Ride with insurance companies

Insurance is likely one of the best types of business. It takes in a huge amount of money upfront and uses it to invest for years for profits. Only part of the money will be used to pay back for claims but usually many years later. That's why the iconic living investment master, Warren Buffett, really loves insurance companies, which are the major component of his holding company, Berkshire Hathaway, and have made a killing over years. I think insurance stocks should also be part of your portfolio.

Validus Holdings (VR) is a holding company. The Company, through its subsidiaries, provides reinsurance coverage in the property, marine and specialty lines markets and insurance coverage in the same markets. VR has two wholly owned subsidiaries, Validus Reinsurance that underwrites property catastrophe reinsurance, property per risk reinsurance and property pro rata reinsurance. The other one is Talbot, which writes primarily short-tail lines of business. Due to its risk insurance which has to pay a lot of money to claims due to natural diasters such as hurricanes etc, VR tends to be seasonal in terms of its stock price. It's often doing poorly during the summer time when many natural disasters occur and then climbs up in the rest of the year. Valuation wise, VR is cheap with a PE of only 7.7 and currently traded around its book value. It also pays a high dividend yield of 3.3%. It will be a good timing to buy the stock during the next couple of months when it typically pulls back.