Arthur J. Gallagher & Co. (NYSE:AJG) has seen an increase in hedge fund interest of late.
According to most market participants, hedge funds are assumed to be slow, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading today, we look at the crème de la crème of this group, about 450 funds. Most estimates calculate that this group controls the majority of all hedge funds’ total capital, and by tracking their top picks, we have deciphered a few investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Equally as important, positive insider trading sentiment is another way to break down the marketplace. Just as you’d expect, there are a number of motivations for an insider to drop shares of his or her company, but only one, very simple reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this tactic if you know where to look (learn more here).
Keeping this in mind, we’re going to take a gander at the key action surrounding Arthur J. Gallagher & Co. (NYSE:AJG).
What have hedge funds been doing with Arthur J. Gallagher & Co. (NYSE:AJG)?
At year’s end, a total of 11 of the hedge funds we track held long positions in this stock, a change of 38% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially.
When looking at the hedgies we track, Ken Griffin’s Citadel Investment Group had the biggest position in Arthur J. Gallagher & Co. (NYSE:AJG), worth close to $108 million, accounting for 0.2% of its total 13F portfolio. On Citadel Investment Group’s heels is Royce & Associates, managed by Chuck Royce, which held a $56 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Israel Englander’s Millennium Management and Brian Taylor’s Pine River Capital Management.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. CR Intrinsic Investors, managed by SAC Subsidiary, established the most outsized position in Arthur J. Gallagher & Co. (NYSE:AJG). CR Intrinsic Investors had 2 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also initiated a $1 million position during the quarter. The only other fund with a brand new AJG position is David Costen Haley’s HBK Investments.
How are insiders trading Arthur J. Gallagher & Co. (NYSE:AJG)?
Insider buying is most useful when the company in question has seen transactions within the past six months. Over the latest 180-day time period, Arthur J. Gallagher & Co. (NYSE:AJG) has seen zero unique insiders buying, and 11 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Arthur J. Gallagher & Co. (NYSE:AJG). These stocks are Brown & Brown, Inc. (NYSE:BRO), Willis Group Holdings PLC (NYSE:WSH), Erie Indemnity Company (NASDAQ:ERIE), Aon PLC (NYSE:AON), and Marsh & McLennan Companies, Inc. (NYSE:MMC). All of these stocks are in the insurance brokers industry and their market caps are similar to AJG’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Brown & Brown, Inc. (NYSE:BRO)||18||1||8|
|Willis Group Holdings PLC (NYSE:WSH)||18||0||5|
|Erie Indemnity Company (NASDAQ:ERIE)||9||1||2|
|Aon PLC (NYSE:AON)||28||1||4|
|Marsh & McLennan Companies, Inc. (NYSE:MMC)||23||1||7|
With the returns shown by the aforementioned studies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Arthur J. Gallagher & Co. (NYSE:AJG) is an important part of this process.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.