The 7 Most Popular High Yielders in Insurance

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 (akin to a "buy" call) or underperform rating (akin to a "sell" call) 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 high yielders
So, with that methodology as prelude, I present to you the seven four- and five-star-rated insurance stocks that yield 3% or more that have garnered the most outperform ratings by CAPS members. I used a minimum market capitalization of $100 million and the proviso that must be listed on a major U.S. exchange. Remember, stocks are rated on a five-star scale by our CAPS community, so four- and five-star stocks are consensus outperforms.

Source: Motley Fool CAPS. NM= not meaningful.

Many of these insurance companies are trading at or less than book value. I count five -- Safety, Manulife, Cincinnati Financial, United Fire & Casualty, and Validus. By the numbers, Manulife Financial is the most eye-catching. However, homeowners insurance outfit Universal Insurance takes top honors with the CAPS voters.

Which is your favorite? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these stocks.