Palomar Holdings, Inc. (PLMR): A Bull Case Theory

We came across a bullish thesis on Palomar Holdings, Inc. on Buffetts Disciple’s Substack. In this article, we will summarize the bulls’ thesis on PLMR. Palomar Holdings, Inc.'s share was trading at $123.21 as of January 29th. PLMR’s trailing P/E was 19.22 according to Yahoo Finance.

Palomar Holdings, Inc., a specialty insurance company, provides property and casualty insurance to individuals and businesses in the United States. PLMR has emerged as a compelling growth-oriented insurer, capitalizing on secular tailwinds and technology-driven opportunities in niche insurance markets. Founded in 2014, the company initially focused on earthquake insurance, quickly building a profitable, low-volatility franchise. Since then, Palomar has methodically expanded into inland marine, casualty, crop, and surety lines, using its expertise and technology to enter underserved markets and deliver consistent earnings.

This disciplined approach, formalized in its Palomar 2X strategy, targets doubling adjusted net income every 3–5 years while maintaining a 20%+ return on equity, a goal it has repeatedly achieved. Revenue has grown at a 35% CAGR and earnings at 79% CAGR over the past five years, yet the stock trades at a forward P/E of just 18.5x, reflecting market mispricing of its consistent growth and diversification.

Palomar’s risk management framework is robust, with a $3.5 billion reinsurance stack and $684 million in cash reserves, allowing the company to withstand catastrophic events well beyond historical precedent. Its combined ratio remains consistently below 80%, highlighting disciplined underwriting, low volatility, and effective use of reinsurance. Strategic acquisitions, such as Gray Surety, further enhance growth and diversification, while aggressive share buybacks signal management’s confidence in valuation. The company also efficiently invests its float, generating yields over 4.5%, enhancing overall returns.

Management under CEO Mac Armstrong has proven capable, with strong incentives aligned to shareholders and a track record of disciplined execution. With the U.S. property and casualty market exceeding $900 billion, Palomar’s small but nimble position allows it to disrupt underserved segments, creating multiple avenues for long-term growth. At current multiples, the company offers significant upside, potentially exceeding 150% over the next five years, combining high growth, low volatility, and shareholder-friendly capital allocation into a compelling investment case.

Previously we covered a bullish thesis on Skyward Specialty Insurance Group, Inc. (SKWD) by Busy Investor Stock Reports in January 2025, which highlighted disciplined underwriting, superior combined ratios, and growth in niche E&S markets. The company's stock price has appreciated approximately by 3.27% since our coverage. The thesis still stands as Skyward remains strong in specialized insurance. Palomar Holdings, Inc. (PLMR) shares a similar focus but emphasizes broader diversification and technology-driven expansion.

Palomar Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held PLMR at the end of the second quarter which was 25 in the previous quarter. While we acknowledge the potential of PLMR as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.