5 Best Insurance Stocks to Buy Now

Progressive ranks 3rd on the list of 10 best insurance stocks to buy now. Progressive is one of the largest providers of car insurance in the country. The company insures motorcycles, boats, RVs, and commercial vehicles and also provides home insurance. The company ranked 99th in Fortune’s list of the largest U.S. corporations by total revenue.

A total of 47 hedge funds out of the 816 tracked by Insider Monkey held stakes in Progressive entering the fourth quarter. The net worth of these positions is about $1.7 billion.

J.P. Morgan recently gave upbeat comments about Progressive on the back of a strong market recovery expected in 2021. We recently shared Wedgewood Partners’ detailed PGR thesis. Here is an excerpt from that article:

As of the Company’s most recent monthly (November) earnings release, it looks like business is starting to return to normal. Companywide policies in force increased +11%, year-overyear. Total personal auto policies in force increased to 16.5 million, +11% – with direct policies up +13% and agency policies up +9%. November net premiums written of $2.96 billion increased a healthy +14% year-over-year, while net premiums earned of $3.2 billion increased +11%. Lastly, the Company’s combined ratio snapped back to a smart 86.6 from 94.1 in October. The Company will likely exit 2020 with +$38 billion in net premiums written and +25 million policies in force.

Due to the relative consistency of the Company’s business model, our expectations of future annual profitability and growth largely mirror that of the recent past. Specifically, we expect both policies in force and revenues to grow at a high single-digit rate and a combined ratio of 93-95. We expect more variability in returns on capital and earnings growth. The last few years have been exceptional with returns on equity ranging from 26% to 32%, above the more typical range in the high teens. We would be thrilled with sustainable ROE’s from 20% to 25%. We also would be happy with earnings growth, lumpy as it typically is, between a high single-digit and low double-digit range.

At current valuations, the stock is far from a screaming bargain (what is these days?), hence our initial position size of just a 2.5% weighting. Future risks to consider that the Company must navigate are margin compression and/or if growth in policies in force decline due to heightened competitive pressures, including fluctuating fears of autonomous vehicles (AV). We look forward to building our position in Progressive as opportunity knocks.”