Madison Investments, an investment advisor, recently shared its first-quarter 2026 investor letter for the “Madison Mid Cap Fund”. The fund experienced a decline of 4.28% in the quarter, in contrast to the Russell Midcap Index’s 1.29% return. The market witnessed a shift from tech stocks to companies in the physical economy during the first quarter, driven by a positive economic outlook and concerns about AI disruption. This transition favored the ‘HALO trade’ (Heavy Assets, Low Obsolescence), benefiting resilient businesses.
In March, escalating geopolitical conflicts and rising commodity prices heightened inflation concerns, leading to strong performance in the Energy and Materials sectors, with Utilities also experiencing gains. However, this trend posed challenges for the Madison Mid Cap Fund due to its limited exposure to these sectors. Despite these challenges, the fund remains focused on identifying opportunities in high-quality, underappreciated businesses and actively investing in them.
One of the highlighted stocks in the first-quarter 2026 investor letter was Brown & Brown, Inc. (NYSE:BRO). Brown & Brown, Inc. is a prominent insurance brokerage firm operating through Retail and Specialty Distribution segments. As of June 29, 2026, the company’s stock closed at $63.96 per share, with a market capitalization of $21.67 billion. While Brown & Brown, Inc. posted a one-month return of 13.02%, its shares experienced a 41.28% decline over the past 52 weeks.
In the investor letter, Madison Mid Cap Fund mentioned that Brown & Brown, Inc. was among the bottom five detractors for the quarter. The company’s shares faced downward pressure as organic growth slowed across the insurance broker industry, coupled with investor concerns about the potential impact of AI on the sector. Despite these challenges, the fund added to its current holdings of Brown & Brown, viewing the AI-related concerns as an opportunity to increase their position.
Although Brown & Brown, Inc. is not included in the list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026, 41 hedge fund portfolios held the stock at the end of the first quarter. While acknowledging the investment potential of Brown & Brown, Inc., Madison Investments believes that certain AI stocks offer greater upside potential with lower downside risk. For investors seeking opportunities in undervalued AI stocks that could benefit from Trump-era tariffs and onshoring trends, they can explore the report on the best short-term AI stock.
In conclusion, Madison Investments remains committed to navigating the evolving market landscape by focusing on high-quality, undervalued businesses while actively seeking new opportunities for growth and value creation within the Madison Mid Cap Fund.
