After a strong performance out of the gate in early October, the bears are back at it as markets are retesting the lows of the year. The back-and-forth price action is toying with investor emotions from hope to fear and back again, with the VIX index serving as our depiction of these emotions. The widely-followed “fear gauge” has sprung back to life, surging in recent days near the highest levels of the year.
Markets are slightly up as we head into the afternoon, but worse-than-expected earnings results along with a high September producer price index (PPI) figure aren’t giving the bulls much in the way of a positive catalyst. Minutes from the Federal Reserve’s recent policy meeting are also due out at 2 p.m. ET today. The recent hawkish tone along with policymakers’ expectations for future interest rate hikes are once again dampening investor sentiment.
Yesterday, we heard from Cleveland Fed Vice President Loretta Mester, who stated that the Fed has yet to make any progress regarding lower inflation. Mester believes that the Fed must move monetary policy to “restrictive” levels, stating that the biggest risk is that the Fed doesn’t hike enough. A dovish pivot looks far away at this point.
One way we can sidestep the recent volatility is to target the pockets of the market that are outperforming and are showing some immunity to the downside moves. The iShares U.S. Insurance ETF IAK fits the bill, as the group has held its own this year while the market has whipped back and forth. Notice how IAK has found support this year while displaying little volatility:
Image Source: StockCharts
While the iShares U.S. Insurance ETF may underperform during bullish periods, companies within IAK have a tendency to outperform during defensive times such as the environment we’ve found ourselves in this year.
Let’s take a look at one individual stock within the IAK ETF that accounts for over 10% of the fund holdings.
The Progressive Corp. (PGR)
The Progressive Corporation is an insurance holding company that provides personal and commercial property and casualty insurance along with other specialty insurance services primarily in the United States. PGR offers automobile, property, general liability and other insurance products through its subsidiaries. The company sells its products through independent insurance agencies as well as directly to the consumer.
Progressive continues to gain on higher premiums given its compelling product portfolio, leadership position and strength in its vehicle and property businesses. PGR is seen as a leader in product, service, and distribution innovation. The company’s rates are very competitive in all of its markets and it continues to gain from an expanded multi-product offering.
Revenues have steadily increased over the years, with current estimates for 2022 calling for growth of 10.09% to $50.85 billion. As we look further ahead, projections appear favorable in 2023. Sales are seen climbing 11.65% to $56.77 billion.
Image Source: Zacks Investment Research
PGR stock has outperformed this year, making a series of higher highs even as the market continues its bearish move lower. Shares have advanced more than 21%, and the insurance provider’s uptrend remains intact.
Image Source: StockCharts
Keep an eye on these this insurance giant as it looks primed to continue its outperformance.
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The Progressive Corporation (PGR): Free Stock Analysis Report
iShares U.S. Insurance ETF (IAK): ETF Research Reports
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