In this installment, we’ll look at 11 undervalued insurance stocks to buy right now. If you want to skip our overview of the insurance industry and some recent trends, take a look 5 Undervalued Insurance Stocks You Can Buy Right Now
The insurance industry is one of the oldest in the world. In its earliest form, this sector dealt with business cargo and provided traders with security protection against accidental losses. Now insurance comes in all shapes and sizes, for individuals, businesses and even governments. The modern financial industry involves assets worth billions of dollars, and a significant reduction in their value can have far-reaching consequences. These impacts require insurance as a backup, and this principle also applies to access to health care in most modern economies.
Of course, this ubiquity makes the global insurance industry quite significant. For example, considering only the health insurance sector, which deals with individuals paying for basic and advanced medical procedures, research shows that this sector could be worth as much as $5.28 trillion by the end of 2030 after growing at a compound annual growth rate (CAGR ) of 9.9% from 2022. If you thought $5.28 trillion was a significant amount, you may be even more surprised to learn about the total insurance premiums written in 2022. Data from recruiting firm Zippia shows that insurance premiums registered worldwide exceeded an incredible 7 trillion dollars, with the US accounting for 20% or 1.4 trillion dollars. By comparison, consider the fact that America makes up less than twenty percent of the global population, and it becomes clear that insurance is big business and big money in the United States.
And with good reason. One of the most polarizing topics in American politics is the cost of health care, especially since other developed countries like Canada, Great Britain, and Scandinavian countries are able to provide government-funded insurance products. However, the US population is larger than all of these countries combined, and coupled with the fact that health care costs such as a simple emergency room visit can often run into the thousands of dollars, subsidizing US health care is not for the faint of heart.
The size of the US insurance industry also comes as no surprise that the largest health insurance company in the world, UnitedHealth Group Incorporated (NISE:UNH), is also headquartered and headquartered in the US. And when it comes to hedge fund sentiment, bigger seems to be better, as our look at the most popular health insurance stocks among hedge funds showed that UNH also had the largest number of hedge fund investors since Q2 2023. This hedge fund interest is was also present during the first quarter, as then , of the 910+ hedge funds tracked by Insider Monkey, 116 invested in United Health Group.
Not only are hedge funds as a whole piling into insurance, but one of the most successful investors of our time, Berkshire Hathaway’s Warren Buffett, is a fan of the sector. Mr. Buffett has a long history with insurance, and his holding company owns entire insurance businesses. Berkshire Hathaway’s earnings report for the third quarter of 2023 shows that the company held $21.3 billion in insurance premiums, which exceeded revenue from its energy and utilities business. Warren Buffett also owned 2.5 million shares of Globe Life Inc. (NISE:GL) by the end of the second quarter of 2023, for an average value of $275 million. There is also another insurance stock in Mr. Buffett’s portfolio, and you’ll have to read on to find out.
In addition to investing heavily in the insurance business by owning the second largest auto insurance company in the US, the Government Employees Insurance Company (GEICO), Warren Buffett’s investment approach also revolves around determining the true, or fair, value of a firm. Simply put, fair value is what an investor or analyst believes a company is worth based on its operations. Companies whose publicly traded value, or share price, is higher than this are called overvalued. Those priced below fair value are called undervalued and are often targeted through patiently held investment positions to provide monetary benefit through share price appreciation over the investment period.
Continuing our analysis of Warren Buffett’s trading strategies over the years, his three longest-held stocks are American Express Company (NISE:AKSP), The Coca-Cola Company (NISE:KO), and Moody’s Corporation (NISE:MCO). To understand the benefits of a value-based investment approach and the returns it can deliver over time, we don’t need to dig too far into Berkshire Hathaway’s investment past. For example, the investment firm Mr. Buffett has held investment positions in all three of his longest-held stocks since 2010. During the fourth quarter of 2010, the average share prices of Amex, Coca-Cola, and Moody’s were $42.19, $31.39, and $26.91, respectively. , respectively. Their last closing prices are $154.38, $56.72 and $344.57, respectively. So if you owned 1,000 shares of the three in 2010, your total investment would currently be up 452% or 4.5 times. In other words, a thousand dollars invested in three companies would now be worth $4,500.
Therefore, it is clear that picking stocks based on their undervaluation can lead to significant profits in little more than a decade. Of course, this depends on a favorable economic environment, as well as the absence of black swan events that can threaten even the most finely tuned investment portfolio.
Today we’re going to look at some undervalued insurance stocks to buy. The top three stock picks on this list are First American Financial Corporation (NISE:FAF), Equitable Holdings, Inc. (NISE:EKH) and BRP Group, Inc. (NASDAK:BRP).
An elderly customer discusses her retirement options with a smiling life insurance agent.
To compile our list of undervalued insurance stocks to buy, we first compiled a list of all insurance companies with market capitalizations greater than $300 million and average analyst Bui ratings. Then, those with the largest difference between the target average stock price and the current stock price were selected as undervalued insurance stocks to buy.
11 Undervalued Insurance Stocks You Can Buy Right Now
11. Ryan Specialty Holdings, Inc. (NOT: RIAN)
Share price growth: 20%
Ryan Specialty Holdings, Inc. (NISE:RIAN) is an insurance company that serves the needs of other insurance companies. The company’s third-quarter earnings report shows that the company saw a 14.7% year-over-year increase in revenue, as well as a 30% increase in profits due to acquisitions and strong product performance.
During Q2 2023, 14 of the 910 hedge funds tracked by Insider Monkey held stakes in Ryan Specialty Holdings, Inc. (NOT: RIAN). Zimmer Partners by Stuart J. Zimmera is the largest shareholder of the company in our database as he owns shares worth 216 million dollars.
Together with Equitable Holdings, Inc. (NISE:EKH), First American Financial Corporation (NISE:FAF) and BRP Group, Inc. (NASDAQ:BRP), Ryan Specialty Holdings, Inc. (NISE:RIAN) is an undervalued insurance stock with a strong analyst rating.
10. AKSIS Capital Holdings Limited (NISE:AKSS)
Share price growth: 20%
AKSIS Capital Holdings Limited (NISE:AKSS) is an insurance and reinsurance company serving the needs of individuals, businesses and other insurance companies. Like several other insurance companies, the company has had a strong financial performance of late, beating EPS analyst estimates in all four of the last quarters.
After digging through 910 hedge funds for their investors in the second quarter of 2023, Insider Monkey found that 19 of them invested in the company. The largest investor in hedge fund AKSIS Capital Holdings Limited (NISE:AKSS) is Pzena Investment Management of Richard S. Pzene because of its investment of 253 million dollars.
9. American Financial Group, Inc. (NOT:AFG)
Share price growth: 21%
American Financial Group, Inc. (NISE:AFG) is an American property and casualty insurance company. Unlike other insurance companies that reported strong earnings growth during the third quarter, its financial results for the period saw a small annual increase of $12 million.
As of June 2023, 17 of the 910 hedge funds profiled by Insider Monkey held American Financial Group, Inc. (NOT:AFG). Dmitry Balyasny’s Baliasni Asset Management owns the largest stake among them which is worth $39.9 million and comes via 336,462 shares.
8. Kinsale Capital Group, Inc. (NOT: KNSL)
Share price growth: 22%
Kinsale Capital Group, Inc. (NISE:KNSL) is a small insurance company that provides services in all US states. Its stock has an average Buy rating, and analysts have set an average price target of $412 on the stock.
For their Q2 2023 holdings, 27 of the 910 hedge funds profiled by Insider Monkey invested in the company. The largest shareholder of Kinsale Capital Group, Inc. (NISE:KNSL) is among them Richard Driehaus Capital as it owns 254,350 shares worth $95 million.
7. Markel Group Inc. (NOT: MKL)
Share price growth: 23%
Markel Group Inc. (NISE:MKL) is a global insurance company that operates on almost every continent. It’s also the first stock on our list to be rated a strong buy on average, with analysts setting a hefty $194 price target on the stock, up from an average price target of $1,547.
During this year’s June quarter, 29 of the 901 hedge funds surveyed by Insider Monkey were Markel Group Inc. investors. (NOT: MKL). Warren Buffett’s Berkshire Hathaway is the company’s largest hedge fund investor, owning $652 million in shares.
6. Fidelis Insurance Holdings Limited (NISE:FIHL)
Share price growth: 26%
Fidelis Insurance Holdings Limited (NISE:FIHL) is a small insurance company with presence in Bermuda, Great Britain and Ireland. It’s also the “freshest” insurance stock on our list since Fidelis Insurance Holdings Limited ( NISE:FIHL ) listed in its June 2023 IPO with the stock down 6.4% on its debut.
15 of the 910 hedge funds surveyed by Insider Monkey in Q2 2023 bought and held shares of Fidelis Insurance Holdings Limited (NISE:FIHL).
First American Financial Corporation (NISE:FAF), Fidelis Insurance Holdings Limited (NISE:FIHL), Equitable Holdings, Inc. (NISE:EKH) and BRP Group, Inc. (NASDAQ:BRP) are some undervalued insurance stocks to buy.
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Disclosure: None. 11 Undervalued Insurance Stocks You Can Buy Right Now was originally published on Insider Monkey.
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