In this article, we will take a look at the top 10 stock picks of GuardCap Asset Management, which is a long-only fund that takes a long-term view while making investment decisions. To skip our detailed analysis of GuardCap Asset Management’s profile, investment strategy, and 13F holdings, you can go directly to see the 5 Long-Term Stocks to Buy.
GuardCap Asset Management is a specialist investment company based in London and solely focused on managing concentrated, bottom-up, strategies for institutional investors. The investment manager is a wholly owned subsidiary of Toronto-based financial services firm, Guardian Capital Group Limited. GuardCap Asset Management had $11.71 billion in assets under management (AUM), as of December 31, 2022.
GuardCap Asset Management’s primary strategies are Global Equities and Global Emerging Market Equities. The strategies are long-only equity strategies, targeting long term absolute investment returns and investing primarily in shares and related instruments of shares, with typical portfolios holding 20-25 stock positions, seeking returns which exhibit lower volatility than their benchmark over the long-term.
GuardCap Asset Management’s GuardCap Global Equity Fund USD I, which was launched in December 2014, has generated an annualized return of 10.59% since its inception, compared to 7.55% for MSCI World Index, as of October 31, 2023. On the other hand, its emerging market equities fund has underperformed the benchmark and has produced an annualized return of 26% compared to 30% for the benchmark, between December 19, 2016, to December 31, 2022.
GuardCap Asset Management typically focuses on the long-term with an investment horizon of 5 to 10 years. The 13F portfolio of the investment manager contains some of the leading companies and is comprised of 26 large cap stocks across different industries. The top 10 stocks, based on portfolio weight, accounted for 81.15% of the aggregate portfolio weight. The list includes companies such as CME Group Inc. (NASDAQ:CME), Mastercard Incorporated (NYSE:MA), Alphabet Inc. (NASDAQ:GOOG), and Booking Holdings Inc. (NASDAQ:BKNG), among others.
In his quarterly Reflections & Insights outlook for Q4 2023, Steve Bates, the Chief Investment Officer of GuardCap Asset Management, made the following comments about the recent developments in the artificial intelligence arena and the market speculation related to them:
“The enthusiasm in the Information Technology sector for AI is still present, and the industry giants are all positioning themselves to benefit from how they foresee the technology developing. As is often the case with any new development, it is not the technology itself which is the barrier to entry but the ownership of vast datasets. These exist in the tech giants themselves, of course – the old adage that ‘if you don’t know what the product is, you’re the product’ holds true. They can also be found in institutions with data protection concerns, who don’t know how to monetise assets or suffer from institutional inertia – for example, Britain’s NHS, which probably has the largest comprehensive health data anywhere, but cannot agree about what to do with it. The point is that it is too early to back a single horse in this race, but the investing herd doesn’t want to explain to its clients that it doesn’t know what’s going on, so it sprinkles fairy dust on a few supposed beneficiaries. This means that the enthusiasm probably has further to run.”
A close-up of a stock exchange board, displaying the active trading of the company’s securities.
Methodology
Since GuardCap Asset Management is a long-only fund that takes a long-term investment approach in investing, we picked top 10 stock picks of the fund as of the end of the third quarter of 2023 to see some promising stocks to buy according to the fund.
The stocks have been ranked based on the weightage of each company in GuardCap Asset Management’s 13 Portfolio.
Long-Term Stocks to Buy According to GuardCap Asset Management
10. MarketAxess Holdings Inc. (NASDAQ:MKTX)
GuardCap Asset Management’s Stake Value: $404,890,314
Percentage of GuardCap Asset Management’s 13F Portfolio: 5.62%
Number of Hedge Fund Holders: 28
New York-based MarketAxess Holdings Inc. (NASDAQ:MKTX) operates a leading, institutional electronic trading platform focused on global fixed-income markets. Its network comprises over 2,000 firms, including the world’s leading asset managers and institutional broker-dealers.
On October 25, MarketAxess Holdings Inc. (NASDAQ:MKTX) reported the financial results for Q3 2023. Its revenue remained nearly constant y-o-y at $172 million, while it generated a net income of $55 million which translated to an EPS of $1.46. Both the top and bottom line were nearly in line with the consensus estimates.
Following the earnings release, Citigroup analyst Christopher Allen lowered the price target for MarketAxess Holdings Inc. (NASDAQ:MKTX) shares to $270 from $330 and maintained a ‘Buy’ rating. He target price represents a potential upside of 18% based on the share price on November 20.
According to the Insider Monkey data on 910 leading hedge funds, 28 hedge funds were long MarketAxess Holdings Inc. (NASDAQ:MKTX) shares as of Q2 2023, with the total shares held by hedge funds valued at $791 million. GuardCap Asset Management was the largest shareholder on record with ownership of 2.0 million shares.
9. Automatic Data Processing, Inc. (NASDAQ:ADP)
GuardCap Asset Management’s Stake Value: $426,954,198
Percentage of GuardCap Asset Management’s 13F Portfolio: 5.93%
Number of Hedge Fund Holders: 50
Automatic Data Processing, Inc. (NASDAQ:ADP), is a Roseland, New Jersey-based global technology company providing comprehensive cloud-based human capital management (HCM) solutions that unite HR, payroll, talent, time, tax, and benefits administration. It serves nearly 1 million clients across 140 countries and territories.
Automatic Data Processing, Inc. (NASDAQ:ADP) posted solid financial results for the latest quarter. Its revenue increased by 7% y-o-y to $4.5 billion, while net earnings increased by 10% y-o-y to $859 million. It reported a normalized EPS of $2.08, which surpassed the consensus by $0.06.
On November 8, the board of directors of Automatic Data Processing, Inc. (NASDAQ:ADP) approved a 12% increase in quarterly cash dividend to an annual rate of $5.60 per share. The increase marks 49th consecutive year of dividend increases for the company.
As of Q2 2023, 50 of the hedge funds tracked by Insider Monkey held shares of Automatic Data Processing, Inc. (NASDAQ:ADP), valued at $3.5 billion. Its largest shareholder was Fundsmith LLP with ownership of 5.5 million shares valued at $1.2 billion.
8. Colgate-Palmolive Company (NYSE:CL)
GuardCap Asset Management’s Stake Value: $470,935,433
Percentage of GuardCap Asset Management’s 13F Portfolio: 6.54%
Number of Hedge Fund Holders: 58
Colgate-Palmolive Company (NYSE:CL) is a leading global consumer products company focused on Oral Care, Personal Care, Home Care and Pet Nutrition products sold across more than 200 countries and territories.
Colgate-Palmolive Company (NYSE:CL) generated an EPS of $0.86 and a revenue of $4.92 billion in Q3 2023. Both the figures narrowly exceeded consensus estimates by $0.07 and $100 million, respectively. Following the earnings release, Morgan Stanley analyst Dara Mohsenian lowered the price target on the consumer company’s shares to $85 from $89 but maintained an ‘Overweight’ rating.
Colgate-Palmolive Company (NYSE:CL) has paid uninterrupted dividends on its common stock since 1895. On September 13, the board of directors of the company declared a cash dividend of $0.48 per share for the quarter.
As of Q2 2023, 58 of the 910 hedge funds tracked by Insider Monkey were long Colgate-Palmolive Company (NYSE:CL) and owned shares valued at $2.7 billion. Jean-Marie Eveillard’s First Eagle Investment Management was the largest shareholder on record with ownership of 11.1 million shares valued at $855 million.
7. Yum China Holdings, Inc. (NYSE:YUMC)
GuardCap Asset Management’s Stake Value: $480,623,503
Percentage of GuardCap Asset Management’s 13F Portfolio: 6.67%
Number of Hedge Fund Holders: 37
Shanghai-based Yum China Holdings, Inc. (NYSE:YUMC) is China’s largest restaurant company with more than 14,000 restaurants across more than 1,900 cities spread throughout mainland China. The company was formed through separation from Yum! Brands, Inc. (NYSE:YUM) in November 2016 and its shares have been listed on the NYSE since then. On October 24, 2022, its shares also started trading on the Hong Kong Stock Exchange.
As of Q2 2023, 37 hedge funds out of the more than 900 hedge funds tracked by Insider Monkey held shares of Yum China Holdings, Inc. (NYSE:YUMC), valued at $984 million. GuardCap Asset Management was the largest shareholder in the company with ownership of 9.1 million shares.
In its “Cooper Investors Global Equities Fund” Q3 2023 investor letter, Cooper Investors, an investment management firm, made the following comments about Yum China Holdings, Inc. (NYSE:YUMC):
“We are accustomed to consumer rollout stories in Asia trading at eye-watering valuations, yet with the negativity swirling around China today there is material Value Latency with Yum China trading on an enterprise value of ~US$20bn and a multiple of earnings ~20 times. The business operates around 13,500 stores and incremental unit economics on new stores are among the best we’ve seen globally in the QSR space, with payback periods on small formats even quicker. Management did a good job navigating the brutal COVID period. With that behind them, the future looks bright and underappreciated by the market. With buybacks of around US$3bn by 2026 the organic growth, combined with reduced share count, should translate to earnings per share growth in the high-teens or even low twenties percent. If that still doesn’t whet the appetite for fried chicken, add a 1% dividend on top.”
6. UnitedHealth Group Inc. (NYSE:UNH)
GuardCap Asset Management’s Stake Value: $488,524,313
Percentage of GuardCap Asset Management’s 13F Portfolio: 6.78%
Number of Hedge Fund Holders: 111
UnitedHealth Group Inc. (NYSE:UNH) provides health coverage, software, data, and consultancy services. Its health insurance business utilizes technology and data capabilities to help coordinate patient care, improve affordability, analyze cost trends, manage pharmacy benefits, and create a simpler consumer experience.
On October 13, UnitedHealth Group Inc. (NYSE:UNH) released its financial results for the third quarter of 2023. It generated a strong performance during the quarter with total revenue and net income both exceeding Q3 2022 figures by more than 10% at $92.4 billion and $6.0 billion, respectively.
Following the earnings release, RBC Capital raised the firm’s price target on UnitedHealth Group Inc. (NYSE:UNH) shares to $596 from $572 and maintained an ‘Outperform’ rating.
As of Q2 2023, 111 of the 910 hedge funds tracked by Insider Monkey owned shares of UnitedHealth Group Inc. (NYSE:UNH), valued at $10.1 billion. Its largest shareholder was GQG Partners with ownership of 3.1 million shares valued at $1.6 billion.
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Disclosure: None. 10 Long-Term Stocks to Buy is originally published on Insider Monkey.
