My Best Financial Stocks to Buy and Hold Forever


One of the best ways to make money on the stock market is to buy shares of stellar companies and hold them for as long as the company is running. A simple buy-and-hold approach can be a very reliable way to achieve significant portfolio returns.

When looking for candidates to turn into long-term holdings, you want to find companies with distinct competitive advantages, a history of outperformance, and a business that has thrived through market cycles. A company that checks all of these boxes is progressive (NYSE: PGR)who underwrites automobile and home insurance policies.

The Progressive Competitive Advantage

Insurance companies tend to make large investments due to their ability to measure risk and adapt to changing environments. The best insurers price policies for decades to generate consistent returns, which Progressive has done.

Progressive generates these accurate risk assessments using a technology called telematics. Telematics uses a device in your car or an app on your phone to collect data such as miles driven, speed and braking time to develop personalized rates that could save the best drivers money. Progressive first deployed telematics in 2004 on a limited basis and made it widely available in 2011 through its Progressive Snapshot product.

Image source: Getty Images.

The technology helps Progressive manage risk with precision, which you can see by looking at its combined ratio, a crucial metric for insurers that gauges policy profitability. It measures the sum of claims and expenses divided by premiums collected, with a ratio of less than 100% indicating that a company’s policies are profitable.

Over the past 20 years, Progressive has posted a combined ratio of 91.4%, crushing the industry average combined ratio of 99.7% over the same period. While the P&C insurance industry’s average combined ratio was 107% in 2011, Progressive’s combined ratio was 93%. And it hasn’t topped 96% since 2000.

Last year, Progressive saw an uptick due to increased claims from Hurricane Ida and high car repair and replacement costs. But he adapted quickly and the ratio remained below management’s long-term target of 96%.

A chart shows Progressive's combined ratio versus the P&C insurance industry average.

Data sources: Progressive and National Association of Insurance Commissioners. Table by author.

The competition is heating up, but Progressive still holds that edge

Progressive faces growing competition from traditional insurers like Geico and State Farm, which have rolled out their own telematics products in recent years. It also faces competition from Root and Lemonade‘s Metromile, which puts telematics-powered usage-based insurance at the heart of its business.

While the influx of competition could eat away at Progressive’s business, it has a first-mover advantage and a large amount of data to work with. Progressive’s Snapshot product gives it 10 years of data, which is crucial for building good pricing models through machine learning. Its competition has yet to build a driving database and build a model capable of effectively pricing policies from this data.

Progressive has shown resilience in the face of inflation

Progressive has pricing power, making it a stellar stock if inflation persists. Over the past year, it has quickly adapted to rising claims costs by increasing its policy premiums. In the first half of this year, net premiums (the equivalent of an insurance company’s revenue) earned increased 12% year-over-year.

Progressive has proven it can perform in a variety of economic environments over the past 20 years and is one of the best insurers in the industry, making it a great stock to buy and hold for the long term.

10 stocks we like better than Progressive
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*

They just revealed what they think are the ten best stocks investors can buy right now…and Progressive wasn’t one of them! That’s right – they think these 10 stocks are even better buys.

View all 10 stocks

* Portfolio Advisor Returns as of July 27, 2022

Courtney Carlsen holds positions in Progressive. The Motley Fool holds positions and recommends Lemonade, Inc. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Comments are closed.