In this article, we discuss 5 best Guru stocks to buy now. If you want to see more stocks in this selection, check out 10 Best Guru Stocks To Buy Now.
5. The Allstate Corporation (NYSE:ALL)
Number of Hedge Fund Holders: 37
Percentage of Guru Index ETF’s Net Assets as of October 18: 1.60%
The Allstate Corporation (NYSE:ALL) is an Illinois-based company that provides property, casualty, and other insurance products in the United States and Canada. The company operates through Allstate Protection, Protection Services, Allstate Health and Benefits, and Run-off Property-Liability segments. As of October 18, Guru ETF had 5,309 shares of The Allstate Corporation (NYSE:ALL), worth over $729 million and representing 1.60% of the total net assets.
Keefe Bruyette analyst Meyer Shields on October 11 upgraded The Allstate Corporation (NYSE:ALL) to Outperform from Market Perform with a price target of $158, up from $136, ahead of the Q3 results. The commercial insurers’ core ratios should generally improve year-over-year on earned rate increases despite high loss trends, the analyst told investors.
According to Insider Monkey’s second quarter database, 37 hedge funds were long The Allstate Corporation (NYSE:ALL), compared to 44 funds in the previous quarter. Cliff Asness’ AQR Capital Management is the leading position holder in the company, with 1.72 million shares worth $215 million.
Here is what Appleseed Fund had to say about The Allstate Corporation (NYSE:ALL) in its Q2 2021 investor letter:
“Allstate is the second-largest personal insurance company in the United States with a 9.3% share in auto insurance (4th largest) and an 8.0% share in homeowner’s insurance (2nd largest). The company sells products primarily through its captive agents though this business line is shrinking as the company’s direct (Esurance.com and, more recently, Allstate.com) and independent agent businesses grow more quickly. The personal insurance industry is relatively consolidated, and competition has historically been rational, allowing Allstate to earn attractive mid-teen returns on equity in this business over the past decade. Allstate also recently announced plans to divest their low-growth, low-return life and annuity businesses. This will free up capital to reinvest into the more attractive personal insurance segment and result in improvements on consolidated returns on equity of approximately 2.5%.
Despite the attractive industry dynamics of the personal insurance business and the steps that Allstate has taken to dispose of lower return businesses, the company’s stock currently trades as if Allstate will never be able to grow its earnings. At our purchase price, Allstate’s stock was trading for less than 10.0x forward earnings estimates. While Allstate does face tough competition in the auto insurance business from GEICO and Progressive, their market position, strong brand, and increased investment into the direct insurance business should allow them to grow earnings. Overall, we believe this entry price is attractive for an industry leader in a high-return, consolidating industry. Further, downside risk management should be positively impacted by the dividend yield, a strong balance sheet, and a management team that has historically increased share repurchases when they view the stock to be trading below its intrinsic value.”
