Arch Capital’s (ACGL) Valuation Supports Strategic Capital Allocation

Arch Capital’s (ACGL) Valuation Supports Strategic Capital Allocation

Thu, August 20, 2026 at 5:23 PM GMT+3 3 min read

• ^GSPC -0.31%
• ACGLO -0.28%

Madison Investments, an investment advisor, released its second-quarter 2026 investor letter for the "Madison Large Cap Fund". A copy of the letter can be downloaded here. In the second quarter, U.S. stock market indices achieved their best performance since 2020, driven largely by a narrow group of Artificial Intelligence-related stocks. As in the pandemic's early days, investors are fixated on who will benefit from AI, reminiscent of the late 1990s internet bubble. Against this backdrop, The Madison Large Cap Fund (class I) returned 8.4% in the second quarter of 2026, compared to a 15.2% increase in the S&P 500 Index. The current market's extreme narrowness is concerning, and history suggests this won't persist. While AI is reshaping society and the economy, today's winners may not remain so, and booms could lead to busts. Additionally, factors such as a volatile federal administration, growing budget deficits, inflation, high interest rates, and strained consumer finances will significantly impact the economy and stock market in the future. Additionally, reviewing the Fund's top five holdings could help identify its best picks for 2026.

In its Q2 2026 investor letter, Madison Large Cap Fund highlighted Arch Capital Group Ltd. (NASDAQ:ACGL), an insurance company that provides insurance, reinsurance, and mortgage insurance products. Holding a 5.84% portfolio weight, Arch Capital Group Ltd. (NASDAQ:ACGL) detracted from performance this quarter. On August 19, 2026, Arch Capital Group Ltd. (NASDAQ:ACGL) closed at $98.53 per share, reflecting a market capitalization of $33.62 billion. Arch Capital Group Ltd. (NASDAQ:ACGL) posted a one‑month return of -1.20%, while its shares gained 5.72% over the past 52 weeks.

Madison Large Cap Fund stated the following regarding Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q2 2026 investor letter:

"Consistent with the last few quarters, Arch Capital Group Ltd. (NASDAQ:ACGL), a multiline insurer, reported weak growth. However, margins held up nicely and capital return was substantial. The company repurchased around $800m worth of stock, retiring nearly 2.5% of its outstanding shares in the quarter. At the current valuation, we believe this is an excellent use of excess capital."

Arch Capital Group Ltd. (NASDAQ:ACGL) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held Arch Capital Group Ltd. (NASDAQ:ACGL) at the end of the first quarter, which was 51 in the previous quarter. While we acknowledge the potential of Arch Capital Group Ltd. (NASDAQ:ACGL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Arch Capital Group Ltd. (NASDAQ:ACGL) and shared a list of most undervalued NASDAQ stocks to buy. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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