Stock Analysis

Aon plc's (NYSE:AON) recent 3.7% pullback adds to one-year year losses, institutional owners may take drastic measures

NYSE:AON
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Key Insights

  • Significantly high institutional ownership implies Aon's stock price is sensitive to their trading actions
  • A total of 14 investors have a majority stake in the company with 50% ownership
  • Insiders have sold recently

To get a sense of who is truly in control of Aon plc (NYSE:AON), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 86% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 3.7% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 5.9% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Aon, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Aon.

See our latest analysis for Aon

ownership-breakdown
NYSE:AON Ownership Breakdown April 15th 2024

What Does The Institutional Ownership Tell Us About Aon?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Aon. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Aon's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE:AON Earnings and Revenue Growth April 15th 2024

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Aon. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 8.9% of shares outstanding. With 8.0% and 6.8% of the shares outstanding respectively, Capital Research and Management Company and BlackRock, Inc. are the second and third largest shareholders. Furthermore, CEO Gregory Case is the owner of 0.8% of the company's shares.

After doing some more digging, we found that the top 14 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Aon

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can report that insiders do own shares in Aon plc. Insiders own US$773m worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Aon. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 3 warning signs for Aon (1 shouldn't be ignored!) that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Valuation is complex, but we're helping make it simple.

Find out whether Aon is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.