Insurers buck sector—and market

08/30/19
  • Insurance stocks have been hit or miss in 2019
  • ETHT and HIG have outperformed market by wide margin YTD
  • Both stocks have recently pulled back

Somebody forgot to tell Hartford Financial (HIG) and eHealth (EHTH) that financial stocks haven’t been doing well lately.

Actually, financials pulled themselves out of the sector cellar over the past week, although insurance stocks were the weakest industry within the S&P financial sector during that span.

Which makes the following charts of insurers HIG and EHTH all the more surprising. As of yesterday, HIG was up around 31% on the year—close to twice the gain of the S&P 500 (SPX):

Hartford Financial Services (HIG), 12/31/18–8/29/19. Hartford Financial Services (HIG) price chart. Ignored May and July-Aug. pullbacks.

Source: Power E*TRADE


An even more notable element of this relative strength is that the stock essentially shrugged off the market’s biggest downturns this year, in May and July-August. And last Thursday the stock closed at $58.48, pushing above its January 2018 peak to its highest level since 2008.

Yesterday, active options traders may have noticed HIG—a ticker that may not typically appear on their radar—because of its heavy call options volume, which was more than 16 times average. It turns out there was a lot of activity in longer-term (March 2020) $60 and $65 calls. That in itself may not have meant much to short-term traders, but those who took the time  to check out the stock’s chart likely noticed HIG’s uptrend and recent pattern of rebounding from relatively shallow pullbacks.

Although it’s been more volatile, fellow insurer and Medicare specialist EHTH has been stratospheric so far this year—up around 132% as of yesterday, and that’s after having fallen around 20% from its August 8 record close of $110.32. In fact, the stock was down more than 3% yesterday, getting very close to filling the explosive up gap (+19%) it made on July 25:

eHealth (EHTH), 12/31/18–8/29/19. eHealth (EHTH) price chart. +132% YTD—after correction.

Source: Power E*TRADE


Despite the differences in their charts, both stocks have two things in common: both crushed their most recent earnings numbers (EHTH on July 25 and HIG on August 1),1 and both have established uptrends that may attract the dip-buying crowd until those trends have been broken.

Trends can end at any time, and they don’t ring bells when they’re concluding, but when stocks buck trends in their industries, sectors, and the broad market, there’s often a good reason.

Holiday reminder: Don't forget—Monday is Labor Day, so US equity markets will be closed.

Today’s numbers (all times ET): Eurozone Unemployment Rate (5 a.m.), Personal Income and Outlays (8:30 a.m.), Chicago PMI (9:45 a.m.), Consumer Sentiment (10 a.m.), Baker-Hughes oil rig count (1 p.m.).

Today’s earnings include: Campbell Soup (CPB), JinkoSolar (JKS).

 

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1 StreetInsider.com. eHealth (EHTH) Tops Q2 EPS by 46c, Offers FY Guidance and Hartford Financial (HIG) Tops Q2 EPS by 19c. 7/25/19 and 8/1/19.

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