Arthur J. Gallagher & Co. (AJG) Fell Out Of Favor With Hedge Funds

In this article you are going to find out whether hedge funds think Arthur J. Gallagher & Co. (NYSE:AJG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Arthur J. Gallagher & Co. (NYSE:AJG) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. Arthur J. Gallagher & Co. (NYSE:AJG) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 40. Our calculations also showed that AJG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the new hedge fund action surrounding Arthur J. Gallagher & Co. (NYSE:AJG).

Do Hedge Funds Think AJG Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AJG over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AJG A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Arthur J. Gallagher & Co. (NYSE:AJG), with a stake worth $207.1 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $139.3 million. Adage Capital Management, Schonfeld Strategic Advisors, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Arthur J. Gallagher & Co. (NYSE:AJG), around 3.9% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, designating 3.42 percent of its 13F equity portfolio to AJG.

Because Arthur J. Gallagher & Co. (NYSE:AJG) has witnessed bearish sentiment from the smart money, it’s safe to say that there were a few hedge funds who were dropping their entire stakes last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising about $14.8 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also sold off its stock, about $6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 8 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Arthur J. Gallagher & Co. (NYSE:AJG) but similarly valued. We will take a look at American Water Works Company, Inc. (NYSE:AWK), Nokia Corporation (NYSE:NOK), Phillips 66 (NYSE:PSX), Liberty Broadband Corp (NASDAQ:LBRDA), Zimmer Biomet Holdings Inc (NYSE:ZBH), Chunghwa Telecom Co., Ltd (NYSE:CHT), and Southwest Airlines Co. (NYSE:LUV). This group of stocks’ market valuations are closest to AJG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AWK 28 1127944 -2
NOK 22 388301 -4
PSX 34 409385 8
LBRDA 24 885745 -4
ZBH 47 1664979 -1
CHT 6 156827 -1
LUV 39 729508 -10
Average 28.6 766098 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $766 million. That figure was $1388 million in AJG’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 bullish hedge fund positions. Arthur J. Gallagher & Co. (NYSE:AJG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AJG is 52.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on AJG as the stock returned 9.6% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Arthur J. Gallagher & Co. (NYSE:AJG)

Suggested Articles:

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