Was The Smart Money Right About Arthur J. Gallagher & Co. (AJG)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Arthur J. Gallagher & Co. (NYSE:AJG) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Is Arthur J. Gallagher & Co. (NYSE:AJG) worth your attention right now? Hedge funds were selling. The number of long hedge fund bets fell by 8 in recent months. Arthur J. Gallagher & Co. (NYSE:AJG) was in 32 hedge funds’ portfolios at the end of the third quarter of 2021. 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). There were 40 hedge funds in our database with AJG holdings at the end of June.

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. With all of this in mind we’re going to go over the key hedge fund action encompassing 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 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2021. On the other hand, there were a total of 35 hedge funds with a bullish position in AJG a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

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.

Due to the fact that Arthur J. Gallagher & Co. (NYSE:AJG) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who sold off their positions entirely heading into Q4. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest position of the 750 funds tracked by Insider Monkey, comprising about $14.8 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also cut its stock, about $6 million worth. These transactions are important to note, as total hedge fund interest fell by 8 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Arthur J. Gallagher & Co. (NYSE:AJG). 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 values resemble AJG’s market value.

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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on AJG as the stock returned 6.6% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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