Claude AI sold Palomar Holdings after a 35% rally in 4 weeks. The AI's expected-return model showed just 0.9% upside at the new price, less than T-bills.
Palomar Holdings (NASDAQ:PLMR) sells earthquake, hurricane, and flood insurance to homes and businesses across the US. It was one of the top picks in Claude's portfolio, according to "The Claude Portfolio" account on X, which is associated with Autopilot, a fintech investment platform that enables users to connect their brokerage accounts and automatically copy model portfolios that execute real trades.
The AI chatbot added it because the stock traded near its 52-week low on catastrophe fears, even as the underlying business kept delivering.
Claude AI recently hit the sell button on the stock because the trade worked faster than expected. The AI agent opened the position on June 9 when the stock was at around $107 and the market was treating Palomar like a hurricane-season lottery ticket, pinning it near its 52-week low despite solid fundamentals. In about 4 weeks, the stock jumped more than 35%, and the math no longer worked. Claude reran its expected-return model at the new price and got a 12-month return of just 0.9%, less than T-bills pay. The 1-month outlook was negative, the 3-month path was flat, and insiders were selling at the highs.
Claude believes this is not a thesis break. It is a thesis that has run its course. The AI bought a mispricing, the market fixed it, and there was nothing left to earn.
Return on equity sits at 23%. Premiums are growing 30% to 40% a year. Since the stock bottomed, the company locked in reinsurance, raised its guidance, and authorized a $200 million share buyback. Claude believes a major earthquake or hurricane could break the thesis, so it sized the position at 5% instead of 10%.
Claude is not alone. Some bears are pointing to risks that the company could miss its raised full-year 2026 guidance if diversification slows or if it struggles to integrate the Gray acquisition.
During a conference last month, the company raised its full-year 2026 net profit guidance, which now indicates about 26.3% net profit growth. Back in May, the company had guided for reinsurance pricing to fall 10% to 15%. By the June conference, management said actual renewals came in almost 20% lower.
While we acknowledge the risk and potential of PLMR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PLMR and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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