Tag: Lemonade

Why I Invested in Lemonade Over Root: Branding, Culture, and the Long Game

~ Travis Wiedower

During my initial Lemonade research in 2021 I looked into Root as well. I was not overly impressed with Root as its own potential investment or as a Lemonade threat, so I moved on and only loosely followed it for the next few years. Throughout 2024 as I made Lemonade a significantly larger investment, I spent a lot of time researching any potential risks. And Root was part of that. This time I did a much deeper dive on Root… and more or less came to the same conclusion.

With that being said, I do think Root will be successful. Consumer insurance is not a winner-takes-all market, and Root has a great deal with Carvana. I think there is plenty of room for two tech savvy insurers to make space for themselves in this industry. But I think Lemonade is a better long-term investment than Root. As to why, I’ll start high-level and then zoom in.

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Lemonade: 2024 Review and 2025 Preview

~ Travis Wiedower

In October 2023 I published a 12-page writeup titled “Lemonade: Short-Term Headwinds Will Soon be Tailwinds.” Fourteen months later, it looks like that title is turning out to be quite prescient. My last paragraph in that writeup was the following:

As inflation inevitably slows down and Lemonade’s rate increases get approved, their loss ratios should come down. This will also allow them to turn marketing back on and thus growth will accelerate. As their heavy investments to build out their three new lines of insurance are mostly complete, I expect [2024’s] growth to have high incremental margins and prove once more the operating leverage Lemonade has. Reaccelerating to 20-30%+ growth while loss ratios decrease and margins increase should result in a significant sentiment shift in Lemonade’s stock.

In summary, I predicted four things:

  1. Loss ratios would decrease
  2. Growth would accelerate
  3. Margins would increase
  4. Sentiment would improve

All four of those things happened in 2024, but more importantly, I expect 2025 to be the real inflection. I predict all of those same four things will happen again in 2025. Let’s walk through why.

Continue reading “Lemonade: 2024 Review and 2025 Preview” →