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Steady As She Goes: A Proven Winner Through Good Times and Bad
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This year’s stock market action has been fast and furious, with a new bull market forming despite numerous macroeconomic headwinds. Better-than-expected corporate earnings, decelerating inflation, and positive seasonality are all contributing to this recent surge off the October lows. Sector rotation has been on full display, with growth and technology names coming back to the forefront.
Adding to the optimistic case is the fact that volatility has been trending downward throughout the year – a hallmark of bull markets. The VIX Index, commonly referred to as the ‘fear gauge’, has spent much of 2023 at relatively low levels. The descent in the widely-followed volatility measure speaks to probabilities about narrower price ranges in the short-term, as opposed to wider ranges that are generally associated with higher market volatility.
While there’s no doubt that technology has been the hottest sector year-to-date, other pockets of the market have also held up well. Outside of tech, where else should we look for profit opportunities?
Insurance Stocks Trending Up
The SPDR S&P Insurance ETF (KIE - Free Report) has displayed relatively little volatility over the past 6 months. In fact, the KIE ETF recently made a new all-time high in October, even as the general market was experiencing a correction.
The SPDR S&P Insurance ETF provides exposure to companies that offer life, property and casualty, and multi-line insurance. One particular holding within the KIE ETF accounts for over 2% of the total fund constituency. This company is part of the Zacks Insurance – Brokerage industry group, which currently ranks in the top 6% out of approximately 250 Zacks Ranked Industries.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Also note the favorable characteristics for this industry below:
Image Source: Zacks Investment Research
Let’s take a deeper look at a top holding within the KIE ETF.
A Steady, Long-Term Market Winner
Arthur J. Gallagher & Co. (AJG - Free Report) provides insurance brokerage, consulting, and administration services globally. The company offers retail and wholesale insurance brokerage operations as well as marketing, underwriting, and policy issuance to business and organizations. Arthur J. Gallagher & Co. provides its services through a network of correspondent insurance brokers and consultants.
The insurance giant has built an impressive track record in terms of earnings surprises, surpassing estimates in each of the last four quarters. Back in October, the company delivered third-quarter earnings of $2.00/share, a 3.09% surprise over the $1.94/share consensus estimate. A Zacks Rank #2 (Buy) stock, AJG has delivered a trailing four-quarter average earnings beat of 2.23%.
AJG shares have advanced more than 32% this year, widely outperforming the major indexes. The stock has soared over the last 5 years, acting very steady during last year’s bear market:
Image Source: StockCharts
Analysts are bullish on the fourth quarter and have raised estimates by 0.54% in the past 60 days. The Q4 Zacks Consensus EPS Estimate now stands at $1.86/share, reflecting potential growth of 20.78% relative to the same quarter last year. Revenues are projected to climb 19.8% to $2.39 billion.
Image Source: Zacks Investment Research
Final Thoughts
The stock market is forward-looking and is telling us to keep an open mind regarding bullish outcomes in the future. Outperformance from sectors like technology paint a picture of a resilient economy.
Still, other areas of the market have also held up well, and we can diversify our portfolio by including leading stocks like AJG. Keep an eye on this insurance giant as it looks to extend its bullish run.
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Steady As She Goes: A Proven Winner Through Good Times and Bad
This year’s stock market action has been fast and furious, with a new bull market forming despite numerous macroeconomic headwinds. Better-than-expected corporate earnings, decelerating inflation, and positive seasonality are all contributing to this recent surge off the October lows. Sector rotation has been on full display, with growth and technology names coming back to the forefront.
Adding to the optimistic case is the fact that volatility has been trending downward throughout the year – a hallmark of bull markets. The VIX Index, commonly referred to as the ‘fear gauge’, has spent much of 2023 at relatively low levels. The descent in the widely-followed volatility measure speaks to probabilities about narrower price ranges in the short-term, as opposed to wider ranges that are generally associated with higher market volatility.
While there’s no doubt that technology has been the hottest sector year-to-date, other pockets of the market have also held up well. Outside of tech, where else should we look for profit opportunities?
Insurance Stocks Trending Up
The SPDR S&P Insurance ETF (KIE - Free Report) has displayed relatively little volatility over the past 6 months. In fact, the KIE ETF recently made a new all-time high in October, even as the general market was experiencing a correction.
The SPDR S&P Insurance ETF provides exposure to companies that offer life, property and casualty, and multi-line insurance. One particular holding within the KIE ETF accounts for over 2% of the total fund constituency. This company is part of the Zacks Insurance – Brokerage industry group, which currently ranks in the top 6% out of approximately 250 Zacks Ranked Industries.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Also note the favorable characteristics for this industry below:
Image Source: Zacks Investment Research
Let’s take a deeper look at a top holding within the KIE ETF.
A Steady, Long-Term Market Winner
Arthur J. Gallagher & Co. (AJG - Free Report) provides insurance brokerage, consulting, and administration services globally. The company offers retail and wholesale insurance brokerage operations as well as marketing, underwriting, and policy issuance to business and organizations. Arthur J. Gallagher & Co. provides its services through a network of correspondent insurance brokers and consultants.
The insurance giant has built an impressive track record in terms of earnings surprises, surpassing estimates in each of the last four quarters. Back in October, the company delivered third-quarter earnings of $2.00/share, a 3.09% surprise over the $1.94/share consensus estimate. A Zacks Rank #2 (Buy) stock, AJG has delivered a trailing four-quarter average earnings beat of 2.23%.
AJG shares have advanced more than 32% this year, widely outperforming the major indexes. The stock has soared over the last 5 years, acting very steady during last year’s bear market:
Image Source: StockCharts
Analysts are bullish on the fourth quarter and have raised estimates by 0.54% in the past 60 days. The Q4 Zacks Consensus EPS Estimate now stands at $1.86/share, reflecting potential growth of 20.78% relative to the same quarter last year. Revenues are projected to climb 19.8% to $2.39 billion.
Image Source: Zacks Investment Research
Final Thoughts
The stock market is forward-looking and is telling us to keep an open mind regarding bullish outcomes in the future. Outperformance from sectors like technology paint a picture of a resilient economy.
Still, other areas of the market have also held up well, and we can diversify our portfolio by including leading stocks like AJG. Keep an eye on this insurance giant as it looks to extend its bullish run.