What Makes Arch Capital Group Ltd. (ACGL) a Lucrative Investment?

Appalaches Capital, an investment management firm, released its first quarter 2025 investor letter. A copy of the letter can be downloaded here. Appalaches Core LO ended the quarter with a loss of 0.5% after all fees and expenses compared to the S&P 500’s decline of 4.3%, the equal-weighted S&P 500’s loss of 0.6%, and the SOFR Index return of 1.1% in the 1st 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, Appalaches Capital 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 2.08%, and its shares lost 5.88% of their value over the last 52 weeks. On June 2, 2025, Arch Capital Group Ltd. (NASDAQ:ACGL) stock closed at $96.27 per share, with a market capitalization of $36.078 billion.

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

“Earlier in the new year we initiated a position in Arch Capital Group Ltd. (NASDAQ:ACGL) and continued to add to it throughout the quarter amidst some concerns over the disastrous California wildfires. Arch Capital is a Bermuda-based diversified insurance operation that writes a portfolio of excess and surplus insurance (E&S), reinsurance, and private mortgage insurance (PMI). After a few years of a hard market, it is very reasonable to question how much longer strong returns can last. However, the shares currently trade hands at an undemanding valuation with favorable structural tailwinds.

The insurance industry is a mixed bag in terms of business quality. On one hand, policies are somewhat commoditized. Insureds typically reach for the lowest cost option, so insurers must offer competitive prices on the policies that they wish to write. Insurers who price their policies too high will not have any customers, while insurers who price their policies too low can lose significant amounts of money after claims roll in. Unlike other commoditized industries, insurers will not know the true cost of the policies they write today until claims are made, which can take many years if not decades. It is a challenging business to be in and many operations generate poor long-term returns. On the other hand, there are some insurance companies that have realized extraordinary long-term returns, such as Berkshire Hathaway. Is it the luck of the draw? Or are there differences in how a great insurance business operates compared to the average one?..” (Click here to read the full text)

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 Madison Mid Cap Fund’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.