Baron Funds: “Arch Capital (ACGL) Should Continue to Generate Mid-Teens Returns on Capital”

Baron Funds, an investment management firm, released its “Baron Focused Growth Fund” first quarter 2023 investor letter, a copy of which can be downloaded here. During the quarter ending on March 31, 2023, the Fund’s Institutional Shares exhibited a notable increase of 14.49%. This remarkable performance can be attributed to the resilience and robust demand witnessed by companies held within the Fund’s portfolio. Spare some time to check the fund’s top 5 holdings to know more about their top bets for 2023.

In its Q1 2023 investor letter, Baron Focused Growth Fund mentioned Arch Capital Group Ltd. (NASDAQ:ACGL) and explained its insights for the company. Founded in 1995, Arch Capital Group Ltd. (NASDAQ:ACGL) is a Hamilton, Bermuda-based insurance company with a $26.5 billion market capitalization. Arch Capital Group Ltd. (NASDAQ:ACGL) delivered a 13.35% return since the beginning of the year, while its 12-month returns are up by 63.96%. The stock closed at $ 71.16 per share on June 16, 2023.

Here is what Baron Focused Growth Fund has to say about Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q1 2023 investor letter:

“Financials investments accounted for 18.7% of the Fund’s net assets. These businesses generate strong recurring earnings through subscriptions and premiums that generate highly predictable earnings and cash flow. Those businesses use cash flows to continue to invest in new products and services, while returning capital to shareholders through share buybacks and dividends. These include  companies like Arch Capital Group Ltd. (NASDAQ:ACGL). Arch, one of the leading P&C insurers, continued to increase premiums written and raise prices. This strong pricing is resulting in robust returns on investments, with increased earnings and cash flow that the company is using to repurchase its shares. We continue to believe that Arch should continue to generate mid-teens returns on capital and that its growth and valuation remain attractive.”

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Our calculations show that Arch Capital Group Ltd. (NASDAQ:ACGL) was not able to secure a spot on our list of the 30 Most Popular Stocks Among Hedge Funds. Arch Capital Group Ltd. (NASDAQ:ACGL) was in 28 hedge fund portfolios at the end of the first quarter of 2023, compared to 25 funds in the previous quarter. Arch Capital Group Ltd. (NASDAQ:ACGL) delivered a 12.68% return in the past 3 months.

Earlier this year, we also shared Baron Fund’s Q4 2022 views on Arch Capital Group Ltd. (NASDAQ:ACGL) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q1 2023 page.

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