Insurance stocks have been performing very strongly in the face of a looming interest-rate hike from the Fed. This tailwind should give insurance companies better returns in their investment portfolios, improving overall profit margins. Progressive (PGR) is an insurance holding company focused mainly on personal and commercial auto insurance.
Progressive just released a stellar June performance report, which included operating income of $94.6 million. This was up 95% from the same period in 2014, and reinforces the improving operating leverage we are starting to see as rates get ready to rise.
Progressive shares have climbed about 14.5% YTD and remain in a material uptrend. The stock is only a few percentage points below its all-time high. Progressive has been flat in a tough tape, and I think it will be able to break through this level on rising volume.
I like buying new positions of Progressive common shares up to $30.85, so use any weakness today or this week to get positioned.
Once your orders are filled, keep holding Progressive for my target of $33.20. And I almost always use a stop loss, so set a stop at $29.90, good after 11 a.m. ET only to avoid any early-trading volatility.
Looking ahead to today’s action, investors will be dissecting this morning’s Consumer Price Index (CPI) report, which showed that prices of most consumer goods rose only fractionally, as well as the Petroleum Status Report from the Energy Information Administration (EIA) that will be released at 10:30 a.m. ET.
Finally, and most significantly, the Federal Open Market Committee (FOMC) is expected to release the minutes from its latest policy meeting at 2 p.m. ET today, and market participants will once again try to decipher each word for any clues of an impending interest-rate hike, so if they push the market lower, use that opportunity to initiate the trade in Progressive.
Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Follow him on Twitter for his latest take on markets and innovation, and be sure to check out his Top Stock for 2015 here.
