These Are the Top 7 Insurance Stocks

As an investor, it doesn't pay to follow the crowd.

In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.

Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.

If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.

In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.

That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (i.e., a "buy") or underperform rating (i.e., a "sell") in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.

The top 7 insurance buys
So, with that methodology as prelude, I present to you the top seven stocks that are involved in the insurance industry based on the number of CAPS members who have rated the stock an outperform. I only included stocks that were rated the maximum five stars by the community.

Company

Market Capitalization (in millions)

Outperform Picks

CAPS Rating (out of 5)

Berkshire Hathaway (NYSE: BRK-B  )

$77,289

5,447

*****

Markel Corporation (NYSE: MKL  )

$3,167

2,702

*****

Montpelier Re Holdings (NYSE: MRH  )

$1,089

2,390

*****

AmTrust Financial Services (Nasdaq: AFSI  )

$826

525

*****

Safety Insurance Group (Nasdaq: SAFT  )

$622

502

*****

Chubb Corporation (NYSE: CB  )

$16,703

458

*****

Tower Group (Nasdaq: TWGP  )

$976

357

*****

Source: Motley Fool CAPS.

Not shockingly, more CAPS members think Berkshire Hathaway is a buy than any other insurance stock. Do you think a different stock deserves to be the No. 1 buy? Make your thoughts known in CAPS by clicking here. Or just click to do further research on one of these popular stocks.

As for me, I own shares in Berkshire Hathaway and have had an outperform rating on it in CAPS for quite a while. See my CAPS profile here.

Anand Chokkavelu owns shares of Berkshire Hathaway. Berkshire Hathaway and Markel are Motley Fool Inside Value picks. Berkshire Hathaway, Montpelier Re Holdings, and Safety Insurance Group are Motley Fool Stock Advisor recommendations. Montpelier Re Holdings is a Motley Fool Hidden Gems pick. The Fool owns shares of AmTrust Financial Services, Berkshire Hathaway, and Markel. The Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 17, 2010, at 3:54 AM, buffettphan wrote:

    While I am a firm believer in the long term prospects of investments in Berkshire Hathaway, I sincerely doubt their market capitalization is $77,289 billion, as shown in the table. That would be $77+ trillion!

  • Report this Comment On August 17, 2010, at 9:20 AM, catoismymotor wrote:

    BRK-B is a really good, safe play. I think it would make for a great cornerstone for any portfolio.

    After saying that I have to admit to believing that BRK has become too big to continue growing at its former pace. I would rather go with MKL since it is far smaller, has room to grow. MKL's heir apparent is established in the company, is well known, worships St. Warren and is currently running the company as a true mini-BRK. I think over the next thirty years MKL will outpace BRK.

    Disclosure: I do not own BRK or MKL.

  • Report this Comment On August 17, 2010, at 10:40 AM, TMFBomb wrote:

    @buffettphan,

    Ah, good catch...the table is fixed now.

    -Anand

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