Arch Capital Group Ltd. (ACGL) Rebounded due to Favorable Operating Trends and Stability

Baron Funds, an investment management company, released its “Baron Growth Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund declined 4.25% (Institutional Shares) in the first quarter, exceeding the Russell 2000 Growth Index’s (the Benchmark) 11.12% fall.  The Trump administration’s rapid agenda implementation led the stock to decline in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Growth Fund highlighted stocks such as Arch Capital Group Ltd. (NASDAQ:ACGL). Arch Capital Group Ltd. (NASDAQ:ACGL) is an insurance company that offers insurance, reinsurance, and mortgage insurance products. The one-month return of Arch Capital Group Ltd. (NASDAQ:ACGL) was -2.41%, and its shares lost 8.18% of their value over the last 52 weeks. On June 9, 2025, Arch Capital Group Ltd. (NASDAQ:ACGL) stock closed at $92.35 per share, with a market capitalization of $34.609 billion.

Baron Growth Fund stated the following regarding Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q1 2025 investor letter:

“Shares of specialty insurer Arch Capital Group Ltd. (NASDAQ:ACGL) rebounded from weakness in the prior quarter due to favorable operating trends and the relative stability of insurance stocks in a risk-off market. In the most recent quarter, the company reported better-than-expected earnings, and returns on equity remained strong in the high teens despite elevated catastrophe losses from Hurricane Milton. Management targets a 15% return on equity over a full cycle and expects to exceed the target in 2025 given firm market conditions. We continue to own the stock due to Arch’s strong management team and our expectation of significant growth in earnings and book value.”

Is Arch Capital Group Ltd. (ACGL) the Best Insurance Stock for the Long Term?

A close-up image of an insurance policy with hands standing firmly on top, conveying security.

Arch Capital Group Ltd. (NASDAQ:ACGL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held Arch Capital Group Ltd. (NASDAQ:ACGL) at the end of the first quarter, which was 41 in the previous quarter. While we acknowledge the potential of Arch Capital Group Ltd. (NASDAQ:ACGL) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Arch Capital Group Ltd. (NASDAQ:ACGL) and shared Appalaches Capital’s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.