What do a 99 year old chairman, takeover rumors, and a 4.2% dividend portend? Perhaps a buying opportunity. Recently, Barron’s profiled Mercury General (ticker MCY), a California auto insurer that looks like a rare opportunity to buy a stock at an attractive price in today’s bullish stock market.

The PE ratio is attractive at about 7, or 14 for a forward PE ratio. At a market cap just above $3 billion, Barron’s says the stock could be an attractive takeover target for a larger auto insurer seeking a bigger presence in the California market, where Mercury General is the fourth largest auto insurer in the Golden State. The company also engages in other property and casualty business.

The stock price is up 34% year-over-year, but that’s in line with the overall market’s rapid rise over the past couple of years. Over the past five years, the stock is up only 9%, so it still looks like a possibly underpriced opportunity.

The short ratio, at 2.5% of float, is higher than average but not alarming. If I were in a mood and position to add a company to my portfolio right now, I think Mercury General might be the one. For a small to mid cap stock, the risk reward potential looks good.

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