Go With the Flow and Buy Progressive Corp (PGR) Stock

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Progressive Corp (NYSE:PGR) is the nation’s No. 4 property & casualty (P&C) insurance company. And of the three ahead of it, only one — Allstate Corp (NYSE:ALL) — is publicly traded.

Go With the Flow and Buy Progressive Corp (PGR) Stock

Geico, which is No. 2 in the nation, is technically traded, but it’s a part of Berkshire Hathaway Inc. (NYSE:BRK.B), which holds a number of other businesses as well. State Farm is No. 1, commanding about 20% of the market. PGR has almost 9%.

P&C insurers have been beneficiaries in the resurgence of the economy for a couple reasons.

PGR Stock: A Bet on the U.S. Economy

First, a growing economy means people are spending. And in the U.S., that means people buy new cars, which means insurance companies get to insure more expensive vehicles, and that means higher premiums. That same goes for all the other toys PGR insures like all-terrain vehicles, boats, motorcycles and recreational vehicles.

Progressive does have a property arm that offers homeowner and rental insurance, but its auto business is where its bread is buttered.

Second, insurers collect premiums regularly. They then hold a good chunk of that in cash and cash equivalents, like U.S. Treasuries. The rest they invest in the markets to help increase the return on their capital.

As interest rates rise, PGR is a beneficiary of the rising T-bond rates. This is a huge risk-free boon to Progressive’s bottom line. And the market has been in rally mode as well, so its investments have likely helped drive earnings.

But those two reasons make a very good argument for the P&C insurance industry as a whole. What makes PGR a uniquely good buy is its ability to grow its market share and stay innovative.

For example, Progressive was online before even Google. PGR launched its site in 1995, set up its comparison shopping model in 1996 and was selling policies online by 1997. Google, now Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), was founded in 1998.

But PGR’s roots go back to 1937. This 80-year-old company has seen some good and bad times over that life, and it has not only endured, but it has thrived. One key for its success is finding ways to innovate and differentiate itself from other insurers. For example, it was the first insurance company to offer plans to high-risk drivers — in 1956.

By 1992, Progressive was the largest auto insurance seller through independent insurance agents. In 1994, it had an 800 number where you could call and get competitive quotes from PGR and three of its competitors. This is still a unique feature that Progressive offers among its competitors.

Recent fourth-quarter earnings show that all these factors are helping keep PGR moving forward. Revenue for the quarter was up almost 15%. Double-digit growth in this highly competitive sector is a very good sign indeed.

While it has a steady if unexciting dividend around 1.8%, it’s the growth that you can expect from Progressive that makes it interesting.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/go-with-the-flow-and-buy-pgr-stock/.

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