Selective Insurance (SIGI) is one of the “Value” stocks on the watch list, which, incidentally, is now a selection on the top menu bar. SIGI is primarily a commercial lines IA company based in the northeast, with Jersey and NY as about 2/5ths of their total premium volume, although they write some PPA, HO, and have some other states in the stable.

I like that they’ve surprised 3 out of the last 4 quarters and that they’ve grown the income while the multiple has shrunk; I like their steadily increasing dividend; I like their relative cheap-ness; I like their low turnover on the float; I like their low float; and I like that they’ve got about 14 days to cover on the short ratio.

While they’ve been moving sideways for about a year, they are now bouncing off an area of recent support as well as a trendline that jibes with the lows of August-September 2004. That sideways movement has kept them generally 10-15% from their multi-year high, as well.

The old trendline got tapped back in August ‘06 and again just last week, and that general uptrend was combined with a collapsing of volatility, which is what I like to see in a trend.

They report Tuesday after hours and have their conference call on Wednesday. I’m thinking that this makes a fairly safe pre-earnings entry, and gives me the opportunity to reduce open risk by choosing to pull the plug just below support if I want – even though my typical stop range would be below $50.

I’m only at about 2% cash and my method calls for this stock to get a 7% allocation with R=0.5%, so I will dip into some margin and buy SIGI at the open with a market order.

Don’t forget to read my disclaimer!