Kansas City Life: A “Dreadfully Boring” Stock with 100% Upside

Kansas City Life: A “Dreadfully Boring” Stock with 100% Upside

Did you know that there are over 40,000 publicly traded companies in the world?

Yet, most investors still choose to focus on a few speculative names — most notably Amazon, Facebook and Tesla.

Now let me ask you another question…

Do you really think these popular stocks can be mispriced with thousands (if not millions) of investors constantly watching and studying these companies’ every move?

Surely it would be more likely to find a bargain amongst the other thousands of stocks that nobody is paying attention to!

That’s why this week, I’m bringing you a dirt cheap, well-run company that is way, way, way off the radar.

Kansas City Life — 100 Percent Upside to a Conservative Valuation

A deeply undervalued stock like Kansas City Life (KCLI) isn’t going to find you.

When a company is this far off the radar, you have to find it.

Everything about this company keeps it out of view for most investors:

  • The company is extremely small with a current market capitalization of just $330 million.
  • The company spends zero dollars on self-promotion. There are no investor presentations and not even an investor relations department.
  • The business that the company operates in is dreadfully boring.

However, don’t get me wrong. For an old number-crunching accountant like me, boring is beautiful!

I believe that shares of this company are trading for less than HALF of what they are really worth, and I’m going to prove that undervaluation to you in a moment.

As you will have guessed, the business that Kansas City Life Insurance is involved in is selling group/individual life insurance, health insurance and also annuities. The company operates this humdrum business in 49 states.

Kansas City Life is a business that has shown itself to have some pretty good staying power.

In fact, the company was founded by a veteran of the Civil War in 1895!

Today, Kansas City Life is still a family business.

The co-founding Bixby Family still controls 60 percent of the company’s shares and CEO Philip Bixby is the fourth generation of the family to lead the business.

I love to invest alongside owner/operators because they care deeply about the business that they are managing. Owner/operators don’t come to work and go through the motions so that they can collect a paycheck.

They put their blood, sweat and tears into the business and that reveals itself in the results.

Let’s Take a Look at How Cheap These Shares Really Are…

Kansas City Life is in excellent financial position with no debt and plenty of excess capital. That sound financial footing allows the company to currently pay a generous dividend of $0.27 per quarter, which on the current share price means a yield of 3.12%.

While the current share price of Kansas City Life bounces around $35, the current book value of the company is actually almost twice that at $65.19 per share.

(Book value is what is left over after subtracting all a company’s liabilities from its assets. It is essentially what the business could be liquidated for today.)

While Kansas City Life trades for barely half of book value, other comparable insurance companies trade near full book value with recent merger and acquisition activity seeing prices closer to 1.2 times book value!

Any way you slice it, Kansas City Life’s share price should be close to $70 per share, not trading at $35 per share.

The fact that investors don’t even know this company exists is clearly having an impact on the current deeply undervalued share price.

But this massive undervaluation has not been lost on the controlling Bixby family, as they’re using it as an opportunity to repurchase 1 million shares — almost 10% of the current share count!

I don’t always love share repurchases, but I most certainly do when they are being done by a healthy company that’s trading at half of its book value.

Kansas City Life is a value investors dream. At this valuation, there is no downside and plenty of upside.

Even better, the 3.12% dividend means you get paid to wait for the market to fix this undervaluation.

I don’t know when that will happen, but it always does eventually, usually sooner than you expect.

Here’s to looking through the windshield,

Jody Chudley

Jody Chudley
Financial Analyst, The Daily Edge

You May Also Be Interested In:

Keep it Simple, Stupid!

The first annual beach clam bake at the lake might be my last. Long story short: Too much thinking went into the fire pit process — and the results were mixed. It sounds simple enough. Dig a hole, start the fire, heat the rocks. Cover, then cook. What could possibly go wrong?

Jody Chudley

Jody Chudley is a contributing analyst to Lifetime Income Report and Contract Income Alert. Jody is a qualified accountant with a degree in Finance from Brandon University. After spending fifteen years in various finance and planning roles with an international financial institution, Jody set out to manage his portfolio on a full-time basis.

His background...

View More By Jody Chudley