Middle Coast Investing Increased its Stake in Progressive (PGR). Here's Why

Middle Coast Investing, an investment advisor firm, released its first-quarter investor letter. A copy of the letter can be downloaded here. Middle Coast Investing had a difficult but manageable first quarter, but everyone has suffered since the Liberation Day crash at the beginning of the second quarter. To manage the volatility, the firm decided to increase cash goal levels by roughly 5% for each portfolio. In the quarter, the firm sold 3% more than it bought. In Q1 2025, the US Portfolios returned -3.7% compared to -4.6% for the S&P 500. It’s Core U.S. portfolios returned -0.7% while Russell 2000 returned -9.8%, S&P 600 returned -9.3% and Nasdaq generated -10.4% for the same period. However, its European Portfolios appreciated by 9.2%. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first quarter 2025 investor letter, Middle Coast Investing emphasized stocks such as The Progressive Corporation (NYSE:PGR). The Progressive Corporation (NYSE:PGR) is a US-based insurance company. The one-month return of The Progressive Corporation (NYSE:PGR) was 1.03%, and its shares gained 32.03% of their value over the last 52 weeks. On April 15, 2025, The Progressive Corporation (NYSE:PGR) stock closed at $276.11 per share with a market capitalization of $161.866 billion.

Middle Coast Investing stated the following regarding The Progressive Corporation (NYSE:PGR) in its Q1 2025 investor letter:

"We added more The Progressive Corporation (NYSE:PGR)shares in the wake of the horrible wildfires outside LA. Progressive’s home insurance business is smaller and its exposure in California wasn’t bad.

The company’s year-over-year policy in force growth rate is 18% in the first two months of 2025, after having the same growth in 2024 for the full year. Its combined ratio was below 85 in both months year to date (Progressive targets 96; lower is better). The combined ratio is unsustainable, and the growth rate will also likely so (annualized December to February growth is about 12%). But it gives Progressive options.

There are risks: competition is starting to grow again, meaning profitability or growth rates will come down. Tariffs will cause car repairs to become more expensive, which is what hit the industry in 2021-22. Climate change is a broad risk to insurance. But Progressive has an enormous lead and continues to extend it. It is still valued at 18.3x trailing earnings at the end of Q1, below the S&P 500. I will not be surprised if this becomes our top holding in the next couple years."

The Progressive Corporation (NYSE:PGR) is in 30th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 100 hedge fund portfolios held The Progressive Corporation (NYSE:PGR) at the end of the fourth quarter compared to 95 in the third quarter. While we acknowledge the potential of The Progressive Corporation (NYSE:PGR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We covered The Progressive Corporation (NYSE:PGR) in another article, where we shared the list of best insurance stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.