Insurance stocks have put in a stellar technical performance since succumbing to the late-June Brexit-inspired broad-market sell-off. For example, the SPDR S&P Insurance ETF (KIE) has rallied more than 13% since hitting its most recent low near $66 on June 27, and notched a record peak on Tuesday, Sept. 6. What's more, according to Schaeffer's Senior Quantitative Analyst Rocky White, 20 of the 22 stocks we track under this exchange-traded fund (ETF) are perched north of their 80-day moving average.
One outperforming insurance stock that recently caught our contrarian eye is Dow component
From a contrarian perspective, there's plenty of pessimism levied toward TRV to keep the wind at the stock's back. Beginning in the options pits, the equity has racked up a 50-day put/call volume ratio of 2.10 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX). Additionally, this top-heavy ratio ranks in the 75th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual clip in recent months.
Likewise, TRV's Schaeffer's put/call open interest ratio (SOIR) currently sits at 1.67. Not only does this show that puts outweigh calls among options expiring in three months or less, but it sits just 4 percentage points from a 52-week peak. Simply stated, short-term speculators have rarely been as put-heavy toward TRV as they are now. Going forward, a capitulation from some of the weaker bearish hands could create fresh tailwinds for the shares.
Elsewhere on the Street, short sellers have been raising the bearish stakes. Specifically, short interest surged 12.8% in the most recent reporting period to 7.7 million shares -- a year-to-date high. While TRV's ability to rally in the face of such intense selling pressure speaks to its underlying strength, this also suggests there's ample sideline cash available to help fuel the stock's fire. In fact, at TRV's average pace of trading, it would take more than six sessions to cover these bearish bets.
Additionally, the door appears wide open for analysts to upwardly revise their outlooks on this outperformer. Of the 13 brokerages covering the shares, eight maintain a "hold" or "strong sell" recommendation. Plus, the average 12-month price target of $114.56 stands just above Travelers' current perch. A round of bullish brokerage notes could draw a fresh batch of buyers to TRV's table.
