In this article, we discuss 10 stocks to buy according to Carlson Capital. If you want to skip our detailed analysis of the fund’s investment philosophy and performance, go directly to 5 Stocks to Buy According to Carlson Capital.
Clint Carlson established Carlson Capital, an alternative asset management hedge fund, in 1993. The fund, whose main office is in Dallas, Texas, offers its services to enterprises and pooled investment vehicles and manages close to $5.3 billion. Carlson Capital’s multi-strategy approach to investing employs: risk arbitrage, convertible arbitrage, relative value arbitrage (mainly pairs trading), event-driven arbitrage, distressed/credit arbitrage, and traditional long/short strategies. Three pillars—ideology, people, and process—direct the fund’s investment decisions. Mr. Carlson is currently Carlson Capital’s president and chief investment officer.
According to the Wall Street Journal, the fund has maintained its success since inception, including 39% returns in 2010 on a $1 billion investment in distressed home bonds. Currently, the Black Diamond and Double Black Diamond funds handle most of Clint Carlson’s assets, which total more than $6 billion. In addition, the hedge fund’s Black Diamond Arbitrage Fund invests in merger possibilities, one of its multifaceted strategies. It had over $666 million in assets in 2021 and returned 8.4% to investors. Despite its challenges, the hedge fund had a solid start to 2022, with its flagship fund, Double Black Diamond, returning 3.94% in April. In 2021, Clint Carlson’s Carlson Capital recorded above-average results, gaining 13.3% compared to the 10% average return for hedge funds.
Carlson’s hypothesis states that money is divided across many different businesses, with no one industry accounting for more than 30% of the total. In the first quarter of 2022, Carlson Capital’s portfolio comprised of 145 different stocks, with the top 10 accounting for around 35.83% of the total equity weight compared to 46.76% in the prior report. The hedge fund’s 13F portfolio was worth about $1.46 billion as of Q1 2022, down from $1.74 billion the previous quarter. The most important equities in Carlson Capital’s portfolio were Exxon Mobil Corporation (NYSE:XOM), Wells Fargo & Company (NYSE:WFC), and Morgan Stanley (NYSE:MS).
Carlson Capital has a $5.15 million stake in Exxon Mobil Corporation (NYSE:XOM). On June 21, Credit Suisse analyst Manav Gupta upgraded Exxon Mobil Corporation (NYSE:XOM)’s to ‘Outperform’ from ‘Neutral’ and also boosted his price target from $115 to $125.
Clint Carlson of Carlson Capital
Additionally, the fund manager owned a sizable amount of Wells Fargo & Company (NYSE:WFC) shares. On July 1, RBC Capital analyst Gerard Cassidy reaffirmed a ‘Sector Perform’ rating on Wells Fargo & Company (NYSE:WFC) while trimming his price objective from $55 to $45. In a research note, the analyst explained to investors that the price target cut was due to market concerns about an impending recession and his assessment of the company’s profitability and risk concerning a peer group of other similar businesses.
In Morgan Stanley (NYSE:MS), Carlson Capital owned 69,000 shares. On July 5, Susan Roth Katzke of Credit Suisse maintained an ‘Outperform’ rating on Morgan Stanley (NYSE:MS), while cutting her price objective from $100 to $95. The analyst reduced her projections to reflect the drop in market value.
Our Methodology
Here is our list of 10 stocks to buy according to Carlson Capital. The equities were chosen from the hedge fund’s first-quarter regulatory filings. The number of hedge funds with positions in each company was determined using data from about 900+ elite hedge funds tracked by Insider Monkey in Q1 2022.
Stocks to Buy According to Carlson Capital
10. Activision Blizzard, Inc. (NASDAQ:ATVI)
Carlson Capital’s Stake Value: $28,039,000
Percentage of Carlson Capital’s Portfolio: 1.91%
Number of Hedge Fund Holders: 80
Activision Blizzard, Inc. (NASDAQ:ATVI) creates and offers interactive entertainment goods and services. Activision Blizzard, Inc. (NASDAQ:ATVI) Entertainment formally bought Proletariat, a Boston-based startup, on July 1 to better serve players of the well-known massively multiplayer online role-playing game World of Warcraft. Securities filings for Q1 2022 revealed that Carlson Capital acquired 350,000 shares of Activision Blizzard, Inc. (NASDAQ:ATVI), worth $28.04 million, representing 1.91% of its total 13F holdings.
In addition to Exxon Mobil Corporation (NYSE:XOM), Wells Fargo & Company (NYSE:WFC), and Morgan Stanley (NYSE:MS), Activision Blizzard, Inc. (NASDAQ:ATVI) is one of the stocks to buy according to Carlson Capital.
Famed investor and billionaire Warren Buffett’s Berkshire Hathaway was the most significant stakeholder of Activision Blizzard, Inc. (NASDAQ:ATVI) as of the end of the first quarter. The Oracle of Omaha held 64.32 million shares of Activision Blizzard, Inc. (NASDAQ:ATVI) valued at $5.15 billion after increasing its stake in the company by a whopping 339% during Q1.
According to Insider Monkey’s database, 80 hedge funds were bullish on Activision Blizzard, Inc. (NASDAQ:ATVI) on March 31, up from 70 in the preceding quarter. As a result, the combined value of their stakes increased from $3.66 billion to $9.48 billion.
In its Q4 2021 investor letter, Baron Partners Fund mentioned Activision Blizzard, Inc. (NASDAQ:ATVI). Here is what the fund said:
“The Fund’s Core Growth investments were negatively impacted by the market rotation to value-oriented businesses. Fundamentals for most of our Core Growth holdings remain strong. We exited two positions in this space, which included Activision Blizzard, Inc. We believe ESG concerns at Activision could be a negative for the company in the coming years.
Shares of Activision Blizzard, Inc., a leading video game publisher, detracted from performance. The company reported solid earnings results and maintained guidance for fiscal year 2021. However, the stock fell primarily due to a combination of increased concern around an employee lawsuit alleging sexual harassment and timing delays for two key Blizzard games (Diablo IV and Overwatch 2). We sold our position.”
9. Glatfelter Corporation (NYSE:GLT)
Carlson Capital’s Stake Value: $28,387,000
Percentage of Carlson Capital’s Portfolio: 1.94%
Number of Hedge Fund Holders: 10
Glatfelter Corporation (NYSE:GLT) is a supplier of engineered materials. Carlson Capital strengthened its position in Glatfelter Corporation (NYSE:GLT) by buying 350,000 additional shares in Q1. That raised its stake in Glatfelter Corporation (NYSE:GLT) to 2.29 million shares worth $28.39 million. According to Insider Monkey’s data, 10 hedge funds were bullish on Glatfelter Corporation (NYSE:GLT) at the end of Q1, up from 7 in the prior quarter.
On May 10, BMO Capital analyst Mark Wilde maintained an ‘Outperform’ rating on Glatfelter Corporation (NYSE:GLT) while cutting his price objective from $18 to $12. Glatfelter Corporation (NYSE:GLT)’s Q1 data suggested that 2022 would be difficult owing to Russian sanctions having a toll, as Russia is a significant market for the company’s Euro-based products, the analyst warned investors in a research note.
Glatfelter Corporation (NYSE:GLT) is a dependable option when it comes to dividend payouts to shareholders, as the company has been paying dividends since 1989. On May 5, Glatfelter Corporation (NYSE:GLT) announced a quarterly dividend of $0.14 per share, in line with the previous payout.
8. First Horizon Corporation (NYSE:FHN)
Carlson Capital’s Stake Value: $29,128,000
Percentage of Carlson Capital’s Portfolio: 1.99%
Number of Hedge Fund Holders: 44
As a bank holding company, First Horizon Corporation (NYSE:FHN) principally offers various financial services through its main subsidiary, First Horizon Bank. At the end of Q1, Simon Sadler’s Segantii Capital was the leading shareholder of First Horizon Corporation (NYSE:FHN), holding about 10.78 million shares.
Carlson Capital added First Horizon Corporation (NYSE:FHN) to its portfolio by acquiring 1.24 million shares during Q1 2022, worth $29.13 million, representing 1.99% of the total value of its 13F portfolio. First Horizon National Corporation (NYSE:FHN) investors should be aware of an increase in enthusiasm from smart money in the first quarter of 2022. First Horizon National Corporation (NYSE:FHN) was in 44 hedge funds’ portfolios at the end of the first quarter of 2022, compared to 24 in the preceding quarter. That represents an all-time high level of hedge fund ownership of the stock.
7. Vonage Holdings Corp. (NASDAQ:VG)
Carlson Capital’s Stake Value: $33,596,000
Percentage of Carlson Capital’s Portfolio: 2.29%
Number of Hedge Fund Holders: 37
Vonage Holdings Corp. (NASDAQ:VG) provides communication services via cloud-connected devices. According to Insider Monkey’s database, Vonage Holdings Corp. (NASDAQ:VG) was part of 37 hedge funds’ portfolios at the end of Q1, down from 38 funds in the earlier quarter.
Following Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC)’s announcement that the SEC was looking into alleged allegations of Iraqi bribery, George Sutton of Craig-Hallum downgraded Vonage Holdings Corp. (NASDAQ:VG) from ‘Hold’ to ‘Sell’ on June 10 with a $14.50 price objective, down from $21. According to comparative assessments, Ericsson is overpaying Vonage Holdings Corp. (NASDAQ:VG) by $3.7 billion. If a deal can’t be reached, the business would only pay Vonage a $200 million breakup fee. Ericsson announced plans to acquire Vonage Holdings Corp. (NASDAQ:VG) on December 16 for a price of $6.2 billion, or $21 per share, in an all-cash deal.
According to Insider Monkey’s analysis of publicly accessible hedge fund and institutional investor holdings data, Israel Englander’s Millennium Management was the biggest stakeholder of Vonage Holdings Corp. (NASDAQ:VG), owning close to $152.01 million in shares. Magnetar Capital is close behind Millennium Management, with a $122.75 million holding; the fund had 1.3% of its 13F portfolio’s assets invested in Vonage Holdings Corp. (NASDAQ:VG).
Here is what Adestella Investment Management had to say about Vonage Holdings Corp. (NASDAQ:VG) in its Q4 2020 investor letter:
“Vonage (VG) – the VG thesis has largely played out as expected. The market has gradually shifted its focus from the declining consumer operations to the growing business ones, highlighted by the API unit. As its legacy home phone VOIP solutions continue to become a smaller and smaller portion of the overall pie, we think this trend will continue. If the API unit can continue to grow at 25-30%, that segment alone covers most of the enterprise value at just a ~6x sales multiple before giving any credit to the sizable UCaaS operations. The API unit’s closest comparable, Twilio (TWLO), currently trades at 31x sales, so it’s not unreasonable to think there’s upside to our estimate here. Shares have returned around 80% since our writeup (and slightly higher from our cost as we added in the weeks that followed), but we’ve maintained most of our position as the key growth drivers remain intact.”
6. CMC Materials, Inc. (NASDAQ:CCMP)
Carlson Capital’s Stake Value: $34,484,000
Percentage of Carlson Capital’s Portfolio: 2.35%
Number of Hedge Fund Holders: 35
CMC Materials, Inc. (NASDAQ:CCMP) creates, produces, and markets consumables for chemical mechanical planarization. Carlson Capital elevated its position in CMC Materials, Inc. (NASDAQ:CCMP) by an impressive 435% in Q1 2022, holding 186,000 shares worth over $34.48 million. The stock accounted for 2.35% of the fund’s total 13F portfolio value.
Just like Exxon Mobil Corporation (NYSE:XOM), Wells Fargo & Company (NYSE:WFC), and Morgan Stanley (NYSE:MS), CMC Materials, Inc. (NASDAQ:CCMP) is one of the key stocks in the Q1 portfolio of Carlson Capital.
Entegris, Inc. (NASDAQ:ENTG) acquired CMC Materials, Inc. (NASDAQ:CCMP) on July 6. Upon conclusion of the deal, CMC Materials, Inc. (NASDAQ:CCMP) became Entegris, Inc. (NASDAQ:ENTG)’s fully owned subsidiary. On July 7, Mizuho analyst Kieran de Brun maintained a ‘Buy’ rating on Entegris, Inc. (NASDAQ:ENTG) while diminishing his price target from $160 to $146. The analyst sees the CMC Materials, Inc. (NASDAQ:CCMP) purchase as a complementary one that will gradually bring considerable value. Given the decline in the share price of Entegris, De Brun recommended that investors buy them now.
As of the end of the first quarter, Insider Monkey found that CMC Materials, Inc. (NASDAQ:CCMP) was part of 35 hedge funds’ portfolios. Those funds’ total stakes in CMC Materials, Inc. (NASDAQ:CCMP) were worth $894.58 million, up from $514.08 million the prior quarter, from 26 positions.
Carillon Tower Advisers mentioned CMC Materials, Inc. (NASDAQ:CCMP) in its Q4 2021 investor letter. Here is what the fund said:
“CMC Materials supplies consumable materials used in semiconductor chip production as well as oil pipelines. Shares rose after it was announced the firm had reached an agreement to be acquired by a materials sciences company that is another of the fund’s holdings in a cash and stock deal valuing the company at a healthy premium to the prior close price. We believe this acquisition makes a lot of sense given the increasing importance of critical chemicals used by chip makers at smaller nodes.”
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Disclosure: None. 10 Stocks to Buy According to Carlson Capital is originally published on Insider Monkey.
