Was The Smart Money Right About Brown & Brown, Inc. (BRO)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Brown & Brown, Inc. (NYSE:BRO) and determine whether hedge funds skillfully traded this stock.

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 has seen an increase in support from the world’s most elite money managers 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. With all of this in mind let’s check out the recent hedge fund action surrounding Brown & Brown, Inc. (NYSE:BRO).

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

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards BRO over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the most valuable position in Brown & Brown, Inc. (NYSE:BRO), worth close to $997.3 million, accounting for 3.4% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $82.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism encompass Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management and Steve Cohen’s Point72 Asset Management. 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, earmarking 2.53 percent of its 13F equity portfolio to BRO.

As one would reasonably expect, key money managers were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the largest 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 other funds with brand new BRO positions are Greg Poole’s Echo Street Capital Management, Joel Greenblatt’s Gotham Asset Management, and Greg Eisner’s Engineers Gate Manager.

Let’s go over hedge fund activity in other stocks similar to Brown & Brown, Inc. (NYSE:BRO). These stocks are 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 closest to BRO’s market value.

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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on BRO as the stock returned 19.7% since the end of Q3 (through 1/31) 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.