Wednesday's IBD 50 Stocks To Watch pick, Arch Capital, is one of the best stocks to buy and watch right now, as it approaches a fresh buy point in today's stock market action. ACGL stock traded 1.5% lower midday Wednesday, just 6% away from its latest buy point.
The Bermuda-based company offers insurance, mortgage and reinsurance products.
In the latest reported quarter on April 26, Arch Capital reported mixed earnings and sales numbers. The company's earnings jumped 57% to $1.73 a share vs. the year-ago period. Sales grew 63% to $3.16 billion.
"Our P&C (Property & Casualty) underwriting teams continue to lean into attractive market conditions where excellent risk-adjusted returns remain available, growing net premiums written by 35% over the same period last year," commented CEO Marc Grandisson in the earnings call.
Grandisson continued: "A key element of cycle management is to respond aggressively when you see conditions change. Since 2019, we have seen the market psychology pivot to underwriting discipline and our underwriting teams were prepared to become a more willing provider of capacity."
Second-quarter results are due out July 26. Wall Street expects the insurer to earn $1.60 a share on sales of $3.17 billion, representing year-over-year increases of 19% and 18%, respectively.
Arch Capital's Sales Accelerate
With two quarters of accelerating sales growth, solid quarterly earnings growth and a solid long-term track record of profitability, ACGL stock shows a near-perfect 97 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years. The two most recent quarters are weighted more heavily.
Over the past three quarters, Arch Capital's sales growth accelerated from 14% to 33% to 63%. Accelerating sales growth is a bullish fundamental metric.
ACGL stock boasts a 97 out of a perfect 99 IBD Composite Rating, due to strong fundamentals in the latest quarters along with powerful price action since October 2022. The IBD Composite Rating is designed to help investors easily gauge the quality of a stock's fundamental and technical metrics.
Arch Capital ranks No. 2 in IBD's 11-stock Insurance-Property/Casualty industry group. The stock ranks behind Kinsale Capital, which is just out of buy range beyond a flat base's 345.75 buy point.
Insurance Leader Is One Of Best Stocks To Buy And Watch
After peaking on May 12, the insurance leader has built a flat base with a 78.30 buy point, per IBD MarketSmith chart analysis. Shares are about 6% away from their latest entry amid Wednesday's 1.5% midday decline.
A key technical indicator to watch is the relative strength line. Currently, the RS line is lagging pretty far from its old highs, a sign that the S&P 500 is outperforming the insurance leader in recent weeks. The RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on every IBD chart. It should hit a new high on the breakout day or shortly thereafter.
Strong fundamentals and technicals make ACGL one of the best stocks to buy and watch in today's stock market.
With the stock market in a confirmed uptrend, investors should be on the lookout for top stocks breaking out of basing patterns. Amid the ongoing stock market pullback, IBD recommends exposure in stocks at 80% to 100% of your portfolio, according to IBD's The Big Picture.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks, which are among the best stocks to buy and watch.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Wingstop | 202.16 | Trendline | |
| Uber Technologies | 45.24 | Tight area | |
| MongoDB | 398.89 | Tight area |
Source: IBD Data As Of July 5
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
