Insurance Industry and Hanover Group (THG) Starting to Rally, Gold Fever Crosses the Line

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JP Morgan (JPM) opts to allow gold rather than stocks or treasuries act as loan collateral, while property and casualty insurer stocks pick up the pace.

Property & Casualty Insurers

Chubb Corporation - which is already on our watchlist - is making good progress, and isn't bad looking with a single-digit P/E ratio and a few earnings beats under its belt. Allstate, however, looks to be one that could explode

Insurance stocks like Berkshire (BRK) and Chubb Corporation (CB) are hinting of superior strength in the near-term, but small cap insurance company The Hanover Insurance Group may be poised to lead this charge, according to James Brumley, Chief Analyst of The Rhino Report. In the latest edition, Brumley named the insurance industry's stocks, including Allstate (ALL) and Chubb Corp. (CB), as compelling buys right now based on budding technical strength.

"Chubb Corporation - which is already on our watchlist (and that's no coincidence) - is making good progress, and isn't bad looking with a single-digit P/E ratio and a few earnings beats under its belt. Allstate, however, looks to be the one that could explode against the backdrop of an EPS of $3.23 this year and a forecasted $3.88 next year" he noted in Tuesday's report.

At the same time, Brumley suggested that gold's recent rally has been stronger than merited, and that a dangerous pullback is on the way, equating it to the tech bubble in the late 90's that was only advanced because of euphoric investors "buying first and asking questions later."

At the core of Tuesday's gold tension was the fact that JP Morgan announced gold could be used as loan collateral now, whereas before only stocks or treasury bonds would be acceptable.

The Rhino Report portfolio is about half as exposed to the market as usual, as Brumley anticipates a pullback soon. To defend against the full brunt of any dip, the portfolio's size has been cut down to about tens stocks from a normal twenty. The result is about a 50% cash position. Though a near-term downside/bearish trade that will act as a hedge is on the radar, it has not yet been put into the official Rhino portfolio.

Brumley feels the insurance group, and the property/casualty insurers in particular, may be best suited to stave off the ill effects of a marketwide correction. But, either way he's bullish on most of the well-founded names in the category. To learn more about these outlooks and other stock in the current portfolio, go to the Rhino Report web site located at: for more information.

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James Brumley
The Rhino Report

Source: The Rhino Report

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James Brumley