In this article we are going to use hedge fund sentiment as a tool and determine whether Brown & Brown, Inc. (NYSE:BRO) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Brown & Brown, Inc. (NYSE:BRO) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BRO investors should be aware of an increase in hedge fund interest in recent months. There were 26 hedge funds in our database with BRO holdings at the end of June. Our calculations also showed that BRO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding Brown & Brown, Inc. (NYSE:BRO).
Peter Rathjens of Arrowstreet Capital
Do Hedge Funds Think BRO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BRO over the last 25 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.
Among these funds, Select Equity Group held the most valuable stake in Brown & Brown, Inc. (NYSE:BRO), which was worth $997.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $82.5 million worth of shares. Millennium Management, Balyasny Asset Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Brown & Brown, Inc. (NYSE:BRO), around 3.35% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 2.53 percent of its 13F equity portfolio to BRO.
As one would reasonably expect, key hedge funds have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most outsized position in Brown & Brown, Inc. (NYSE:BRO). Adage Capital Management had $11.3 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $7.6 million position during the quarter. The following funds were also among the new BRO investors: Greg Poole’s Echo Street Capital Management, Joel Greenblatt’s Gotham Asset Management, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Brown & Brown, Inc. (NYSE:BRO) but similarly valued. We will take a look at Omnicom Group Inc. (NYSE:OMC), Confluent Inc. (NASDAQ:CFLT), argenx SE (NASDAQ:ARGX), Novavax, Inc. (NASDAQ:NVAX), Royalty Pharma Plc (NASDAQ:RPRX), Just Eat Takeaway.com N.V. (NASDAQ:GRUB), and United Airlines Holdings Inc (NASDAQ:UAL). This group of stocks’ market values are similar to BRO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OMC | 25 | 396360 | -5 |
| CFLT | 27 | 1319263 | -3 |
| ARGX | 28 | 1364285 | 1 |
| NVAX | 35 | 786706 | -2 |
| RPRX | 20 | 1961787 | 0 |
| GRUB | 18 | 204963 | -6 |
| UAL | 30 | 403253 | -9 |
| Average | 26.1 | 919517 | -3.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $920 million. That figure was $1392 million in BRO’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Just Eat Takeaway.com N.V. (NASDAQ:GRUB) is the least popular one with only 18 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 78.2. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on BRO as the stock returned 16.4% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
