At a time when it's hard to find any stocks rising, insurance stocks have shown resilience. IBD Stock Of The Day Bowhead Specialty shares are up more than 7% this year, and holding at an important level on their chart.
The diversified insurance play went public less than a year ago at $17 a share. It's already the leader in IBD's diversified insurance industry group. It has the highest Composite Rating of 16 stocks in the group.
The firm's earnings growth accelerated from 20% to 41% and 133% in the past three quarters, according to IBD MarketSurge. Revenue increased 51%, 53% and 44% over the same periods.
Bowhead Specialty provides niche coverage, such as liability insurance for professionals and health care providers. It also covers companies against cybersecurity risks and offers protection to investment management, lending and other financial risks. Policies are provided through the firm's network of brokers.
The firm, which began operations in November 2020, reported a 37% increase in premiums for 2024. Last year, Bowhead launched Baleen Specialty, a provider of specialized coverage for small, distressed, and hard-to-place business risks. The tech-based platform generated $1.2 million in premiums in Q4, a 175% increase from the third quarter.
IBD' Insurance sector remains one of the top performers, up 2.4% so far this year. The diversified insurance industry group is ranked No. 13 out of 197 groups.
Insurance Stock Retreats To Buy Point
Bowhead Specialty stock broke out of cup-without-handle base on March 20. Shares rose as much as 12% from the 37.81 buy point but started to give back gains this month as the stock market went into a correction.
The fact that the insurance stock erased a gain of more than 10% means it triggered a round-trip sell signal. Yet, Bowhead's pullback stopped at 50-day support, and it has more or less held up at its buy point. That could present a buy area when the stock market improves. For now, it's best to keep the stock on a watchlist.
Analysts expect the firm's earnings to rise 12% this year and 26% in 2026, according to FactSet.
Of six analysts who cover the company, half have buy ratings and the rest hold ratings. The consensus price target is 38.20. Bowhead stock traded around 37.50 Friday morning.
Bowhead will announce first-quarter results May 6 before the market opens. The consensus earnings estimate is 33 cents a share, down 3% year over year.
Bowhead stock has a 21-day average true range (ATR) of 4.86%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior.
Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs. In the current, unpredictable market, IBD suggests stocks with ATRs of 3% or below.
