But as an investor, I like his second-biggest and less-noticed move much better: the increase in his stake in AON AON, +1.59%, a global insurance brokerage.
No. 2. Insiders love AON stock I track insiders closely at my stock letter Brush Up on Stocks because they lead us to great ideas. An “Insurance 10” portfolio of 10 names I put in my stock letter of July 6, 2020 was up 77% as of the close on Aug. 17, compared to 42.7% for the S&P 500 SPX, +0.81% . That’s 34 percentage points of outperformance.
No. 3. AON has pricing power As predicted in my column on the group in July 2020, insurance companies are enjoying a nice phase of strong pricing power. Why? The Covid 19 pandemic and several natural disasters created lots of claims, which reduced capital in the sector. That trimmed insurance-sector capacity. This boosts pricing – or premiums.
Meanwhile, AON is very profitable, which Buffett loves. It reports a return on invested capital of 23.5% for 2020, up from 11.7% in 2010. Anything above 20% is considered high, says Sykes. No. 5. AON is a contrarian play Most of the 16 analysts who cover AON don’t like the stock. Ten have hold ratings, while four have buy ratings and two have overweight ratings, according to FactSet. The average price target is $276.75, or less than the current stock price.
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