Enact Holdings: Insider Selling Sparks Concern, but Is the Stock Still a Buy?

The recent wave of insider selling at Enact Holdings (ACT) has raised eyebrows, with 18 transactions in the past year—including a notable sale by a director on June 6, 2025. Yet, the stock's valuation metrics, such as its low P/E ratio and GF Value assessment, suggest it might still be undervalued. This creates a tension between signals of insider pessimism and the allure of a potentially cheap stock. Let's dissect the data to determine whether Enact is a contrarian opportunity or a red flag.

The Insider Selling Narrative: A Cause for Alarm?

Enact has seen significant insider selling over the past 12 months, particularly from its largest shareholder, Genworth Holdings, and key executives. Genworth alone sold over 60 million shares in 2024 and 2025, with the most recent tranche of 24.4 million shares on May 30, 2025, at $36.11 per share. Meanwhile, insiders like COO Brian Gould and General Counsel Evan Stolove have also offloaded shares in Q1 2025.

The most recent trigger was a June 6 sale by Director Robert Restrepo Jr. of 1,000 shares at $34.72, just as the stock trades near $34.50. Such activity often spooks investors, as it can signal a loss of confidence in the company's trajectory. However, context matters. Genworth's sales, for instance, may reflect strategic portfolio adjustments rather than a verdict on Enact's fundamentals. Similarly, executives might be monetizing compensation tied to stock awards, a common practice.

Financial Performance: Strong Numbers, But Is It Enough?

Despite the insider selling, Enact's financials are robust. In Q1 2025, it reported $166 million in GAAP net income ($1.08 per share) and maintained a 13.1% return on equity (ROE), a key profitability metric. Its PMIERs (Primary Mortgage Market Initiative Risk Score) sufficiency of 165%—indicating strong liquidity—adds credibility. The company also returned capital to shareholders via $66 million in buybacks in Q1 alone, plus a 14% dividend hike to $0.21 per share.

This performance contrasts sharply with the insider selling, suggesting the moves may not reflect doubts about Enact's core business. Instead, they could be a side effect of its large shareholder base and compensation structures.

Valuation: A Discounted Stock or Overpriced Given the Risks?

The valuation metrics paint a compelling picture. Enact's P/E ratio of 7.8 is far below its industry average of 15.87 and even below its own historical average of 6.38. The GF Value—a metric developed by GuruFocus to estimate intrinsic value—stands at $29.17, implying the stock is modestly overvalued at its current price of $34.50. However, this gap is narrow, and the GF Value's methodology (which factors in growth rates and safety margins) might still signal a margin of safety for long-term investors.

Analysts are bullish: the average price target of $37.75 (8.98% above current levels) reflects confidence in Enact's ability to grow dividends and repurchase shares. Meanwhile, its 2.43% dividend yield offers a cushion against volatility.

Weighing the Risks and Opportunities

The key question is whether the insider selling outweighs the valuation allure. Here are the counterpoints:
- Bear Case: Persistent selling by insiders, especially a director, could indicate a ceiling on growth. If Genworth continues to offload shares, it might pressure the stock further.
- Bull Case: The stock's low valuation and strong financial metrics suggest a mispricing. Enact's dividend growth and buyback discipline—bolstered by its solid ROE—could drive long-term returns.

Final Verdict: Buy with a Margin of Safety

Enact's valuation and fundamentals make it a compelling pick for investors willing to look past the insider noise. The P/E discount and dividend yield offer a cushion, while the GF Value suggests limited downside risk. However, buyers should:
1. Monitor insider activity: If Genworth's selling accelerates or executives continue to offload shares, it could signal deeper issues.
2. Wait for dips: The stock's current price is near its GF Value; a pullback to $30–$32 would create a clearer entry point.
3. Focus on the long term: Enact's business model—relying on consistent mortgage insurance revenue—requires a multiyear view.

In short, Enact is a stock to watch, not necessarily avoid. Its valuation suggests opportunity, but investors should proceed cautiously, mindful of the insider dynamics.

The final word? Enact's numbers justify a position, but keep an eye on the exits.