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“We Expect Continuing Good Results Through Next Year”


Madison Funds, managed by Madison Asset Management, LLC, released its “Madison Investors Fund” third quarter 2022 investor letter – a copy of which can be downloaded here. The Madison Investors Fund (Class Y) was down -5.46% in the third quarter, compared to the -4.88% decline in the benchmark S&P 500 Index. The Fund (-21.21%) remains ahead of the benchmark (-23.87%) for the year-to-date period. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.

In its Q3 2022 investor letter, Madison Investors 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 $19.0 billion market capitalization. Arch Capital Group Ltd. (NASDAQ:ACGL) delivered a 16.29% return since the beginning of the year, while its 12-month returns are up by 23.60%. The stock closed at $51.69 per share on October 27, 2022.

Here is what Madison Investors Fund has to say about Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q3 2022 investor letter:

“We’ve discussed Arch Capital extensively in the past, and our admiration for its management team remains unchanged. At a high level, its business consists of a U.S. mortgage insurance operation, and a global commercial property and casualty insurance operation. Investors appear concerned about a slowdown in its mortgage operation, but are ignoring the fact that it operates with long-tailed revenues wherein a big drop in originations only translates to a small drop in revenues. This is because the vast majority of revenues is dependent on the existing base of mortgages outstanding, rather than new mortgages originated. In the past year, Arch’s new mortgage insurance written is down 18%, yet policies-in-force are down less than 3%. This stability in its policy base means that the value of the mortgage business is relatively stable regardless of the mortgage environment. In the meantime, the prospects in the medium-term for its property and casualty business are getting better and better. Competitors are starting to report losses from policies written in 2015 through 2019, while Arch’s discipline in those years is now being revealed. Global natural catastrophes are also starting to erode industry capital and risk appetites. The tide is going out, and we are starting to see who has been swimming naked. Arch is leaning into this environment, and we expect continuing good results through next year at least.”

Pixabay/Public Domain

Our calculations show that Arch Capital Group Ltd. (NASDAQ:ACGL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Arch Capital Group Ltd. (NASDAQ:ACGL) was in 23 hedge fund portfolios at the end of the second quarter of 2022, compared to 38 funds in the previous quarter. Arch Capital Group Ltd. (NASDAQ:ACGL) delivered a 16.42% return in the past 3 months.

In September 2022, we also shared another hedge fund’s 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 2022 Q3 page.


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

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