In this article, we discuss 10 stocks to buy now according to Jeffrey Gates’ Gates Capital. If you want to skip our detailed analysis of Gates’ history, investment philosophy, and hedge fund performance, go directly to 5 Stocks to Buy Now According to Jeffrey Gates’ Gates Capital.
Jeffrey Gates earned a bachelor’s degree in finance from Kansas State University and an MBA degree from the University of Pennsylvania’s Wharton School. He worked as a high-yield bond research analyst at Kidder, Peabody & Company. Between 1990 and 1995, Jeffrey Gates worked for Schroder & Co. as a high yield salesperson, and from 1995 to 1996, as a director. He focused on high yield bond research for most of his career, which dates back to 25 years. Jeffrey Gates is an event-driven financier who focuses on cash flow and long-term value generation at publicly listed companies. Jeffrey Gates founded Gates Capital in 1996. Presently, he is the president and portfolio manager of the hedge fund.
Gates Capital, a New-York based hedge fund, uses an event-driven investment approach, implying it tries to profit from short-term stock price mispricings that happen before or after a business event. Within a company’s capital structure, the hedge fund aims to locate the best risk/reward connections for long holdings and the worst risk/reward ties for short positions. It invests throughout the capital structure using a disciplined, cash-flow-oriented, and credit-focused strategy to maximize risk-adjusted returns. The hedge fund has $3.62 billion in managed 13F securities and a top 10 concentration of 53.63%, according to the 13F filing for the fourth quarter of 2021.
The hedge fund made significant investments in the fields of services, technology, finance, and healthcare. International Flavors & Fragrances Inc. (NYSE:IFF), Caesars Entertainment, Inc. (NASDAQ:CZR), and Bath & Body Works, Inc. (NYSE:BBWI) are among the hedge fund’s most prominent positions.
Jeffrey Gates’ Gates Capital fund owns 607,328 shares of International Flavors & Fragrances Inc. (NYSE:IFF) worth over $91.49 million, despite selling 366,053 shares in the fourth quarter. Lauren Lieberman, an analyst at Barclays, reduced her price objective on Flavors & Fragrances Inc. (NYSE:IFF) to $121 from $127 on February 14 and maintained an Underweight rating on the stock. The analyst expected IFF to be more flexible in its 2022 projection but warned that delivering EBITDA would be challenging in an already difficult market.
Jeffrey Gates is also bullish on Caesars Entertainment, Inc. (NASDAQ:CZR). Even though his hedge fund slashed its stake in the company by 2% in the fourth quarter of 2021, it still owns 1.06 million shares of the company, worth $99.39 million. On February 28, Loop Capital analyst Daniel Adam boosted his price target on Caesars Entertainment, Inc. (NASDAQ:CZR) to $109 from $99 and reiterated a Buy rating on the shares.
Bath & Body Works, Inc. (NYSE:BBWI) is another large-cap stock in Gates Capital’s portfolio, in which the fund has reduced its stake by 23% in the fourth quarter of 2021. Following the Q4 results, B. Riley analyst Susan Anderson cut her price target on Bath & Body Works, Inc. (NYSE:BBWI) to $76 from $91 and reiterated a Buy rating. The analyst said that the business provided guidance a little below the market estimates.
Our Methodology
With this economic outlook in mind, let’s start our list of the 10 stocks to buy now according to Jeffrey Gates’ Gates Capital. We picked these stocks from the Q4 portfolio of Gates’ hedge fund.
Stocks to Buy Now According to Jeffrey Gates’ Gates Capital
10. VICI Properties Inc. (NYSE:VICI)
Gates Capital Stake Value: $155,903,000
Percentage of Gates Capital’s 13F Portfolio: 4.31%
Number of Hedge Fund Holders: 37
VICI Properties Inc. (NYSE:VICI) is a casino, hospitality, and entertainment real estate investment trust that owns, buys, and develops properties. Following a limitation period, Citi analyst Smedes Rose initiated coverage of VICI Properties Inc. (NYSE:VICI) with a Buy rating and a $32 price target on February 7.
In the fourth quarter, Jeffrey Gates cut his stake in VICI Properties Inc. (NYSE:VICI) by more than 1.82 million shares, reducing his total stake by 27%. However, he still holds more than 5.18 million shares of VICI Properties Inc. (NYSE:VICI), worth more than $155.90 million. He first invested in VICI Properties Inc. (NYSE:VICI) in the first quarter of 2018.
At the end of the fourth quarter of 2021, 37 hedge funds were bullish on VICI Properties Inc. (NYSE:VICI), according to Insider Monkey’s exclusive database, down from 47 in Q3. Ken Griffin’s Citadel Investment Group is the most significant stakeholder in VICI Properties Inc. (NYSE:VICI), with 6.91 million shares worth $208.16 million.
In addition to International Flavors & Fragrances Inc. (NYSE:IFF), Caesars Entertainment, Inc. (NASDAQ:CZR), and Bath & Body Works, Inc. (NYSE:BBWI), VICI Properties Inc. (NYSE:VICI) is a top stock pick of Jeffrey Gates’ Gates Capital.
9. Wyndham Hotels & Resorts, Inc. (NYSE:WH)
Gates Capital Stake Value: $156,394,000
Percentage of Gates Capital’s 13F Portfolio: 4.32%
Number of Hedge Fund Holders: 33
Wyndham Hotels & Resorts, Inc. (NYSE:WH) is a company that operates and franchises hotels under the Wyndham name. After taking up coverage of Wyndham Hotels & Resorts, Inc. (NYSE:WH) on December 2, Loop Capital analyst Daniel Adam reiterated a Buy rating on the stock with a $99 price objective.
Jeffrey Gates’ Gates Capital is one of Wyndham Hotels & Resorts, Inc. (NYSE:WH)’s most prominent investors. Even after selling 220,328 shares of Wyndham Hotels & Resorts, Inc. (NYSE:WH) in the fourth quarter, Jeffrey Gates’ Gates Capital still holds more than 1.74 million shares of the company, worth about $156.39 million.
According to our database, the number of Wyndham Hotels & Resorts, Inc. (NYSE:WH)’s long hedge funds positions increased at the end of the fourth quarter of 2021. There were 33 hedge funds that hold a position in Wyndham Hotels & Resorts, Inc. (NYSE:WH) in Q4, up from 26 funds in the third quarter.
8. Carrier Global Corporation (NYSE:CARR)
Gates Capital Stake Value: $164,738,000
Percentage of Gates Capital’s 13F Portfolio: 4.55%
Number of Hedge Fund Holders: 45
Carrier Global Corporation (NYSE:CARR) is a company that sells HVAC, security, and building automation systems. The number of hedge funds tracked by Insider Monkey having stakes in Carrier Global Corporation (NYSE:CARR) went down to 45 in Q4, from 46 in the preceding quarter. These stakes hold a consolidated value of $1.25 billion, down from $1.32 billion.
On February 16, Carrier Global Corporation (NYSE: CARR) and Marriott International announced a multi-year partnership to research and develop innovative technologies to improve in-room services and hotel construction.
Mizuho analyst Brett Linzey cut his price objective on Carrier Global Corporation (NYSE:CARR) to $50 from $57 on February 9 and maintained a Neutral rating on the stock. Linzey warned investors in a research note that Carrier Global Corporation (NYSE:CARR)’s fourth quarter was overshadowed by supply chain challenges and inflation.
Davis Funds, in its third quarter 2021 investor letter, mentioned Carrier Global Corporation (NYSE:CARR). Here is what Davis Funds said about Carrier Global Corporation:
“In the industrial space, we own a select list of well-entrenched market leaders, such as Carrier Global, a global leader in heating, ventilation and air conditioning (HVAC) solutions.. These have recovered this year from their lulls in 2020, yet continue to trade at reasonable multiples of subdued earnings, creating a potential setup for the double play of recovering multiples on recovering earnings.”
7. GXO Logistics, Inc. (NYSE:GXO)
Gates Capital Stake Value: $166,223,000
Percentage of Gates Capital’s 13F Portfolio: 4.59%
Number of Hedge Fund Holders: 37
GXO Logistics, Inc. (NYSE:GXO) is a North American and European logistics company. It provides order fulfillment, warehousing and distribution, e-commerce, reverse logistics, and other supply chain services. Of the 37 hedge funds that were bullish on GXO Logistics, Inc. (NYSE:GXO) according to the fourth quarter database of Insider Monkey, Orbis Investment Management is the leading stakeholder of the company, holding 9.56 million shares worth $868.35 million.
On March 1, Stifel analyst J. Bruce Chan initiated coverage of GXO Logistics, Inc. (NYSE:GXO) with a Buy rating and setting a price target of $94. According to the analyst, supply chain instability has fueled the secular outsourcing trend, with GXO currently being the world’s largest pure-play logistics services provider.
Gates Capital owns over 1.83 million GXO Logistics, Inc. (NYSE:GXO) shares according to his Q4 13F filings, worth $166.22 million, representing 4.59% of the fund’s total investments for the fourth quarter of 2021. In the fourth quarter, Gates Capital boosted its stake in GXO Logistics, Inc. (NYSE:GXO) by 6%.
ClearBridge Investments, an investment management firm, in its third quarter 2021 investor letter mentioned GXO Logistics, Inc. (NYSE:GXO). Here is what the fund said:
“GXO Logistics was recently spun off from its parent company, XPO Logistics, to become the world’s second-largest contract logistics provider. The quality of this business is underappreciated by the market because it had been embedded within XPO and lacked visibility. We believe the stock will receive a higher valuation as its attributes become more widely recognized, including revenue growth of high single to low double digits, +90% retention rate, business visibility from multiyear contracts, and +20% return on invested capital. GXO’s superior business makeup also adds to its appeal, with 30% of sales coming from automation and robotics, compared to the industry average of 5%. E-commerce and technology drive 50% of total revenue.”
6. DaVita Inc. (NYSE:DVA)
Gates Capital Stake Value: $182,181,000
Percentage of Gates Capital’s 13F Portfolio: 5.03%
Number of Hedge Fund Holders: 32
DaVita Inc. (NYSE:DVA) is a medical care company that offers various services. Legendary investor and billionaire Warren Buffett’s Berkshire Hathaway is the most significant stakeholder of DaVita Inc. (NYSE:DVA) out of the 924 hedge funds tracked by Insider Monkey as of the end of the fourth quarter. The Oracle of Omaha owns 36.10 million shares of the company worth $4.11 billion.
On January 18, DaVita Inc. (NYSE:DVA) announced the purchase of transplant software firm MedSleuth. MedSleuth is a transplant software firm that helps improve kidney and liver transplant results by linking transplant candidates, transplant facilities, physicians, and care teams. DaVita Inc. (NYSE:DVA) shares have returned 7.24% to investors over the last 12 months as of March 2.
At the end of the fourth quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $4.74 billion in DaVita Inc. (NYSE:DVA), down from 39 the preceding quarter worth $4.81 billion.
DaVita Inc. (NYSE:DVA) is a notable stock pick of Jeffrey Gates, just like International Flavors & Fragrances Inc. (NYSE:IFF), Caesars Entertainment, Inc. (NASDAQ:CZR), and Bath & Body Works, Inc. (NYSE:BBWI).
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Disclosure: None. 10 Stocks to Buy Now According to Jeffrey Gates’ Gates Capital is originally published on Insider Monkey.
