Insurance company Lemonade (LMND 3.80%) has been trouncing the market recently. It's up 220% over the past year as of Aug. 20, while the market is up only 21% at the same time.
It's a huge change from the pessimism of the past few years. Let's see how much money you'd have if you'd invested $1,000 three years ago in Lemonade.
Image source: Getty Images.
A great concept is finally taking off
Lemonade captured market attention when it went public in July 2020 because it offers a disruptive, tech-based insurance model that's refreshingly different. It uses artificial intelligence (AI) and machine learning to price policies, and it uses chatbots to onboard customers and process claims. It's a digital insurance solution for a changing world, and it's used AI to drive its business since it began operating a decade ago, well before AI became the buzzword of the day.
Although it's been growing by leaps and bounds, with high customer additions and increasing premiums, Lemonade has had trouble establishing profitability. Insurance companies have a distinct model, since they pay claims from premiums, and the loss ratio tracks how much is being paid out. It has taken time for Lemonade to get its algorithms to work. That, along with high rollout expenses that have eaten away profits, has dragged on the stock. It's been and up and down over the past few years as the market began to lose patience, and even today, it's still 72% off of its all-time highs.
Investors who recognized the opportunity to buy on the dip have been rewarded. If you bought stock a year ago, when it was still close to all-time lows, your investment has more than tripled. But if you invested $1,000 three years ago, you'd still be still beating the market, with more than $1,700.
If you're worried you've missed the Lemonade gains, don't be. The company has lots of opportunity ahead.
