential fan - Warren Buffet, CEO of Berkshire Hathaway. Berkshire Hathaway disclosed last month that it held 6% of the shares in Chubb, one of the world's largest insurance companies, by the end of 2023. Berkshire itself is a major participant in the insurance industry, but it is not the only buyer. In the past year, Chubb's stock return, including dividends, was about 40%, surpassing the S&P 500 index's total return of 25%, and making the company's market capitalization reach $110 billion. This increase in market capitalization reflects Chubb's outstanding performance, which is attributed to its prudent underwriting practices and conservative management of its investment portfolio of about $140 billion. The company's earnings per share increased by 48% in 2023 and its book value per share increased by 21%. Greenberg is the son of Maurice "Hank" Greenberg, the former CEO of American International Group (AIG). Greenberg worked at AIG for 25 years, rising through the ranks. He left the insurance company in 2000 and took over Ace Limited in 2004. The company merged with Chubb in 2016, the largest M&A in the property and casualty insurance industry at the time. Today, Chubb is the largest commercial insurance provider in the United States, and the company is also known for its high-end homeowner insurance for the wealthy. However, about half of the company's premiums last year came from outside the United States. Asia has always been a growth area where the company is bullish: Although Asia accounts for 40% of global GDP, the insurance industry accounts for only 26% of the global insurance market share. This gap is expected to narrow over time. Greenberg sits on the board of several nonprofits that focus on international and Asian affairs. Barron's recently interviewed Greenberg about his underwriting philosophy, the challenges of dealing with increasingly frequent climate disasters, and US-China relations. Following are the edited excerpts of the conversation.
Author: Jacob Sonnenshine

As of Thursday (October 31), the US technology stocks ETF $The Technology Select Sector SPDR® Fund (XLK.US)$ This week fell by 3.4% to $223, well below the peak of $237 set in July.

Investors have many reasons for abandoning their previously favorite technology stocks:$Microsoft (MSFT.US)$The performance is very strong, but not strong enough for a price-to-earnings ratio of nearly 30 times; Wall Street's "darling"$Super Micro Computer (SMCI.US)$After disclosing that its auditor resigned due to accounting issues, the company's stock price plummeted nearly 40% in just two days, sparking concerns among investors about excessive behavior in the artificial intelligence industry; a group of stocks that rose 40% in the past 12 months failed to attract enough buyers.

However,$Amazon (AMZN.US)$Rose 5.2% in after-hours trading on Thursday, the company's third-quarter performance exceeded expectations; at the same time, $Apple (AAPL.US)$ The performance also exceeded expectations, although the stock price experienced a slight decline, at 0.4%.

The increase in US bond yields has also put pressure on technology stocks. Since the Federal Reserve cut interest rates on September 18th, the yield on 10-year US Treasury bonds has risen by 0.63 percentage points. The increase in yield is due to the continued growth of the US economy, as well as the policies proposed by the two presidential candidates that could lead to inflation. A rise in long-term bond yields will reduce the value of future profits for companies, thereby bringing downward pressure on valuations.

Obviously, technology stocks have been under tremendous pressure in terms of valuation. Currently, the 12-month forward price-to-earnings ratio of the Technology Select Sector SPDR is 28 times, lower than the peak of 31 times reached in July. If bond yields decline, the valuation of technology stocks is expected to rise again. However, even if the price-to-earnings ratio does not increase, earnings will still be a strong driver.

According to FactSet data, driven by revenue growing at a rate of 9% and billions of dollars in share buybacks, profits in the technology sector are expected to grow at an annual rate of 18% over the next two years. In other words, despite the recent weakness in the technology sector, it has not encountered any major issues.

Jordan Klein, an analyst at Mizuho Securities, said: "Tech stocks have risen a lot this year, and moderate selling is not particularly worrying."

Selling has also brought buying opportunities. Belonging to the communications services sector$Meta Platforms (META.US)$also did not escape the weakness of the technology sector. Meta's revenue in the third quarter increased by 19% to $40.6 billion, exceeding market expectations. The adoption of artificial intelligence played a key role. In the quarter, the company's expense growth rate was slower than the revenue growth rate, leading to an increase in profit margin. Earnings per share increased by 37% to $6.03, exceeding market expectations.

Investors believe that Meta's performance is not good enough, causing the stock price to fall by 4%. Investors are concerned because Meta's performance guidance indicates that expenses are expected to increase in 2025, which could erode profit margins as revenue growth slows. The reality is that Meta's management plans to increase expenses next year to maintain its leading position among users on its platform. However, when expenses slow down, profits will accelerate.

Evercore ISI analyst Mark Mahaney said: "Meta is currently in the middle of the product cycle, with a revenue growth rate of over 20%." He rates Meta stock as "outperforming the large cap index."

In addition, despite such a high growth rate, Meta's expected P/E ratio is only 23.2 times, lower than the three-year high of 25 times, just slightly higher than 21.8 times of $S&P 500 Index (.SPX.US)$.

This is a technology stock worth buying for investors when the stock price falls.

Editor/Jeffy