Insurance company Arch Capital Group is Thursday's pick for IBD 50 Growth Stocks To Watch. ACGL stock is in a buy zone after a successful breakout out of a cup-with-handle base.
Arch Capital offers property and casualty, specialty, mortgage and reinsurance to customers in North America, Europe, Bermuda and Australia. Its variety of products include property, liability, marine, aviation and space, agriculture, accident, life and health insurance.
Arch's specialty coverage includes cyber, terrorism and political risk. Arch's terrorism insurance is a separate offering available within the U.K. as part of their property insurance offerings. And the company launched its proactive cyber insurance on Sept. 13 in the U.S.
"Arch CyPro is our solution for the dynamic and ever-growing threats of cyber risks," Marilyn Marshall, Arch executive vice president said in a news release.
The insurance company fell to the No. 6 spot from No. 1 four weeks ago, out of 63 stocks in the Property-Casualty-Title Insurance group. The Property and Casualty Insurance group is ranked No. 49 out of 197 IBD industry groups.
Insurance stocks often are seen as a defensive play as demand for their products tend to remain strong even in recessionary times. ACGL stock has gained around 33% thus far in 2023. It stands in sharp contrast to peer Chubb, which fell 5% and Travelers, down more than 13% this year.
Stock In A Buy Zone
ACGL stock broke out of a cup-with-handle base Wednesday after hitting the 82.18 buy point, according to MarketSmith pattern recognition. Shares are in the 5% buy zone reaching to 86.29. The insurance company stock tapped the buy point on Oct. 6, but the breakout quickly failed.
Then shares rose Tuesday after Barclays raised its price target to 96 from 92 and maintained its overweight rating. On Wednesday, Morgan Stanley lifted its price target to 100 from 98 and kept it overweight rating. ACGL stock is nearing its all-time high of 84.83 set on July 27, following Arch's earnings report.
Volume has picked up slightly from the low trading volume in August and September, with one higher-than-average daily volume spike.
Insurance Company Earnings Growing
Arch Capital reported higher-than-expected second-quarter earnings on July 26. The insurance company beat profit estimates by 19.1% according to IBD Stock Checkup. Arch reported second-quarter profit growth of 43%, which lagged the 57% and 69% in the prior two quarters. Second quarter sales growth slowed to 43% from 63% in the prior quarter but was higher than the 33% two quarters ago.
Third-quarter earnings are expected on Oct. 30.
Analysts recently raised projected full-year 2023 per-share earnings growth to 43% from 39% a month ago. They also trimmed their 2024 growth to 6% from 8%, according to MarketSmith data.
Institutions are adding shares as shown by the Accumulation/Distribution Rating of B. Mutual funds own 60% of shares for the insurance company, with 1,927 funds holding the stock in September, up from 1,889 in June and 1,779 in March. Funds have added shares for the last eight quarters, according to IBD Leaderboard.
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