Time to Get Personal With Insurers

Erie Indemnity (ERIE) is well run, but expensive. It deserves a discount valuation because there are control investors who own a majority of the company.

21st Century Insurance Group (TW) is well run, but majority-owned by AIG, and deserves a discount valuation as a result.

Aside from Progressive, there are reasons why each of the bottom four deserve discount valuations, but have premium valuations. I would steer clear, but those willing to speculate could consider shorting.

It takes a lot for me to short a stock. Remember: Being short a stock is not the opposite of being long, it is the opposite of being leveraged long. Much as I'm not crazy about the bottom four stocks listed above, I'm much less likely to short them than I am to go long the top four. Take a look at the top four, and consider whether the cheap valuations warrant an investment, considering the challenging operating environment.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Affirmative Insurance to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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