2. The Progressive Corporation (NYSE: PGR)
P/E Ratio as of June 14: 8.51
Number of Hedge Fund Holders: 45
Ranking 2nd on the 10 best undervalued stocks to buy now is The Progressive Corporation (NYSE:PGR). The Ohio-based American insurance company is one of the worldwide leaders in vehicle insurance with over 13 million policies. The Progressive Corporation (NYSE:PGR) owns notable brands such as Progressive Commercial Holdings, Inc., National Continental Insurance Company, and Progressive Express Insurance Company. Earlier this year, the company purchased commercial vehicle insurer Protective Insurance Corporation in a $338 million deal. The acquisition will help expand the company’s operations and provide greater quality service to its clients.
The Progressive Corporation (NYSE:PGR) posted its net realized gains of $585.3 million in the first quarter of 2021, up from $553.6 million year-over-year. The Progressive Corporation (NYSE:PGR) shares currently trade for $93.60 and have a PE ratio of 8.51. The 52-week price range of The Progressive Corporation (NYSE:PGR) is $75.25-105.59. Shares of PGR jumped 22% over the last twelve months. On March 19, Edward Jones upgrades Progressive to a Buy rating.
There were 45 hedge funds that reported owning stakes in The Progressive Corporation (NYSE:PGR) at the end of the first quarter, down from 48 funds a quarter earlier. The total value of these stakes at the end of Q1 is $1.21 billion.
Tweedy, Browne Company LLC mentioned The Progressive Corporation (NYSE:PGR) in its Q1 2021 investor letter:
“One of our new buys in the Worldwide High Dividend Yield Value Fund during the quarter was Progressive Corporation, the third largest personal automobile insurance carrier in the U.S., with a market share of 13% as of December 31, 2020. While the Company has a successful history of expanding into new markets (like commercial auto insurance), personal auto insurance still dominates its profit and loss statement (“P&L”), representing 89% of Progressive’s pre-tax underwriting profit in 2020.
Progressive is a best-of-breed auto insurance carrier. The company has a long track record of innovation, market share gains, industry-leading profitability (lowest 10-year average combined ratio) and generating high returns (19% average operating ROE). Over the 16 years ended December 31, 2020, the value compound (defined as growth in book value per share plus cumulative dividends per share) was +13.3%. The Company seems to have clear competitive advantages: direct distribution (low expense ratio) and superior data analytics (low loss ratio).
At purchase, we paid between $85 and $87 per share, or roughly 15 times estimated 2021 operating earnings per share (excluding net after-tax gains/losses realized on securities), approximately 75% to 80% of our conservative estimates of intrinsic value. Moreover, Progressive has paid an above average dividend in the form of a regular quarterly dividend and a discretionary additional variable dividend paid annually. In 2019 and 2020, the total dividend declared per share was $2.65 and $4.90, respectively.”