Targeting a Low-Profile Alabama-Based Insurer

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It was a broadly flat market for most U.S. stocks last week, with the Dow Jones up 0.18%, the S&P 500 rising 0.05% and the NASDAQ gaining 0.23%. The MCSI Emerging Markets Index, however, did jump 2.35%.

Big gainers in your Bull Market Alert portfolio included Drew Industries Incorporated (DW), which gained 2.39%, and the iShares MSCI Emerging Markets (EEM) , which added 2.35%.

Raise your stop in Drew Industries Incorporated (DW) to $90.15 to lock in at least a 15% gain.

A slew of positions hit 52-week highs, including the MCSI Emerging Markets Index (EEM), The TJX Companies, Inc. (TJX), Drew Industries Incorporated (DW), ABM Industries Incorporated (ABM) and Cirrus Logic, Inc. (CRUS).

This week’s Bull Market Alert recommendation takes us down south to
Birmingham, Alabama. ProAssurance Corporation (PRA) is an insurance holding company that provides property and casualty insurance, and reinsurance products.

The company boasts a strong track record, steady competitive market position and pays strict attention to efficient capital deployment to ensure its growth. Year to date, the stock has gained 12.86%, close to doubling the 7.16% return on the S&P 500.

Here’s why I expect ProAssurance to continue its market-beating ways in the coming months.

First, despite the challenges of attracting new customers, ProAssurance’s core operations have had a solid past few quarters. Regarding organic growth, net earned premiums have expanded on the back of an increase in prior-period writing. Regarding inorganic growth, the company has grown via successful acquisitions and integrations.

Second, ProAssurance is delivering on its earnings. On August 10, 2016, its shares hit a 52-week high of $54.92, driven by strong second-quarter 2016 results. The company delivered operating earnings per share of 67 cents in Q2, trouncing estimates by 19.6%. ProAssurance has delivered an average positive surprise of 4.7% in the last four quarters.

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Finally, nine specialist small-cap strategies I track are targeting ProAssurance, making it one of the favorite investments in the small-cap universe. Also, the company is actively buying back its shares, with almost $110 million still authorized for repurchase.

So buy ProAssurance Corporation (PRA) at market today, and place your stop at $51.25.

I am holding off on recommending options here until the stock settles off its 52-week highs.

Portfolio Update
iShares MSCI Emerging Markets (EEM) moved higher for a second week in a row, adding 2.35% and hitting a new 52-week high. EEM has been a winner so far in 2016 and is up 11% since entering your portfolio. After a tough 2015, global economic conditions have improved and are shining a light on this sector. EEM is a BUY.
The TJX Companies, Inc. (TJX) gained 1.09% last week and hit a 52-week high. TJX will report earnings on Tuesday. Earnings per share (EPS) estimates are $0.80 on $7.87 billion in revenue. TJX is above its 50-day moving average, making it a BUY in your portfolio.
Drew Industries Incorporated (DW) gained 2.39% over the past five trading days, and also joins several other Bull Market Alert holdings that hit new 52-week highs last week. Of the two analyst firms covering this stock, both rate is at “Buy.” The average price target is set at $127.88, suggesting a potential 34% gain from last Friday’s close. Raise your stop to $90.15 to lock in at least a 15% gain. DW is a BUY.

B&G Foods Inc. (BGS) fell 4.78%. BGS announced last Friday that it had completed its secondary offering of 3,750,000 shares of its common stock. The public offering price had been $49.00 per share — a figure consistent with its recent post-earnings stock price. BGS is a BUY.
ABM Industries Incorporated (ABM) gained 1.26% last week, pushing the stock back up to its 52-week high at $38. ABM was last at the $38 resistance level back in early June. It dipped below in the following months, and made a resurgence back to this level just recently. With market sentiment high at the moment, investors could push ABM well above this line. ABM is a BUY.
Cirrus Logic, Inc. (CRUS) traded flat for its first week in your portfolio, but still managed to eke out a new 52-week high last Monday. This chip-maker appears primed to rise higher after its recent earnings report. And, with the fourth quarter traditionally the most “tech friendly” quarter in a year, CRUS could move significantly higher as technology makers crank out millions of handheld electronic devices to fill Santa’s stockings this December. CRUS is a BUY.

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Nicholas Vardy

Nicholas A. Vardy

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