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Jamie Murray Aon Corp. AON-N TOP PICK Nov 08, 2023

Insurance brokerage, risk management, employee benefit, compensation consulting. Steady eddy with high, recurring revenue. High margin. Not many expenditures, so free cashflow goes into share buybacks. Lower risk, set it and forget it. Yield is 0.75%.

(Analysts’ price target is $336.39)

Jamie Murray

Owned

Unlock Rating

$327.790

Stock price when the opinion was issued

insurance

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TOP PICK

Long AON Senior Unsecured Debentures 4.760%, Short Government of Canada 1.25% of March 2018. Likes the company because it is a very highly rated investment grade bond, the only one they have in Canada. A strong company with good credit that generates stable earnings and has good growth potential. Bond trades at a higher spread than all their other bonds.(Stock price will not match as this is a bond.)

TOP PICK

A global insurance broker for larger corporate entities. They do reinsurance, risk management, pensions and benefits. They are merging right now with Willis Tower Watson. The merger has been very promising for investors. It currently trades at 20x PE and 5% free cashflow so it should be a good buy. (Analysts’ price target is $219.23)

DON'T BUY

The DoJ alleges the Aon-Willis Towers Watson deal will suppress competition He won't touch either. If the companies decide to fight this, it will be a long court battle. You can't short this, because everyone involved must unwind positions. You may think these stocks are a bargain, but he would avoid them.

PAST TOP PICK

(A Top Pick Sep 04/20, Up 59%) They were looking at completing a merger that would push them to the largest in the world. It was blocked by regulators last summer. This was the catalyst that sent the shares higher. It really took off. He'd be buying it here.

TOP PICK

Global leader in insurance brokerage services. Brokerage business has high margin structure. Growth has been mid to high single digits. Recently bought back a large amount of shares. Presents good value with current share price.

PAST TOP PICK

(A Top Pick Feb 18/22, Up 13%) Grows mid-single digits. Big expectations not built in, so it skated through the pounding last year. It's moved up, so not a hot buy right now. Will do well over the long term. Cross-selling globally, layer in acquisitions, free cashflow goes to share buybacks.

BUY

Historically, steady earnings growth and pretty solid ROIC. Technically, chart looks pretty strong, trading above rising 200-day and 200-week moving averages. Decent valuation of 21x forward earnings, 12% long-term growth. Yes, PEG is above 1, but you're paying up a bit for steady earnings growth.

BUY

US insurance broker. Really likes the business model. Corporate benefits, retirement planning. Right now we're in a "hard" market, where pricing is accelerating. Doesn't have the risk of paying out claims, just collects the premium and takes its share.

PAST TOP PICK

(A Top Pick Nov 08/23, Up 21%)

Bumpy through 2024 due to acquisition of mid-market company plus weak results in corporate division. Will benefit from higher transaction volumes due to lower interest rates. Very stable, high cashflow.

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Jamie Murray Aon Corp. AON-N TOP PICK Nov 08, 2023

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