We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Brown & Brown, Inc. (NYSE:BRO).
Is Brown & Brown, Inc. (NYSE:BRO) a buy right now? Hedge funds are in a bullish mood. The number of long hedge fund bets rose by 7 in recent months. Our calculations also showed that BRO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BRO was in 28 hedge funds' portfolios at the end of the third quarter of 2019. There were 21 hedge funds in our database with BRO holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are viewed as underperforming, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the aristocrats of this club, about 750 funds. It is estimated that this group of investors direct the majority of all hedge funds' total asset base, and by observing their best stock picks, Insider Monkey has formulated many investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_189632" align="aligncenter" width="600"] David Harding of Winton Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to check out the key hedge fund action surrounding Brown & Brown, Inc. (NYSE:BRO).
How are hedge funds trading Brown & Brown, Inc. (NYSE:BRO)?
At Q3's end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the second quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in BRO a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Robert Joseph Caruso's Select Equity Group has the largest position in Brown & Brown, Inc. (NYSE:BRO), worth close to $356.2 million, accounting for 2.4% of its total 13F portfolio. On Select Equity Group's heels is Renaissance Technologies holding a $95.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Brown & Brown, Inc. (NYSE:BRO), around 4.1% of its portfolio. Select Equity Group is also relatively very bullish on the stock, dishing out 2.41 percent of its 13F equity portfolio to BRO.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in Brown & Brown, Inc. (NYSE:BRO). Point72 Asset Management had $9.7 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also initiated a $5.4 million position during the quarter. The following funds were also among the new BRO investors: Donald Sussman's Paloma Partners, Matthew Tewksbury's Stevens Capital Management, and Hoon Kim's Quantinno Capital.
Let's now take a look at hedge fund activity in other stocks similar to Brown & Brown, Inc. (NYSE:BRO). We will take a look at Tyler Technologies, Inc. (NYSE:TYL), Insulet Corporation (NASDAQ:PODD), Altaba Inc. (NASDAQ:AABA), and Eastman Chemical Company (NYSE:EMN). All of these stocks' market caps are similar to BRO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TYL,26,602875,2 PODD,37,500045,13 AABA,48,4699502,-11 EMN,27,409073,4 Average,34.5,1552874,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1553 million. That figure was $810 million in BRO's case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand Tyler Technologies, Inc. (NYSE:TYL) is the least popular one with only 26 bullish hedge fund positions. Brown & Brown, Inc. (NYSE:BRO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BRO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BRO investors were disappointed as the stock returned 4.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.