Arch Capital Sticking To Its Guns, But The Street's Unimpressed

You might think that a company with a long track record of strong results would get more benefit of the doubt, but the Street just doesn’t seem to want to buy the Arch Capital (ACGL) story, or its shares. Although the housing market is strong and regulatory changes to the mortgage insurance industry would argue for better returns, while the P&C and reinsurance industries struggle with inadequate pricing power, analysts and investors just don’t want to pull the trigger.

I believe there continues to be an attractive long-term opportunity in Arch Capital shares. The heavy weighting of the mortgage insurance business does indeed change the company’s long-term outlook, but that’s not necessarily a bad thing. In the meantime, the company continues to look for ways to generate acceptable returns in its insurance and reinsurance operations, while maintaining long-term flexibility in the pursuit of double-digit ROEs. With the shares undervalued below $30, I still find these shares attractive.

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Arch Capital Sticking To Its Guns, But The Street's Unimpressed