3 reasons why I believe this FTSE 250 stock is a recovery buy

first_img Enter Your Email Address “This Stock Could Be Like Buying Amazon in 1997” Image source: Getty Images Savvy investors have been looking at the FTSE for good recovery buys since the market crashed. I believe that Hiscox Ltd (LSE:HSX) could be an excellent recovery buy, and have put it on my watch list.Hiscox is an international specialist insurer that provides general and commercial insurance products to its customers. These products can range from general home insurance to more complex commercial insurance for businesses.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…FTSE recovery opportunityIn 2020 so far, HSX has lost approximately 40% of its share price value. At the turn of the year, shares were trading for 1,430p per share. As I write, shares can be picked up for just 848p. It is worth noting that at the height of the market crash, shares plummeted as low as 692p per share. It has recovered 25% since that low price.There are three key reasons I believe HSX represents a potential recovery opportunity. First, HSX was one of eight UK insurers that participated in a legal test case to determine whether it should pay out on business interruption claims related to Covid-19 and the pandemic. Based on a favourable High Court ruling, the payout it expects to make is less than one-third the amount initially feared. In monetary terms, this equates to approximately £100m in payouts. I believe this is a good result based on the fact it has approximately 34,000 business interruption policies. The payout figure could have been far higher.Second, at its current price, I feel shares are cheap to buy right now. The FTSE has been badly beaten by the Covid-19 pandemic and many share prices across it have been weighed down. HSX shares are trading at close to 1.5 times book value, which is a lot lower than in recent times. In addition, broker forecasts for 2021 suggest a healthy $0.74 earnings per share amount with a potential dividend of $0.42. For a company with HSX’s track record, this is an excellent price in my opinion.Trading updateThe final reason is the trading update HSX released today for the nine months to 30 September 2020. For me there were some key indicators showing HSX’s business is resilient against the backdrop of economic uncertainty. Gross written premiums grew by 2%. There was a growth in customer numbers and in the third quarter alone, premiums grew by 15%.Hiscox separates its business into different segments and nearly all of them saw some form of improvement since the crash. Retail reported growth in all five of its business units driven by its digital platforms. Reinsurance and Insurance-linked Strategy achieved good growth at July renewals with rates up 12% for the year.HSX has prudently prepared for catastrophe claims in the form of reserving $75m in the third quarter. I believe this shows financial resilience and good planning ahead despite the economic uncertainty across the world.My verdictOverall I would be willing to buy shares in HSX at its current price point. I firmly believe it is an FTSE recovery opportunity. The High Court ruling in its favour regarding business and interruption policies and today’s trading update solidify my belief. Don’t be surprised to see HSX’s price and performance continuing to creep in an upward trajectory over the coming months. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. See all posts by Jabran Khan I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. 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Jabran Khan | Monday, 2nd November, 2020 | More on: HSX Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! 3 reasons why I believe this FTSE 250 stock is a recovery buylast_img