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Why Allstate (ALL) Stock is a Compelling Investment Case

Alex Smith
·3 mins read

Generation PMCA recently released its Q2 2020 Investor Letter, a copy of which you can download here. The fund is managed by co-founders Randall Abramson and Herb Abramson. The investment firm serves its clients through two distinct areas: Portfolio Management and Capital Advisory services. You should check out Generation PMCA's top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Generation PMCA highlighted a few stocks and Allstate Corp (NYSE:ALL) is one of them. Allstate Corp (NYSE:ALL) is an insurance company. Year-to-date, Allstate Corp (NYSE:ALL) stock lost 17.0% and on September 3rd it had a closing price of $93.34. Here is what Generation PMCA said:

"Allstate, the second largest personal auto and home insurance writer in the U.S., should see earnings expand this year, during a challenging period when most companies aren’t expected to deliver year-over-year earnings growth. Higher mortality rates from coronavirus are being offset by lower mortality outside of virus-related deaths and expense control. In auto, the benefits of lower miles driven due to the pandemic offset auto rebates. Historically, Allstate’s scale and conservative underwriting have translated to superior profitability metrics. The company is on pace to achieve a mid-teen return on equity for '21, well above peers. However, with shares currently at 1.3x book value, Allstate trades at a discount to competitors. We believe skepticism around recent acquisitions to diversify away from life and auto insurance (e.g., identify theft and warranties) is the reason for its discounted valuation. We expect the company to continue to cast its net further afield given the long-term threat of autonomous vehicles to its automobile franchise. We are comfortable with the strategy, especially since these acquisitions are immaterial. Meanwhile, the company should continue to post peer-beating results. Our FMV estimate is $120."

In Q1 2020, the number of bullish hedge fund positions on Allstate Corp (NYSE:ALL) stock increased by about 16% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Allstate's growth potential. Our calculations showed that Allstate Corp (NYSE:ALL) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.