The following is one of our personal favorite watch lists. We started tracking the insurance industry in January 2011 and we’re very impressed with the results so far.
Anyone who wishes to be successful in insurance stocks should read the book The Davis Dynasty by John Rothchild. The book starts with Shelby Collum Davis investing approximately $50,000 to $100,000 that ultimately grew to $900 million after 47 years. The strategies employed by Davis seem more accessible to average investors as opposed to Warren Buffett’s leveraged strategies and education from Benjamin Graham.
| Symbol | Name | Price | P/E | EPS | Yield | P/B | payout ratio | % from low |
| NSEC | National Security Group Inc. | 7.6 | - | -3.14 | 1.3 | 0.63 | -3.18% | 0.00% |
| MIG | Meadowbrook Insurance Group | 5.44 | - | -0.33 | 1.5 | 0.49 | -24.24% | 2.64% |
| GLRE | Greenlight Capital Re, Ltd. | 23.01 | 6.06 | 3.8 | - | 0.96 | 0.00% | 3.46% |
| RLI | RLI Corp. | 64.23 | 12.35 | 5.2 | 2 | 1.52 | 24.62% | 3.83% |
| PKIN | Pekin Life Insurance Company | 10.75 | 59.39 | 0.18 | 1.1 | 1.56 | 66.67% | 4.37% |
| FRFHF | Fairfax Financial Holdings | 352.5 | - | -34.42 | - | 0.98 | 0.00% | 4.71% |
| TWGP | Tower Group Inc. | 17.54 | 12.73 | 1.38 | 4.3 | 0.63 | 54.35% | 6.30% |
| ANAT | American National Insurance Co. | 68.05 | 9.98 | 6.82 | 4.5 | 0.47 | 45.16% | 6.86% |
| AIZ | Assurant Inc. | 34.81 | 4.93 | 7.06 | 2.4 | 0.53 | 11.90% | 7.41% |
| CRVL | CorVel Corporation | 42.4 | 20.53 | 2.06 | - | 3.97 | 0.00% | 7.45% |
| RGA | Reinsurance Group of America | 51.99 | 6.4 | 8.12 | 1.8 | 0.57 | 11.82% | 7.51% |
| WSH | Willis Group Holdings Plc | 34.52 | 15.92 | 2.17 | 3.1 | 2.27 | 49.77% | 7.94% |
| TDHOY | T&D Holdings, Inc. | 5.29 | 15.11 | 0.35 | - | 0.42 | 0.00% | 8.18% |
| ASI | American Safety Insurance Hlds | 17.21 | 33.03 | 0.52 | - | 0.48 | 0.00% | 9.27% |
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Avoid insurance stocks with payout ratios that are in the negative or exceeding 100%
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Insurance stocks with low average trading volume have low liquidity and are considered higher risk
Watch List Summary
Since the publication of our watch list dated November 6, 2012, we have acquired two insurance stocks, American National Insurance (ANAT) on December 3, 2012 and Reinsurance Group of America (RGA) on December 6, 2012. Combined, the stocks comprise 26% of our partnership portfolio.
Of interest to us on the current watch list is Greenlight Capital Re (GLRE). The company has been publicly traded since 2007. Although relatively new, we believe that with GLRE being in the reinsurance sector it is the most lucrative opportunity for insurance investing at the current time.
According to Dow Theory, Greenlight Capital Re has the following downside targets:
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$22.93
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$19.49
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$16.07
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$9.20
The short-term upside target is $26.35.
Our interest in Greenlight Capital Re is not based on David Einhorn’s involvement with the company. In fact, we believe that Einhorn’s notoriety and ever changing investment stance is a possible liability. Careful consideration of company fundamentals is required for anyone interested in this stock.