Progressive Corp (NYSE:PGR) has been around since 1937, so it has seen its fair share of ups and downs. After all those years, it’s most impressive that PGR has stuck to its knitting.
It hasn’t ventured out much, as it was established as a client-focused business and has remained that way for the ensuing eight decades.
And this is a very good time for good insurance companies like PGR.
You see, like banks, insurance companies sit on a lot of cash. Banks hold deposits, as well as mortgage and loan payments, while insurance companies hold premium payments.
The government mandates that insurers need to keep a good proportion of their cash stash in very liquid places, like U.S. Treasuries. The rest they can put to work in the markets as they see fit. The goal is to balance risks and rewards, so that the cash they’re holding is earning more for them than they would get off sitting in U.S. Treasuries.
A secular bull market is very helpful. And now, with rates moving up, even their Treasuries are improving on the yield side. We’ve already started to see this in some of the banking stocks. Earnings are exploding now that they’re trading desks are back to full strength.
Morgan Stanley (NYSE:MS) just blew away earnings estimates because of its trading desk performance. Bank of America Corp (NYSE:BA) and Citigroup (NYSE:C) also reported strong trading successes in the most recent quarter.
Bottom Line on PGR Stock
PGR recently released its first-quarter earnings and while it missed on earnings for the quarter, earnings are up 64% year over year. And if you look deeper, there’s something very encouraging for the rest of the year: net realized gains on securities was up 198% year over year.
PGR’s trading desk and Treasuries strategy is working.
Also, operating revenues were up 13% for the quarter. It boosted its Personal Auto segment 8% versus the same quarter a year ago. Its Commercial Auto segment was up 6% in the same period. The Property division was up a very impressive 17% .
The thing is, after missing earnings, PGR stock has been off its highs, down about 2.5% in the past month. But even with that loss, the stock is up more than 10% year to date. That makes this pause a great time to get in, because the coming quarters should be even better for PGR.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.