What Makes Neptune Insurance Holdings (NP) an Investment Choice?

Baron Fund, an investment management company, released its Q4 2025 letter for “Baron Small Cap Fund”. A copy of the letter can be downloaded here. The market extended its positive trends in the fourth quarter. The Baron Small Cap Fund was down 1.56% in the quarter compared to 1.22% gain for the Russell 2000 Growth Index. The fund returned (0.66)% in 2025, trailing the index by 13.67 percentage points. The yearly performance was weak both on an absolute and a relative basis. Large-cap growth stocks led the market for the third consecutive year, with concentrated leadership. Heading into 2026, the firm expects better growth ahead for small caps given the solid setup. Please review the Strategy’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, Baron Small Cap Fund highlighted Neptune Insurance Holdings Inc. (NYSE:NP). The fund added Neptune Insurance Holdings Inc. (NYSE:NP), a leading flood insurance provider, during the quarter. On February 6, 2026, Neptune Insurance Holdings Inc. (NYSE:NP) stock closed at $23.56 per share. One-month return of Neptune Insurance Holdings Inc. (NYSE:NP) was -9.42%, and its shares are down 19.20% over the past twelve months. Neptune Insurance Holdings Inc. (NYSE:NP) has a market capitalization of $3.252 billion.

Baron Small Cap Fund stated the following regarding Neptune Insurance Holdings Inc. (NYSE:NP) in its fourth quarter 2025 investor letter:

"In the fourth quarter, we added one new holding and increased positions of many of our existing holdings at what we think are attractive prices. We sold out of three names. The factorization of the market and short-term mentality had led to some wild swings on relatively mundane earnings announcements and news flow from the Trump Administration. As a result, 11 of our stocks moved +/- 30% in the quarter, and we tried to take advantage on both sides of the buy/sell ledger. For the year, we invested in 12 new ideas (2 were sold during the year), half of which were new to the public markets. As we have discussed in the past, we are heartened by the return of the IPOs, as they have been a great source on successful new investments for the Fund over the years.

One such IPO was Neptune Insurance Holdings Inc. (NYSE:NP), an underwriter of private flood insurance. Neptune is the leader in private flood insurance and utilizes a proprietary underwriting model combined with easy-to-use technology, which enables insurance agents to offer flood insurance.

Flood insurance in the U.S. is largely dominated by the government run National Flood Insurance Program (NFIP). Neptune offers a private market option. Compared to the NFIP, Neptune is faster and easier for insurance agents to quote, which leads to agents quoting and pricing more business through Neptune. Accurate data-based pricing allows Neptune to win business outside of flood zones where insurance is not mandatory, but now reasonably priced for the risk. In the third quarter, over 80% of new business sales came from non-mandatory purchases. Neptune is an MGA (Managing General Agent), meaning that it doesn’t bear the risk of losses, which makes the business very capital efficient. Instead, the company writes business on behalf of seven capacity providers, who in turn pay Neptune commissions for sourcing and underwriting the business..." (Click here to read the full text)

Neptune Insurance Holdings Inc. (NYSE:NP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the potential of Neptune Insurance Holdings Inc. (NYSE:NP) 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 Neptune Insurance Holdings Inc. (NYSE:NP) and shared a list of stocks Jim Cramer discussed on. In addition, please check out our hedge fund investor letters Q4 2025 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.