Do You Believe Arthur J. Gallagher (AJG) Could Deliver Mid-Teens EPS Growth for Years?

Do You Believe Arthur J. Gallagher (AJG) Could Deliver Mid-Teens EPS Growth for Years?

Thu, September 3, 2026 at 6:01 PM GMT+3 3 min read

• AJG +1.08%

Eagle Capital Management, an investment management company, released its second quarter 2026 investor letter. A copy of the letter can be downloaded here. In the quarter, Eagle Capital Management discussed how enthusiasm around AI capital spending has driven strong S&P 500 earnings growth while also increasing risks from elevated valuations, concentrated demand, and aggressive investment assumptions. Eagle remains a strong believer in AI but prefers constructing a portfolio that can perform across multiple outcomes rather than relying on one forecast. The firm believes current earnings can overstate underlying economics because semiconductor equipment is depreciated over several years, while free cash flow growth remains much weaker. It also expects competition and additional capacity across AI labs, hyperscalers, and semiconductors to eventually create winners and losers. These dynamics are encouraging Eagle to recycle capital toward attractive opportunities outside the most crowded AI trades while maintaining selective exposure to high-quality beneficiaries. The portfolio trades at a 20% market discount with faster expected EPS growth. Please review the Strategy's top five holdings for key selections in 2026.

In its second-quarter 2026 investor letter, Eagle Capital Management highlighted Arthur J. Gallagher & Co. (NYSE:AJG). Arthur J. Gallagher & Co. (NYSE:AJG) provides insurance and reinsurance brokerage, consulting, and third-party property/casualty claims settlement and administration services to entities and individuals. On September 02, 2026, Arthur J. Gallagher & Co. (NYSE:AJG) closed at $264.46 per share. Over the past month, Arthur J. Gallagher & Co. (NYSE:AJG) was up 5.05%, while its shares lost 11.91% over the past 52 weeks. Arthur J. Gallagher & Co. (NYSE:AJG) has a market capitalization of $67.78 billion.

Eagle Capital Management stated the following regarding Arthur J. Gallagher & Co. (NYSE:AJG) in its Q2 2026 investor letter:

"High quality with low volatility (24% of capital): London Stock Exchange, Danaher, S&P Global, Mastercard, A.J. Gallagher: Approximately a quarter of Eagle's portfolio is spread across a handful of superb businesses that exhibit high and stable margins, strong returns on capital, wide competitive advantages, and well above GDP growth. We expect the group to deftly navigate the integration of AI into their markets. Most operate with a combination of oligopoly/monopoly assets, network effects, or regulatory moats. A.J. Gallagher is a commercial insurance broker that continues to gain share in a consolidating industry.

A few years ago, these stocks were priced for perfection. Their attractive characteristics were prized, and the group traded at more than 30x earnings. Over the past five years, the businesses have grown significantly, while the stocks have de rated. Today, the group trades at a high teen multiple. In a market that is growing EPS at nearly 20%, their steady growth isn't scarce. However, as earnings in the economy normalize back towards mid businesses should demonstrate significant outperformance. We expect EPS growth to approach mid teens over the next several years."

Arthur J. Gallagher & Co. (NYSE:AJG) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held Arthur J. Gallagher & Co. (NYSE:AJG) at the end of the second quarter which was 54 in the previous quarter.While we acknowledge the potential of Arthur J. Gallagher & Co. (NYSE:AJG) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Arthur J. Gallagher & Co. (NYSE:AJG) and shared Brown Advisory's' insight on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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