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Hedge Funds Can’t Stop Buying Aon plc (AON)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Aon plc (NYSE:AON) based on that data and determine whether they were really smart about the stock.

Aon plc (NYSE:AON) was in 57 hedge funds’ portfolios at the end of June. The all time high for this statistics is 51. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AON has experienced an increase in enthusiasm from smart money in recent months. There were 47 hedge funds in our database with AON holdings at the end of March. Our calculations also showed that AON isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are several formulas stock market investors employ to analyze publicly traded companies. Two of the most useful formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace their index-focused peers by a superb margin (see the details here).

Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a gander at the new hedge fund action encompassing Aon plc (NYSE:AON).

What have hedge funds been doing with Aon plc (NYSE:AON)?

Heading into the third quarter of 2020, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AON over the last 20 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.

More specifically, Eagle Capital Management was the largest shareholder of Aon plc (NYSE:AON), with a stake worth $1241.4 million reported as of the end of September. Trailing Eagle Capital Management was Viking Global, which amassed a stake valued at $569.3 million. BlueSpruce Investments, Farallon Capital, and Citadel Investment Group 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 BlueSpruce Investments allocated the biggest weight to Aon plc (NYSE:AON), around 11.03% of its 13F portfolio. Steel Canyon Capital is also relatively very bullish on the stock, setting aside 10.97 percent of its 13F equity portfolio to AON.

As industrywide interest jumped, specific money managers have jumped into Aon plc (NYSE:AON) headfirst. Farallon Capital, created the most outsized position in Aon plc (NYSE:AON). Farallon Capital had $331.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $109.3 million investment in the stock during the quarter. The other funds with brand new AON positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Peter Seuss’s Prana Capital Management, and Anand Parekh’s Alyeska Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Aon plc (NYSE:AON) but similarly valued. We will take a look at Atlassian Corporation Plc (NASDAQ:TEAM), Honda Motor Co Ltd (NYSE:HMC), Workday Inc (NASDAQ:WDAY), Edwards Lifesciences Corporation (NYSE:EW), Baxter International Inc. (NYSE:BAX), Itau Unibanco Holding SA (NYSE:ITUB), and Biogen Inc. (NASDAQ:BIIB). All of these stocks’ market caps match AON’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TEAM 55 2872691 -4
HMC 10 296833 2
WDAY 73 3444523 15
EW 45 1391002 -4
BAX 59 2583223 9
ITUB 20 352115 4
BIIB 63 3268402 -7
Average 46.4 2029827 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $2030 million. That figure was $4755 million in AON’s case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 bullish hedge fund positions. Aon plc (NYSE:AON) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AON is 77.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately AON wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AON were disappointed as the stock returned -1.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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