Read Steven Cress' Article on Seeking AlphaBundle the Alpha Picks and Quant Growth & Income Portfolios Now!This transcript was generated by AI. It is not curated or reviewed and is provided for convenience and information purposes only. The accuracy and completeness of the transcript are not guaranteed.Nicole Benjamin: Hey, everyone. It's Nicole Benjamin, your host here at Seeking Alpha, to bring to you another episode of The Weekly Grade, where we're bringing to you market insights in minutes. Now, joining us for today's episode is none other than Steven Cress himself, VP of quantitative strategy here at Seeking Alpha. He is the wonderful guy behind many of the amazing products we have here on site, our Alpha Picks portfolio, our Pro Quant portfolio, and our newest Quant Growth and Income portfolio. So if any of that sounds of interest to you, go ahead, hit the follow button on Steve's page and go take a look at that. Now, Steve, thank you so much for joining us today.Steven Cress: Absolutely. Thanks for having me.NB: Absolutely. Now, I wanna jump right in here. Today, we are gonna be talking about Allstate. And here on this slide, you know, I see that, like, volatility has been spiking as investors are kind of just rotating out of tech. So how does that, you know, play into the quant system using cash flow and balance sheets to, you know, kinda separate the resilient plays like Allstate from that market noise?SC: Yeah. So Allstate does have a strong buy on it right now. Sometimes there is a lot of market noise, and even companies that have strong buys or really good fundamentals, their prices could be impacted negatively, and there have been, like, a lot of headwinds out there. There's been a fear over interest rates going up, a fear over inflation. We've had a sort of a big rotation out of the tech sector and obviously geopolitical events. So I think something that really, in many financials are very interest rate sensitive, and often when yields and inflation are rising, companies that are in the financial sector could perform poorly off of fears of those rising rates.But a lot of times that could end up being sort of opportunistic, and with a company like Allstate, we really do find it to be opportunistic. Their focus is on property and casualty. Most companies that could be negatively impacted would have mortgages, and their mortgage origination rates would slow down, or their loan growth would slow down. That really isn't Allstate's main drivers. Again, they're sort of property and casualty, and insurance has been good, and actually they can be a benefactor when rates go up. They can actually invest in notes or government bonds that have higher yields, and then they control sort of what they pay out to their customers, and that could be limited.So there's a bit of a spread that they can make there when rates are going up, and we anticipate Allstate will do well off of that.NB: All right. Well, jumping over to the next slide, you know, I wanna talk about how we actually covered Allstate back in July for anybody that's listening in. So with that in mind, it shows that Allstate's maintaining just this top quant strong buy rating. So why is it a good time to revisit this stock, and how does the quant model, you know, view its policy demand as this inflation hedge is coming into play?SC: Yeah. So in the world of quant, we, we look at the data. It's a data-driven process, and we're looking at historical numbers from balance sheet information and income statement and cash flows, as well as hundreds of financial metrics, but we also look at forward numbers that come from Wall Street consensus. And what we're finding is the numbers are pretty good for Allstate. The business fundamentals remain intact. They continue to expand their customer base while the insurance business remains highly profitable. There's been consistent earnings results. They had a beat for their twelfth straight quarter most recently for twenty twenty-six for the second quarter. Excuse me.It came in their non-GAAP EPS of $8.99. It beat by $2.92, so it was way higher than expected, and their revenues rose 11.8% year over year, and that's a huge number for a large insurance company to have that type of growth. In regards to the profitability, it's up there as well. According to our quant system, it has an A+ for their profitability, and that's when you look at the company's profitability and quality metrics compared to other financial companies. So it's ranking at the top with that A+. Their return on equity was 49%, which is a huge number for ROE, and cash flows also stay strong for the company.NB: Right. Well, now you mentioned that A+ profitability, so I guess my question becomes how does the quant system evaluate Allstate's valuation relative to its peers, and what keeps that strong buy rating intact despite the stock's run-up?SC: Right. So the, you know, the stock has had a nice run-up in recent weeks. We actually put Allstate in our quant growth and income portfolio service back in July. So if you actually bought over the last couple weeks, you did fairly well as you can see from this chart here. But Allstate, it ranks really well. When we take a look at all that financial data and we compare it to other companies in the sector, they end up... They rank number three out of 57 property and casualty companies, so their ranking is really high. The stock price is up over 30% for the last year versus the sector, which is just up over 16%. The return on equity is 49% versus the sector at 12%.And in regards to its valuation, the forward P is 7.2 times, which puts it at a 35% discount to the sector. So y- analysts are really positive on it. Investors are really positive on it. And if you look at the factor grades, which are, are on the upper right-hand side, you could see that the valuation is a B minus now and growth is a B plus. So the valuation despit- despite the stock making that big move at l- about 13% over the last four weeks and I guess over the last six months it's up about 20%, you can actually see that valuation grade is better now with B minus than it was back three months ago where it was a C minus.So it's actually increased by one full grade, which means the valuation is now more attractive compared to the sector than it was six months ago. And just as importantly, the growth grade is a B plus versus six months ago where it was a C plus. So the company's actually growing faster than it was three months ago.NB: Oh, right.SC: Especially six months ago where it was a D minus. So it's way, way more attractive on growth now than it was, like, six months or three months ago.NB: Okay, cool. Well, I think I wanna wrap things up there, but before we get out of here, Steve, if somebody wanted to do a deeper dive on Allstate, are you pointing them in any particular direction?SC: Yeah. I, you know, I would say if you go to our platform and you put in the company's name you could follow it there. However, if you want other recommendations, I mentioned we put this in our quant growth and income portfolio. That is a, a product that's designed for s- investors who want both capital appreciation and income generation. It's had a really good return. So it has other companies that are similar to Allstate in that portfolio. This is a service where you get an email once every week that tells you our favorite stocks, and you would be able to see what we like. So we do the homework for you.NB: All right. Well, thank you so much, Steve, for joining us today. And for everybody that's listening in, we'll catch you here next time on another episode. Past performance is no guarantee of future results. Content is offered for information purposes only. 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