Key Points
California-based Palisades Investment Partners initiated a position of 81,716 shares of Root valued at $7.3 million in the third quarter.
Root now accounts for 2.9% of fund AUM, which places it outside the fund's top five holdings
The fund also dumped its full stake in ADMA Biologics in the quarter.
California-based Palisades Investment Partners disclosed a new position in Root(NASDAQ:ROOT) valued at $7.3 million as of September 30, according to an SEC filing released Thursday.
What Happened
On Thursday, Palisades Investment Partners reported a new stake in Root, acquiring 81,716 shares in the third quarter. The position, valued at $7.3 million as of September 30, was disclosed in a Form 13F filed with the U.S. Securities and Exchange Commission. The addition brings the fund’s total reportable U.S. equity holdings to 49 positions.
What Else to Know
This move marks a new position for the fund, with Root representing 2.9% of reportable assets under management as of September 30.
Top five holdings after the filing:
- NASDAQ:STRL: $32.5 million (12.8% of AUM)
- NYSE:SPXC: $21 million (8.2% of AUM)
- NASDAQ:MMYT: $11 million (4.3% of AUM)
- NYSEMKT:IWM: $9.8 million (3.8% of AUM)
- NASDAQ:ITRI: $9.2 million (3.6% of AUM)
As of Friday's market close, Root shares were priced at $80.52, up nearly 18% over the past year—just behind the S&P 500's 19% gain in the same period.
Company Overview
| Metric | Value |
|---|---|
| Revenue (TTM) | $1.4 billion |
| Net Income (TTM) | $85.3 million |
| Price (as of market close Friday) | $80.52 |
| One-Year Price Change | 18% |
Company Snapshot
- Root provides automobile, homeowners, and renters insurance products.
- The company operates a direct-to-consumer model leveraging mobile applications, website, digital media, and distribution partners to acquire and serve customers efficiently.
- It targets individuals and households in the United States seeking property and casualty insurance solutions.
Root is a technology-driven insurance provider specializing in property and casualty products, with a focus on personal auto, homeowners, and renters insurance. The company differentiates itself through a direct distribution model and digital-first approach, aiming to streamline the insurance experience for customers.
Foolish Take
Palisades Investment Partners’ new position in Root, Inc. seems like a classic small-cap momentum bet for the Santa Monica-based firm, which favors companies showing improving earnings dynamics and balance-sheet strength. The timing is also notable: In the same quarter, Palisades fully exited ADMA Biologics, suggesting a pivot from steady but mature healthcare exposure to a tech-driven growth story.
Root shares remain down 81% from five years ago, reflecting skepticism around the company and potentially insurers more generally, but the firm's second quarter offered early signs of a turnaround. The insurer posted $22 million in net income, swinging from a loss a year earlier, and achieved a gross combined ratio of 94%, a measure of underwriting profitability. Policies in force climbed 12% year over year, with partnership channel writings nearly tripling, thanks to deeper integrations with agents and partners like Carvana.
For long-term investors, Palisades’ entry underscores its contrarian small-cap approach—buying early into recovering balance sheets before consensus turns. But Root still faces execution risks in scaling profitably amid fierce competition and economic sensitivity.
Glossary
13F: A quarterly SEC filing by institutional investment managers disclosing their equity holdings.
Assets Under Management (AUM): The total market value of investments managed by a fund or firm on behalf of clients.
Form 13F: A regulatory filing required by the SEC for institutional investment managers with over $100 million in qualifying assets.
Trailing Twelve Months (TTM): The 12-month period ending with the most recent quarterly report.
Enterprise Value to EBITDA: A valuation ratio comparing a company's total value to its earnings before interest, taxes, depreciation, and amortization.
Forward Price-to-Earnings Ratio: A valuation metric dividing a company's current share price by its projected future earnings per share.
Direct-to-Consumer Model: A business approach where products are sold directly to customers, bypassing traditional intermediaries.
Reportable Assets: Investments that must be disclosed in regulatory filings, such as those required by the SEC.
Outperforming: Achieving a higher return than a benchmark or comparable investment over a specific period.
Stake: The ownership interest or shareholding an investor or fund holds in a company.
Position: The amount of a particular security or asset held by an investor or fund.
Property and Casualty Insurance: Insurance covering property loss or damage and liability for accidents or injuries to others.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MakeMyTrip and Sterling Infrastructure. The Motley Fool has a disclosure policy.
