Brown & Brown, Inc. (BRO) Fell Out Of Favor With Hedge Funds

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Brown & Brown, Inc. (NYSE:BRO) changed recently.

Is Brown & Brown, Inc. (NYSE:BRO) a buy, sell, or hold? The smart money was taking a bearish view. The number of bullish hedge fund bets retreated by 4 recently. Brown & Brown, Inc. (NYSE:BRO) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that BRO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are several tools investors use to evaluate their stock investments. Some of the less utilized tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce their index-focused peers by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to review the key hedge fund action encompassing Brown & Brown, Inc. (NYSE:BRO).

Do Hedge Funds Think BRO Is A Good Stock To Buy Now?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BRO over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Select Equity Group, managed by Robert Joseph Caruso, holds the number one position in Brown & Brown, Inc. (NYSE:BRO). Select Equity Group has a $673.3 million position in the stock, comprising 2.4% of its 13F portfolio. The second most bullish fund manager is Millennium Management, led by Israel Englander, holding a $50.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies and Matthew Stadelman’s Diamond Hill Capital. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Brown & Brown, Inc. (NYSE:BRO), around 2.45% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, earmarking 2.14 percent of its 13F equity portfolio to BRO.

Due to the fact that Brown & Brown, Inc. (NYSE:BRO) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that elected to cut their entire stakes by the end of the first quarter. At the top of the heap, Sahm Adrangi’s Kerrisdale Capital cut the biggest position of all the hedgies followed by Insider Monkey, comprising close to $8.1 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dropped about $7.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Brown & Brown, Inc. (NYSE:BRO). These stocks are Enel Americas S.A. (NYSE:ENIA), F5 Networks, Inc. (NASDAQ:FFIV), Bentley Systems, Incorporated (NASDAQ:BSY), LKQ Corporation (NASDAQ:LKQ), Packaging Corporation Of America (NYSE:PKG), UWM Holdings Corporation (NYSE:UWMC), and Textron Inc. (NYSE:TXT). This group of stocks’ market caps resemble BRO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENIA 11 116873 2
FFIV 26 871819 -8
BSY 22 109974 3
LKQ 36 1543090 -14
PKG 29 245296 13
UWMC 19 76660 19
TXT 21 702168 -2
Average 23.4 523697 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $915 million in BRO’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 11 bullish hedge fund positions. Brown & Brown, Inc. (NYSE:BRO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BRO is 53.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on BRO, though not to the same extent, as the stock returned 16% since Q1 (through July 9th) and outperformed the market as well.

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