Allstate Corp (NYSE: ALL) continues to be in the driver's seat in the U.S. insurance sector, with robust earnings growth, a solid market position, and key acquisitions in the form of Arity and SquareTrade.
The insurance giant is well-positioned in two heavily-trafficked insurance industry segments – private passenger auto and homeowner's insurance. Analysts have taken note and are pushing stock price estimates upward.
Can the Northbrook, Illinois-based company keep the pedal to the medal?
You bet, market experts say.
Allstate stock at a glance: Allstate is one of the major players in the insurance space, boasting a market cap of $34 billion.
Its stock price has taken shareholders on a bumpy ride so far in 2018 – down 9.4 percent. That's worse than competitors Cincinnati Financial Corp. (CINF, up 1.6 percent), Arch Capital Group (ACGL, down 3 percent) and Erie Indemity Co. (ERIE, down 1.4 percent).
But over the last 12 months, ALL stock has by far outperformed its competitors, gaining 16 percent. Analysts expect the company's stock to rebound in 2018.
Recently, MKM Partners boosted ALL's stock price target from $110 to $120, although most analysts have placed a "neutral" call on Allstate stock over the past 90 days.
Pros of buying Allstate stock. Traders are generally bullish on Allstate, noting a long-term trend of strong stability and steady returns.
"From a purely technical perspective, ALL looks great," says Merlin Rothfield, an instructor at Online Trading Academy and the host of Power Trading Radio.
"The recent sell-off created a high probability buy at $89, and it's been performing well since that point.
The obvious obstacle of $105 still persists, but the strength of the trend since 2011 has been solid and showing no signs of stopping yet."
Rothfield says he expects ALL stock to keep rising in 2018. "I see it challenging the $105 mark if the market holds at these levels or rallies higher," he says. "After $105, it's blue skies.
There are no supply levels to set targets to, so it's possible to ride the momentum with proper trailing stop selection."
Others also have a bullish sentiment, noting that like most stocks, Allstate's long-term price trend remains positive. Despite its recent pullback it remains close to its 200-day moving average.
"More importantly, that same moving average is upward-sloping, which is a technical analyst's quick test for where price might be heading," says Keith Finkelstein, managing director at MarketStrats LLC.
Cons of buying Allstate stock. Institutional asset managers have curbed their ALL holdings. Managers held about 17.23 million shares of Allstate on behalf of their clients in the fourth quarter of 2017.
"However, that's down about 759,000 shares compared to the previous quarter and 1.7 million shares over the course of the full year in 2017, says Mark Scott, a trading specialist and spokesperson at eVestment.
"Given the run-up in Allstate's stock price, this sell-off could be the result of managers just rebalancing their positions, some profit taking or some managers deciding overall it's time to lower their positions for any number of other reasons."
That said, money managers have been overweight most of the insurance companies on the whole, with Allstate coming in sixth among the most widely held insurance stock by institutional asset managers.
Allstate stock has yet to recover fully and currently lags the insurance sector, Finkelstein says. He points to the SPDR S&P Insurance exchange-traded fund (KIE), which holds ALL and 50 other insurance stocks.
"It's nearly back to all-time highs while Allstate has roughly another 9 percent to go. Some catch-up in the form of mean reversion could be in order."
The recent decline in ALL stock has some market watchers concerned. "I am a little concerned that Allstate has been selling off before the market turn in late January, and has not been able to get back up to the highs like most other broader market indexes have," Rothfield says.
"To me, investors should be a bit more cautious at these levels. If it continues to show weakness in the face of market strength, there could be some big downside."
Rothfield sees several unfilled gaps which should be tested at some point: $81.83 and $75.57 are "two price points that jump off the chart," he says.
The bottom line. Despite ALL's price slump in early 2018, most market mavens expect both the insurance sector and Allstate to pick up momentum as 2018 rolls on.
"U.S. large-cap managers have been overweight Allstate for the past two years as compared to the Russell 1000 – overweight by 0.064 percent back in [the first quarter of 2016] and now overweight 0.079 percent in [the fourth quarter of 2017], based on the most recent data," Scott says.
"This likely indicates confidence in the stock's current and future prospects."