Zacks Investment Ideas feature highlights: IAK, Chubb and The Progressive.
For Immediate Release
Chicago, IL – April 7, 2022 – Today, Zacks Investment Ideas feature highlights iShares U.S. Insurance ETF IAK, Chubb Limited CB and The Progressive Corp. PGR.
Insurance Giants Flash Powerful "Buy" Signal
After a strong finish in March, the bears are back at it to kick off the seasonally strong month of April. A near-record intra-month surge of over 16% on the Nasdaq has started to fade as the tech-heavy index is now down -2.5% to start off this holiday-packed month. The 'yo-yo' market is toying with investor emotions from hope to fear and back again, with the VIX index serving as our depiction of these emotions. The widely-followed fear gauge has sprung back to life, surging over 17% in just the past few days.
Minutes from the Federal Reserve's March policy meeting are due out at 2 p.m. ET today and may be contributing to the volatility. The recent hawkish tone along with policymakers' expectations for future interest rate hikes are once again dampening investor sentiment.
Fed Chairman Jerome Powell stated during his recent news conference that the minutes will portray the balance sheet tightening parameters as the Fed unwinds trillions of dollars in asset purchases made during the pandemic. The 10-year treasury yield spiked to 2.64% this morning, its highest level in over three years.
One way we can sidestep the recent volatility is to target the pockets of the market that are outperforming and are showing some immunity to the downside moves. The iShares U.S. Insurance ETF fits the bill, as the group has made consistently higher highs this year while the market has whipped back and forth.While the iShares U.S. Insurance ETF may underperform during bullish periods, these companies have a tendency to outperform during defensive times such as the environment we've found ourselves in this year. Today's price action is a great example of this as the major indices are down substantially while IAK is strongly in the green.
Let's take a look at the top two individual stocks within the IAK ETF that account for over 20% of the fund holdings. Both companies are part of the Zacks Insurance – Property and Casualty industry group, which currently ranks in the top 33% out of approximately 250 industries. Targeting individual stocks contained within the top industry groups provides a constant 'tailwind' to our investing success.
Chubb Limited
Chubb Limited is a property and casualty insurance company. It provides a host of services including commercial and personal property and casualty insurance, accident and supplemental health insurance, reinsurance, and life insurance. CB markets its products mainly through insurance and reinsurance brokers. Chubb Limited was incorporated in 1985 and is based in Zurich, Switzerland.
CB has built an impressive track record in terms of earnings surprises, missing just one quarterly estimate in the past five years. Back in February, the insurance firm reported Q4 EPS of $3.81, a +16.51% surprise over the $3.27 consensus. CB has posted a trailing four-quarter average earnings surprise of +12.03%, aiding the stock's 35.5% return over the past year.
Analysts are bullish on CB and have raised their Q1 estimates by +1.41% in the past week. The Zacks Consensus Estimate now stands at $3.60, which would translate to 42.86% growth relative to the same quarter last year. CB is set to report the quarterly results on April 26th.
The Progressive Corp.
The Progressive Corporation is an insurance holding company that provides personal and commercial property and casualty insurance along with other specialty insurance services primarily in the United States. PGR offers automobile, property, general liability and other insurance products through its subsidiaries.
The company sells its products through independent insurance agencies as well as directly to the consumer. The Progressive Corporation was founded in 1937 and is headquartered in Mayfield, OH.
PGR has missed earnings estimates just three times in the past three years. The insurance company most recently reported Q4 EPS of $1.05, beating the $0.99 consensus by +6.06%. The stock has responded favorably and is up nearly 14% this year alone.
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently witnessed positive earnings estimate revision activity. This more recent information can be a better predictor for future earnings and can give investors a leg up during earnings season. The technique has proven to be quite useful for finding positive earnings surprises. In fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
PGR is a Zacks Rank #3 (Hold) and has a +0.21% Earnings ESP. Another beat may be in the cards when the company reports Q1 results on April 21st.
Analysts covering PGR are expecting progress to continue this year, with the 2022 Zacks Consensus EPS Estimate anticipating a 9.98% growth rate to $4.85 per share.
Keep an eye on these two insurance giants as they look primed to continue their outperformance.
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Chubb Limited (CB) : Free Stock Analysis Report
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iShares U.S. Insurance ETF (IAK): ETF Research Reports
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