Every market player has a story about how much money he blew because he sold a stock too soon. One of them recently e-mailed me. “Dan, I feel like a real jerk,” wrote Arthur Curtain, who lamented that he bought insurance giant Allstate Corporation a couple of years ago in the low $30s, sold it for a nice profit last year in the low $40s and now it’s in the $50s (actually, it’s $56.16). “My broker,” he went on, “wants me to buy it back. I told him no because it was too high. I also worry about more hurricane damages. He insists I’m being too conservative. How would you handle it? I hope you will agree with me so I can show him I know as much about the market as he does.”

Answer: Sorry Arthur, but at least one pro thinks your broker is on the money. He’s analyst Bob Sweet of the Dow Theory Forecasts, a well-regarded weekly newsletter out of Hammond, Ind., who tells me that Allstate – which ranks no. 2 among property/casualty insurers and no. 10 among life insurers -“is still a stock to own.” He believes it’s perfectly capable of beating the market over the next 12 months, and he looks for the stock in that period to easily generate a double-digit gain. “Investors,” he said, “are in good hands with Allstate.”

Apparently, he’s not alone in his thinking, what with Allstate shares having touched an all-time high Friday of $56.38.

Allstate’s products, which are sold through nearly 100,000 agents to a customer base of more than 16 million households, also include auto and homeowners’ insurance.

Hurricanes, of course, take their toll on everybody, and those that occurred last year in the Southeast pounded Allstate by saddling it with $1.3 billion in after-tax losses.

Still, the company, despite the catastrophic losses, managed to wrap up the year with a 17% gain in operating earnings, thanks chiefly to premium increases and favorable underwriting results.

Consensus estimates call for another strong profit increase this year, with per-share earnings pegged at $5.72, up 30% from 2004’s $4.41, which came on a 6% boost in revenues to $33.9 billion. The analyst notes that near-term earnings should benefit from an improved underwriting strategy that charges lower premiums to less risky customers. A much lower earnings increase, just 3%, is seen in 2006. But over the ensuing five years, Mr. Sweet figures annualized profit growth of 8% to 12% is likely.

Allstate’s latest reported results – better than expected earnings gains of 18% in the first quarter and 34% in last year’s fourth quarter – appear to give credence to the newsletter’s enthusiasm for the stock. The fourth quarter was also characterized by a 58% increase in underwriting income (earnings before investment income, taxes, and realized gains). Meanwhile, property-casualty net premiums written last year rose 5% to an all-time high of $26.5 billion on growth in both rates and policy count.

An obvious question: With rates coming under increasing pressure, what about the threat of cutthroat price competition? It’s unlikely over the near term, argues Mr. Sweet, because the entire industry sustained massive losses from last year’s hurricanes.

A couple of other catalysts, according to our bull:

* At about nine times expected 2005 earnings, the stock trades toward the low end of its five-year valuation and at a discount to its peers.

* After completing a $1.5 billion share-repurchase one year ahead of schedule in 2004, the company initiated another $4 billion buyback program in January.

The prospects of higher dividends. Allstate, which has a current dividend yield of 2.3%, boasts a string of 10 consecutive years of dividend growth.

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Shorting T-bonds: Practically everyone agrees that interest rates are going higher, and that includes former money manager Michael Steinhardt, who is shorting 10-year Treasury bonds in his personal account. After making that bet, the yield on the bonds dropped to under 4.2% from 4.7%. But Mr. Steinhardt, despite the setback, is convinced he’s on the right track, noting that inflation is picking up quite a bit, which means, he said, “rates are headed still higher and we could see the (T-bond) yield well over 5%.” At the moment, he tells me, he still has a “modest profit” on his short position.

If you can believe Merrill Lynch’s two top economists, Sheryl King and David Rosenberg, Mr. Steinhardt has made a bum bet. They see a different bond script, arguing that slowing economic growth at a time of continued excess capacity will likely render current inflation concerns as overdone. Accordingly, they remain bullish on long-term bonds and continue to advocate buying on dips.