Today we are recommending buying and selling insurance stocks.
Buy: Erie Indemnity Company (ERIE)
From Positive Patterns
Erie Indemnity Company is smaller but unique, ‘mostly a Midwest/USA player’ in the insurance/brokerage business that was set up by the Hirt-Crawford family 125+ years ago, starting with $31,000 and building to what it is today—a $10 billion insurance company. The ‘family’ still owns about 46% of the stock and controls the vote, and one would conclude (if they looked at history) that they have done a good job of it and they are still doing a good job of it, even as the world spins.
Erie operates as a “managing attorney” (i.e., licensed insurance broker) for those that subscribe to the Erie insurance exchange. Erie has business relationships from a network of 2,000 local agencies with over 10,000 agents who use the Erie exchange to place business. Erie places insurance and then does the back-office work. Erie operates in and is well-established in 12 states: IL, IN, KY, MD, NV, NC, OH, PA, TN, VA, AND WV.
Erie offers a wide variety of insurance—auto, P&C, life, and many types of business insurance, and would be considered what is called a “main street” insurance business operator.
This is a fine company, A+ in all aspects with a very clean balance sheet, a business model that works, and a fine future ahead. The dividend is not large, but the stock has rewarded patient shareholders with steady gains SPX/beating returns for long-term investors.
Erie had its IPO in 1996 at $15; it was $68 by 2014, and now it’s around $210. Since the IPO, the S&P 500 is up about 5-fold. During the same time, Erie is up about 14-fold. That is why we love obscure/boring insurance stocks like Erie. The returns are exciting!
The real attraction here is the steady upside in the stock for patient buy/keep investors. We want stocks on offense and Erie fits the bill.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, August 4, 2020