This week, two financials caught the attention of investors: Bank of Georgia (LSE: BGEO) and Hiscox (LSE: HSX). While BGEO posted a dramatic 9% rise in its share price on a single day, HSX saw the opposite reaction with a 10% price decline. With these price changes, the investor had to dig deeper into me and see in which of these stocks the value really lies.
Great results, inconsistent stock price
Let's first look at the retail bank BGEO, which posted impressive 30% earnings growth in the first nine months of 2019. This is a great endorsement for the stock, which is still far from the highs it had prior to its break from its investment arm, Georgia Capital, last year. In the two weeks from mid-May to early June last year, the share price has almost halved.
Nevertheless, the bank itself is optimistic about future developments, especially as it relates to the health of the Georgian economy. Robust growth and credit enhancement by S & P are highlighted in the earnings release as positive for the economy.
The fact remains, however, that Georgia is a small, growing economy and a slowdown may hit banks there more than in more developed markets. The movements of the stock price over time do not give me the assurance that it will lead to capital gains even for a long-term investor. Nevertheless, it is worth keeping an eye on developments over time.
Bad results, reliable share price
When the BGEO share price has experienced its ups and downs, the investment giant Hiscox has seen a fairly soft price rise in the long run, although last year was a challenge. A catastrophic announcement of the results earlier this week worsened the share price. By Thursday, it sank by almost 15%, before recovering at the end of the week.
However, in the long run, there is much to like in HSX. First, the highly diversified business in markets such as the UK, Europe, the US, and Asia provides immunity to the Brexit-related inconvenience that investors might face today.
Second, not always, but often enough, the best indicator of the future is the past. And if this insurer's share price is still sufficient, long-term investors can take a deep breath. Over the past five years, the share price has more than doubled and investors who bought the stock ten years ago can now count on a cool appreciation of 350% of their capital. I would consider buying it today.
If both the BGOE and HSX share prices had not risen so much in the same week, I probably would not have talked about them in the same breath. But now that we're here, giving up on a single set of results is a valuable lesson. It is better to look at the longer-term patterns.
Manika Premsingh has no position in any of the above stocks. Motley Fool UK holds no position in any of these stocks. The views on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we think we are better investors by considering different insights.