US stock markets began to show signs of life on Friday. But many investors are still steering clear of stocks until a clear trend emerges.

One sector that’s taken a pummeling recently is insurers, says Ian Davis in The Growth Stock Wire. The Datastream Property and Casualty Insurance sector has lost 28 percent of its value since last summer.

This could lead to a great profit play when the time is right. Ian is an expert in finding stocks that are hated, cheap and in an uptrend. Right now, the insurance sector is certainly hated and cheap… the trick is finding the right moment to buy in. More from Ian…

Property and casualty insurers are trading for less than 10 times earnings and close to book value. They’re also trading at good discounts to their historic levels. The price-to-earnings ratio for the sector is currently 13% below its median. The price-to-book ratio is at a more modest 8% discount.

Despite these cheap valuations, I don’t expect much from this sector for months to come. When a sector experiences a severe selloff, it usually grinds sideways, even dropping a little. I call this the “sandpaper” stage. We have to wait for investors to get frustrated enough with the sector to give up completely.

So I don’t think now’s the time to buy. But the sector is getting incredibly cheap… and it should be a terrific buy soon (more credit problems are the wild card here, however).

However, when that time comes, Ian says the best-performing insurance ETF is the PowerShares Dynamic Insurance Portfolio ETF (AMEX:PIC). Otherwise, you could consider what Ian calls “the ultimate insurance stock”: Warren’s Buffett’s Berkshire Hathaway (NYSE:BRK.A).

Despite insurance activities weighing down on Berkshire’s 2Q results – the company generated $2.9 billion in net income, or $1,859 per share, during the quarter that ended June 30, down from the $3.1 billion net income, or $2,018 per share, it reported in the same period a year ago – Berkshire beat analysts’ expectations.

According to BusinessWeek, the company said it expects underwriting profits to be significantly lower in 2008 because of increased price competition and because the string of relatively catastrophe-free quarters is certain to end.