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Should You Avoid Brown & Brown, Inc. (NYSE:BRO)?

Is Brown & Brown, Inc. (NYSE:BRO) a bargain? Prominent investors are taking a bearish view. The number of long hedge fund positions shrunk by 3 in recent months.

Brown & Brown, Inc. (NYSE:BRO)

In the eyes of most stock holders, hedge funds are assumed to be slow, outdated investment tools of years past. While there are more than 8000 funds trading today, we at Insider Monkey hone in on the aristocrats of this club, around 450 funds. It is widely believed that this group has its hands on the lion’s share of the smart money’s total capital, and by paying attention to their best picks, we have revealed a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Just as key, optimistic insider trading sentiment is a second way to parse down the financial markets. Obviously, there are lots of incentives for an upper level exec to cut shares of his or her company, but just one, very simple reason why they would buy. Plenty of academic studies have demonstrated the valuable potential of this tactic if shareholders understand what to do (learn more here).

Keeping this in mind, let’s take a gander at the recent action surrounding Brown & Brown, Inc. (NYSE:BRO).

How are hedge funds trading Brown & Brown, Inc. (NYSE:BRO)?

At year’s end, a total of 18 of the hedge funds we track were bullish in this stock, a change of -14% from the third quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Brown & Brown, Inc. (NYSE:BRO). Citadel Investment Group has a $115 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is David Blood and Al Gore of Generation Investment Management, with a $89 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Donald Chiboucis’s Columbus Circle Investors, Anand Parekh’s Alyeska Investment Group and Chuck Royce’s Royce & Associates.

Judging by the fact that Brown & Brown, Inc. (NYSE:BRO) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies cut the biggest stake of all the hedgies we key on, totaling close to $6 million in stock.. Brian Taylor’s fund, Pine River Capital Management, also dumped its stock, about $5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds last quarter.

What do corporate executives and insiders think about Brown & Brown, Inc. (NYSE:BRO)?

Insider buying is best served when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time frame, Brown & Brown, Inc. (NYSE:BRO) has seen 1 unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

With the returns shown by the aforementioned studies, everyday investors must always keep an eye on hedge fund and insider trading activity, and Brown & Brown, Inc. (NYSE:BRO) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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