We recently compiled a list of the 8 Best Momentum Stocks To Invest In Right Now. In this article, we are going to take a look at where The Progressive Corporation (NYSE:PGR) stands against the other momentum stocks.
U.S. Labor Market Remains Resilient
After the Fed’s rate cut and a positive inflation report, the latest jobs report also showed better-than-expected results. In an interview with Yahoo Finance, Elise Gould from the Economic Policy Institute discussed the latest employment data as she highlighted the continued strength of the U.S. labor market.
Payroll employment increased by 254,000 in September, with revisions adding 72,000 jobs from previous months. The unemployment rate remained stable at 4.1% and showed declines among various demographics, especially among men.
Gould emphasized that the prime-age employment-to-population ratio is at a 23-year high, which shows a strong economy. Despite wage growth reaching 4%, she downplayed concerns that this could lead to inflation and mentioned improvements in productivity and a low labor share of corporate income.
She expressed confidence in the labor market’s strength and suggested that it may influence the Fed’s decisions on interest rates. She also believes that the Fed should normalize rates, which remain high historically given current employment levels.
Gould observed that the overall labor market is strong, but not excessively heated, as shown by softer job turnover rates.
Economic Resilience and Its Impact on the Stock Market
At CNBC’s Closing Bell, Wharton finance professor Jeremy Siegel discussed the impact of the recent economic data on the stock market. He noted that while 550,000 jobs were added in the third quarter, wages remained flat, leading to a GDP growth projected at 2.5% to 3%.
Siegel believes that the Federal Reserve will likely implement smaller rate cuts of 25 basis points rather than larger cuts and will aim for a long-term neutral rate of about 3.5% by the second half of next year.
He expressed optimism regarding the stock market and suggested that the S&P 500 could reach 6,000 by year-end. However, he mentioned that higher yields may present challenges.
Despite concerns about equity valuations appearing high, Siegel pointed out that with cash still abundant and a resilient economy, the market remains attractive. He acknowledged that while the forward earnings ratio for the market is around 21.5x, it is not expensive in the current economic climate. He emphasized the absence of recession indicators and the potential for earnings growth and suggested that while significant market gains may not be expected, there is still room for growth.
Our Methodology
For this article, we looked at the October 2 holdings of iShares MSCI USA Momentum Factor ETF and narrowed our list to 8 stocks most widely held by institutional investors. The best momentum stocks to invest in are listed in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of accountants in a boardroom, discussing strategic moves of an insurance company.
The Progressive Corporation (NYSE:PGR)
Number of Hedge Fund Holders: 89
The Progressive Corporation (NYSE:PGR) is an American insurance company headquartered in Ohio. It is the largest motor insurance provider in the U.S. and offers coverage for a wide range of vehicles, including passenger cars, motorcycles, and commercial vehicles, as well as home and life insurance.
It operates through three segments. The Personal Lines segment includes agency and direct businesses. The Commercial Lines segment offers primary liability and physical damage coverage for vehicles used by small businesses. The Property segment provides insurance for homeowners, property owners, and renters.
On September 17, Goldman Sachs increased its price target for Progressive’s (NYSE:PGR) stock from $262 to $280 and maintained a Buy rating. The firm updated its financial model due to better expectations for the growth rate of the company’s policies and improved loss ratios in personal auto insurance.
However, these improvements are partially balanced out by an increase in expected expenses related to personal lines insurance. As a result, Goldman Sachs has raised its earnings-per-share predictions for 2024, 2025, and 2026 by 13%, 3%, and 3%, respectively. The significant increase for 2024 is mainly due to the company’s better-than-expected earnings reported in August.
Progressive (NYSE:PGR) is expected to report a significant increase in its EPS for 2024. The median average EPS for the company is expected to be $13.08, which shows a 115% year-over-year growth. It is the 8th-best momentum stock on our list.
Parnassus Investments stated the following regarding The Progressive Corporation (NYSE:PGR) in its first quarter 2024 investor letter:
“The Progressive Corporation (NYSE:PGR) shares appreciated as investors reacted well to the insurer’s latest financials, including higher-than-expected-growth in net premiums. The company’s consistently profitable underwriting, scale advantages and strong execution are becoming more evident to investors as it continues to gain market shares.”
Overall PGR ranks 8th on our list of the best momentum stocks to buy. While we acknowledge the potential of PGR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PGR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.