{"id":2589398,"date":"2025-12-24T15:24:59","date_gmt":"2025-12-24T20:24:59","guid":{"rendered":"https:\/\/www.valuewalk.com\/?p=2589398"},"modified":"2025-12-24T16:00:28","modified_gmt":"2025-12-24T21:00:28","slug":"ai-insights-is-palomar-holdings-a-hidden-insurance-winner","status":"publish","type":"post","link":"https:\/\/www.valuewalk.com\/news\/ai-insights-is-palomar-holdings-a-hidden-insurance-winner\/","title":{"rendered":"AI Insights: Is Palomar Holdings a Hidden Insurance Winner?"},"content":{"rendered":"\n

The AI Insights stock picker goes outside the box with innovative insurance company Palomar Holdings.<\/strong><\/p>\n\n\n\n

Wouldn\u2019t it be nice to have a little assurance during times of market volatility? A financial safety net during times of trouble? Perhaps a little\u2026 insurance?<\/p>\n\n\n\n

That might have been what ChatGPT was thinking when it recommended insurance company Palomar Holdings this week.<\/p>\n\n\n\n

Of course, insurance stock is strikingly different from actually HAVING insurance, and insurance company stock is notoriously volatile due to storms, fires, and other natural disasters.<\/p>\n\n\n\n

That doesn\u2019t mean insurance stock is a bad choice for your portfolio, however, and Palomar is certainly an interesting addition to the overall AI Insights portfolio.<\/p>\n\n\n\n

Let\u2019s talk insurance.<\/p>\n\n\n\n

ChatGPT stock pick of the week: Palomar Holdings<\/span><\/h2>\n\n\n\n

Here\u2019s what ChatGPT had to say when asked for a stock recommendation this week:<\/p>\n\n\n\n

Palomar Holdings (ticker: PLMR) looks like a strong value-oriented pick today for a $100 purchase, given its discount to estimated fair value, earnings growth, and balance sheet profile.<\/em><\/p>\n\n\n\n

Palomar Holdings (PLMR) at a glance<\/strong><\/p>\n\n\n\n

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A look at Palomar\u2019s performance over the last 12 months. Data from Perplexity.<\/em><\/p>\n\n\n\n

Company<\/td>Palomar Holdings, Inc.<\/td><\/tr>
Ticker (Exchange)<\/td>PLMR (NASDAQ)<\/td><\/tr>
Founded<\/td>2013<\/td><\/tr>
Headquarters<\/td>La Jolla, California, USA<\/td><\/tr>
CEO<\/td>D. McDonald \u201cMac\u201d Armstrong<\/td><\/tr>
Core business<\/td>Specialty property and casualty insurer focused on catastrophe-exposed and niche products (e.g., earthquake, hurricane, flood, inland marine) for individuals and businesses in the U.S.<\/td><\/tr>
Market cap<\/td>$3.6 billion<\/td><\/tr>
Employees<\/td>253 (2024)<\/td><\/tr>
Price to earnings ratio (P\/E)<\/td>21<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Our take<\/span><\/h2>\n\n\n\n

Palomar Holdings is a far cry from the buzzier stocks we usually write about like Google and Tesla so it was a good time to check in with senior news writer Dave Kovaleski<\/a> and get a few quick thoughts about the upstart insurance company:<\/p>\n\n\n\n

Palomar Holdings<\/em><\/strong> (NASDAQ:PLMR) is an interesting stock. It is a specialty insurer that covers commercial and residential customers for catastrophic events, like earthquakes, floods, hurricanes, which carry higher premiums. But these types of insurers can be more volatile, depending on how many catastrophic events there are.<\/em><\/p>\n\n\n\n

Palomar is a more diversified specialty insurer, as it balances out its catastrophic insurance by only taking on a small part of the risk. They use third-party reinsurance companies to handle the bulk of the payouts should a major event occur. They also offer property and crop insurance, which are not dependent on catastrophes and are more broad-based offerings. Further, they offer fronting insurance, whereby they rent out their name and A rating to smaller insurers for a fee, but transfer the risk to them.<\/em><\/p>\n\n\n\n

So, while specialty insurance stocks are typically volatile, Palomar <\/em>has<\/em> been pretty steady over the years. It is up about 30% year-to-date (YTD) and has a three-year average annualized return of 44%. Its 5-year average annualized return is 8% while its 10-year return is 34% per year. These are obviously excellent results \u2013 to go along with a reasonable valuation, trading at 21 times earnings. <\/em><\/p>\n\n\n\n

What other experts are saying about Palomar<\/span><\/h2>\n\n\n\n

Unsurprisingly, Palomar Holdings isn\u2019t covered by a huge number of analysts.<\/p>\n\n\n\n

Currently, there are just six analysts who cover Palomar,<\/a> but they do give a consensus of a strong buy recommendation (with five buys and one hold).<\/p>\n\n\n\n

According to the analysts, Polomar has a 12% potential upside over the next 12 months with an average price target of $153.60<\/strong>.<\/p>\n\n\n\n

A key element that makes Palomar attractive is that it appears to be significantly undervalued. The stock experienced a sharp correction following a somewhat disappointing second-quarter earnings report. Several pundits\u00a0argued the dip wasn\u2019t rea<\/a><\/span>lly warranted,\u00a0and the company still carried a raised full-year profit forecast.<\/p>\n\n\n\n

As it happened,\u00a0Palomar beat third-q<\/a><\/span>uarter expectations,\u00a0but the stock has yet to receive the benefit of the positive news.<\/a><\/p>\n\n\n\n

How did last week\u2019s pick perform?<\/span><\/h2>\n\n\n\n
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Long-running cables\/connectors company Amphenol was an excellent addition to the AI Insights Portfolio.<\/em><\/p>\n\n\n\n

It\u2019s hard to argue with the inclusion of Amphenol in the AI Insights portfolio. It\u2019s been one week, and APH is up an eyebrow-raising 8.39%<\/strong>.<\/p>\n\n\n\n

One of the main catalysts for the recent price explosion is that Truist Securities raised its price target for Amphenol, which gave investors even more confidence. Truist analyst William Stein<\/a> updated his price target to a whopping $180 for the stock, representing a sizable 22% gain.<\/p>\n\n\n\n

At first glance, Amphenol appears to be a gem of a stock and we\u2019re excited to see how it performs in the portfolio.<\/p>\n\n\n\n

The overall portfolio did exceptionally well over the last week. That\u2019s largely thanks to favorable macro conditions, but it\u2019s worth noting that all but two of the nine stocks in the portfolio are now in profit (the laggards are NetApp and, surprisingly, Google).<\/p>\n\n\n\n

Still, the portfolio is being carried by tech juggernaut Micron Technology, which is now up nearly 50%<\/strong> since being added in the first week of the AI Insights experiment.<\/p>\n\n\n\n

AI Insights Portfolio Week #9<\/h3>\n\n\n\n