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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

3 Reasons to Sell ACT and 1 Stock to Buy Instead

ACT Cover Image

Enact Holdings has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 12.5% to $38.70 per share while the index has gained 14.9%.

Is there a buying opportunity in Enact Holdings, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is Enact Holdings Not Exciting?

We're cautious about Enact Holdings. Here are three reasons there are better opportunities than ACT and a stock we'd rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Enact Holdings’s net premiums earned has grown at a 1.3% annualized rate over the last five years, much worse than the broader insurance industry and slower than its total revenue.

Enact Holdings Trailing 12-Month Net Premiums Earned

3. EPS Barely Growing

Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Enact Holdings’s full-year EPS grew at an unimpressive 8.1% compounded annual growth rate over the last three years, worse than the broader insurance sector.

Enact Holdings Trailing 12-Month EPS (Non-GAAP)

Final Judgment

Enact Holdings isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.1× forward P/B (or $38.70 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.

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