Capitalizing on Undervalued Sectors: Why Brown & Brown and Surgery Partners Are Strategic Buys in a Shifting Market

In a market increasingly dominated by speculative tech darlings and AI-driven narratives, contrarian investors are turning to overlooked sectors where fundamentals remain robust but valuations have been unfairly depressed. Bank of America's recent analysis underscores a pivotal shift in macroeconomic dynamics, identifying five key drivers poised to reshape the investment landscape. Among the most compelling opportunities lie in two industries long sidelined by Wall Street: insurance brokerage and ambulatory surgery centers. Brown & Brown (BRO) and Surgery Partners (SGRY) stand out as strategic buys, aligning with these macro trends while trading at compelling discounts to their intrinsic value.

The Macro Drivers Reshaping the Market

Bank of America's five macroeconomic catalysts—ranging from political stimulus to capital expenditures by tech hyperscalers—highlight a market in transition. While the “Magnificent 7” continue to dominate headlines, the bank's proprietary “regime indicator” suggests a broader market recovery is on the horizon. This creates fertile ground for contrarian investors to capitalize on sectors mispriced by short-term volatility.

For instance, the push for U.S. manufacturing revival under the “Big Beautiful Bill” and the potential for European stimulus measures signal a global rebalancing toward industrial and healthcare infrastructure. These trends directly benefit companies like Brown & Brown, which operates in the insurance brokerage space—a sector critical to managing risk in an era of economic uncertainty. Similarly, Surgery Partners, a leader in ambulatory surgery centers, stands to gain from policy tailwinds such as the Centers for Medicare & Medicaid Services' (CMS) proposed 2.4% rate update for 2026.

Brown & Brown: A Premium Brokerage Trading at a Discount

Brown & Brown, a top-tier insurance brokerage, has seen its shares plummet 26% since April 2, 2025, despite outperforming earnings expectations in its Q2 2025 report. Bank of America upgraded the stock to Buy with a $130 price target, citing its undervaluation relative to peers. At a 49.42% gross profit margin and 12.16% year-over-year revenue growth, the company's financials are rock solid. Yet its valuation remains near trough levels, trading at a discount to its historical premium.

The disconnect between performance and price is emblematic of contrarian investing. While the broader market fixates on AI and consumer discretionary stocks, Brown & Brown's role in insuring a post-pandemic economy—where risk management is paramount—remains underappreciated. reveals a sharp divergence from the S&P 500's gains, creating a compelling entry point for long-term investors.

Surgery Partners: Mispriced Growth in a Resilient Sector

Surgery Partners, a dominant player in ambulatory surgery centers, has similarly been undervalued despite strong fundamentals. After rejecting a $24-per-share buyout offer from Bain Capital, the company's board signaled confidence in its standalone potential. Bank of America resumed coverage with a Buy rating and a $28 price target, arguing that the stock's current EV/EBITDA of 12.7x is below its historical average of 14x.

The firm's analysis highlights structural advantages: a 14% year-over-year revenue growth rate, a “GOOD” financial health score, and favorable regulatory tailwinds. The CMS rate update alone could boost cash flows in 2026, while the company's joint-venture structures—often mispriced by analysts—add hidden value. illustrates the gap between current valuations and intrinsic worth, making it a prime candidate for a re-rating.

Contrarian Logic in a Macro-Driven World

Both stocks align with Bank of America's macro drivers in critical ways. Brown & Brown benefits from the political will to stimulate short-term economic growth, as insurance remains a cornerstone of corporate and consumer resilience. Surgery Partners, meanwhile, is positioned to capitalize on capital expenditures in healthcare infrastructure, a sector often overlooked in favor of tech-led narratives.

The key to unlocking value lies in patience. While the market fixates on near-term volatility, these companies offer durable cash flows and competitive advantages that will compound over time. For investors willing to think beyond the headlines, Brown & Brown and Surgery Partners represent a rare combination of macro alignment, undervaluation, and long-term growth potential.

Final Thoughts: A Call to Rebalance Portfolios

As Bank of America's regime indicator hints at a market inflection point, now is the time to revisit sectors that have been unfairly punished by short-termism. Brown & Brown and Surgery Partners are not just undervalued—they are misvalued. By investing in these fundamentally strong, overlooked industries, contrarian investors can position themselves to benefit from both macroeconomic tailwinds and a correction in valuation extremes.

For those seeking to diversify beyond the “Magnificent 7,” these two stocks offer a compelling roadmap to long-term growth in a shifting market.