In this article we will take a look at whether hedge funds think Arthur J. Gallagher & Co. (NYSE:AJG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is AJG a good stock to buy now? Arthur J. Gallagher & Co. (NYSE:AJG) was in 35 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AJG shareholders have witnessed an increase in hedge fund sentiment recently. There were 29 hedge funds in our database with AJG positions at the end of the second quarter. Our calculations also showed that AJG isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to review the key hedge fund action regarding Arthur J. Gallagher & Co. (NYSE:AJG).
Do Hedge Funds Think AJG Is A Good Stock To Buy Now?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in AJG over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the number one position in Arthur J. Gallagher & Co. (NYSE:AJG). Adage Capital Management has a $66.9 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Dmitry Balyasny of Balyasny Asset Management, with a $52.5 million position; 0.4% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions encompass Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and John D. Gillespie’s Prospector Partners. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Arthur J. Gallagher & Co. (NYSE:AJG), around 3.34% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, designating 2.55 percent of its 13F equity portfolio to AJG.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Gillson Capital, managed by Daniel Johnson, assembled the largest position in Arthur J. Gallagher & Co. (NYSE:AJG). Gillson Capital had $7.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $5.7 million position during the quarter. The following funds were also among the new AJG investors: Michael Gelband’s ExodusPoint Capital, Peter Muller’s PDT Partners, and Parvinder Thiara’s Athanor Capital.
Let’s also examine hedge fund activity in other stocks similar to Arthur J. Gallagher & Co. (NYSE:AJG). We will take a look at Alexandria Real Estate Equities Inc (NYSE:ARE), Nasdaq, Inc. (NASDAQ:NDAQ), Interactive Brokers Group, Inc. (NASDAQ:IBKR), Rogers Communications Inc. (NYSE:RCI), FleetCor Technologies, Inc. (NYSE:FLT), China Unicom (Hong Kong) Limited (NYSE:CHU), and AmerisourceBergen Corporation (NYSE:ABC). This group of stocks’ market values match AJG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARE | 25 | 168133 | 7 |
| NDAQ | 32 | 220480 | 7 |
| IBKR | 28 | 787440 | -4 |
| RCI | 15 | 264156 | -1 |
| FLT | 40 | 1497542 | -13 |
| CHU | 6 | 49582 | -2 |
| ABC | 45 | 477155 | 5 |
| Average | 27.3 | 494927 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $495 million. That figure was $321 million in AJG’s case. AmerisourceBergen Corporation (NYSE:ABC) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) 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 77.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on AJG as the stock returned 19.2% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Arthur J. Gallagher & Co. (NYSE:AJG)
Follow Arthur J. Gallagher & Co. (NYSE:AJG)
Disclosure: None. This article was originally published at Insider Monkey.
