Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Brown & Brown, Inc. (NYSE:BRO).
Brown & Brown, Inc. (NYSE:BRO) has seen a decrease in enthusiasm from smart money lately. At the end of this article we will also compare BRO to other stocks, including GameStop Corp. (NYSE:GME), Jabil Circuit, Inc. (NYSE:JBL), and Six Flags Entertainment Corp (NYSE:SIX) to get a better sense of its popularity.
Follow Brown & Brown Inc. (NYSE:BRO)
Follow Brown & Brown Inc. (NYSE:BRO)
Today there are a lot of signals stock traders have at their disposal to evaluate their stock investments. A couple of the most innovative signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can outpace the S&P 500 by a significant amount (see the details here).
With all of this in mind, let’s take a look at the fresh action regarding Brown & Brown, Inc. (NYSE:BRO).
How are hedge funds trading Brown & Brown, Inc. (NYSE:BRO)?
Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Wallace Weitz’s Wallace R. Weitz & Co. has the biggest position in Brown & Brown, Inc. (NYSE:BRO), worth close to $34.6 million, amounting to 1.1% of its total 13F portfolio. On Wallace R. Weitz & Co.’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $24.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Robert Joseph Caruso’s Select Equity Group.
Since Brown & Brown, Inc. (NYSE:BRO) has faced falling interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies who were dropping their entire stakes last quarter. Intriguingly, Greg Poole’s Echo Street Capital Management said goodbye to the largest investment of the 700 funds watched by Insider Monkey, worth about $5 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $4 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Brown & Brown, Inc. (NYSE:BRO). These stocks are GameStop Corp. (NYSE:GME), Jabil Circuit, Inc. (NYSE:JBL), Six Flags Entertainment Corp (NYSE:SIX). This group of stocks’ market valuations resemble BRO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GME | 31 | 482560 | 5 |
| JBL | 30 | 310300 | -2 |
| SIX | 29 | 1046035 | -4 |
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $497 million in BRO’s case. GameStop Corp. (NYSE:GME) is the most popular stock in this table, while Six Flags Entertainment Corp (NYSE:SIX) is the least popular one. Compared to these stocks, hedge funds display much less interest in Brown & Brown, Inc. (NYSE:BRO) and considering that hedge funds aren’t fond of this stock in relation to other companies mentioned in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
