In this article, we will take a look at the 10 stocks to buy under $50 according to Brian Higgins’ King Street Capital. You can skip our detailed analysis of Higgins’ history, investment philosophy, and hedge fund performance, and go directly to the 5 Stocks to Buy Under $50 According to Brian Higgins’ King Street Capital.
Serving as its managing partner and co-portfolio manager, billionaire Brian J. Higgins is the co-founder of the New York-based investment firm, King Street Capital Management. Higgins received his B.S in Business Administration from Villanova University in 1987, beginning his career in finance that same year at the First Boston’s Merchant Banking Group. He then moved on to serve in First Boston’s Special Situations Fund and the Distressed Securities Group, where he earned most of his experience managing distressed funds. In 1995, he established King Street Capital Management alongside fellow billionaire Francis Biondi.
Brian Higgins’ investment strategy revolves around public equity and fixed income markets around the globe. His hedge fund primarily focuses on investments in distressed companies, foreign exchange, equity bonds and warrants. One of the largest and most successful hedge funds in the industry, King Street Capital Management has never reported a losing year, despite economic fluctuations. In fact, the fund reported a 2.5% positive return on investments in 2008, at a time when most of the hedge fund industry was reeling.
According to the recent 13F Filings, King Street Capital, as an investment management firm, oversees more than $1.2 billion in its investment portfolio. The fund’s portfolio is diversified across 9 primary sectors, with the Communications Services sector being the largest one, accounting for 19.7% of the fund’s total portfolio value. A majority of the companies in the fund’s investment portfolio consist of large-cap companies, with companies whose stocks scale up to more than $10 billion in market capitalization making up 21% of the fund’s total value.
Some of the top stocks present in the investment portfolio of King Street Capital Management at the end of the second quarter of 2021 include Wells Fargo & Co. (NYSE:WFC), QUALCOMM Inc. (NYSE:QCOM) and T-Mobile US Inc. (NYSE:TMUS), among others.
Photo by Jason Briscoe on Unsplash
Our Methodology
With this background in mind, let us now look towards the 10 stocks to buy under $50 according to Brian Higgins’ King Street Capital. We made use of King Street Capital’s 13F portfolio for the second quarter for this analysis. The following list will consist of the top stocks present in King Street Capital’s portfolio that have a stock price below $50.
Why should we pay attention to Brian Higgins’ stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Stocks to Buy Under $50 According to Brian Higgins’ King Street Capital
10. Cornerstone Building Brands, Inc. (NYSE:CNR)
Higgins’ Stake Value: $25.4 million
Percentage of Brian Higgins’ 13F Portfolio: 2.09%
Number of Hedge Fund Holders: 25
Stock Price as of October 6: $14.29
Based in North Carolina, Cornerstone Building Brands, Inc. (NYSE:CNR) operates as a commercial construction company, involved in the design, manufacture and marketing of exterior building products. Ranked tenth on the list of the 10 stocks to buy under $50 according to Brian Higgins’ King Street Capital, Cornerstone Building Brands, Inc. (NYSE:CNR) has a market capitalization of $1.82 billion.
According to the recent 13F Filings, Brian Higgins’ King Street Capital holds over 1.4 million shares of Cornerstone Building Brands, Inc. (NYSE:CNR), amounting to over $25.4 million in worth and accounting for 2.09% of the fund’s investment portfolio. At the end of the second quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $818.7 million in Cornerstone Building Brands, Inc. (NYSE:CNR). This is compared to 28 hedge funds in the previous quarter that held stakes worth approximately $652 million.
On June 9, Barclays analyst Matthew Bouley raised his price target on Cornerstone Building Brands, Inc. (NYSE:CNR) to $21 from $15, and kept an Equal Weight rating on the shares.
For the second quarter of 2021, Cornerstone Building Brands, Inc. (NYSE:CNR) reported earnings per share at $0.67, beating market estimates by $0.36. The company also reported revenues of $1.40 billion, surpassing estimates by $5.35 million.
Just like Wells Fargo & Co. (NYSE:WFC), QUALCOMM Inc. (NYSE:QCOM) and T-Mobile US Inc. (NYSE:TMUS), Cornerstone Building Brands, Inc. (NYSE:CNR) has a notable position in King Street Capital’s portfolio.
In its Q2 2021 investor letter, Blue Tower Asset Management declared its expectations for a high rate of return from Cornerstone Building Brands, Inc. (NYSE:CNR). Here is what the fund said:
“While Cornerstone has been engaged in several M&A transactions since the formation of the company from NCI Building Systems and Ply Gem, this quarter saw their first major divestment of a subsidiary. On June 7th, Cornerstone announced that it had reached an agreement with the Nucor Insulated Panel Group to sell Cornerstone’s Integrated Metal Panels business for $1 billion. The Insulated Metal Panels (IMP) business was a legacy subsidiary of NCI and was focused on serving the needs of industrial and commercial clients. The IMP business generated revenues of $349M in 2020. The EBITDA margin for the commercial segment that contained IMP was 14.2% in 2020. If we assume that the IMP business had the same EBITDA margin as its segment, this gives a 2020 EBITDA contribution of $50M. By comparison, the pro forma Adjusted EBITDA for Cornerstone on the whole is $609M.
This sale appears to be accretive for the value of Cornerstone as their net debt after the transaction1 is $2.22 billion, down from $2.97 billion at the end of Q1 2021. Therefore, Cornerstone gave up 8% of their total consolidated EBITDA in exchange for a cash payment equal to 15% of their enterprise value.
This will decrease their new debt-to-EBITDA level to approximately 3.9×2 and moves up their date for reaching their target debt-to-EBITDA level of 2.0-2.5x by a full year.The central idea of our investment philosophy is to buy businesses at bargain valuations. As most stocks trade roughly near their intrinsic values, we must always ask ourselves why businesses appear to have been misjudged by equity markets. In the case of Cornerstone, we believe this was due to three main factors. 1) The large transactions and mergers associated with combining NCI and Ply-Gem created many one-time expenses and hid the underlying profitability of the business. 2) The large amount of debt held by the company caused many institutional investors to be unable to invest in the company due to mandate restrictions. 3) We held the belief that the construction sector, a cyclical industry, was likely to outperform the overall US economy as the country had been building an insufficient amount of new housing for at least the past decade. As the company realizes acquisition synergies, the housing boom continues, and Cornerstone pays down debt, the company’s value will become apparent to investors and share price will rise to meet its true fundamental value. Investors who were previously repelled by the high debt levels will invest at lower leverage levels. The share price has already tripled from the average price our long-term investors in the strategy composite paid, but we still believe the company has a high expected forward rate of return.”
9. Las Vegas Sands Corp. (NYSE:LVS)
Higgins’ Stake Value: $25.5 million
Percentage of Brian Higgins’ 13F Portfolio: 2.09%
Number of Hedge Fund Holders: 48
Stock Price as of October 6: $36.75
Las Vegas Sands Corp. (NYSE:LVS) is ranked ninth on our list of 10 stocks to buy under $50 according to Brian Higgins’ King Street Capital. The Nevada-based firm owns and operates resorts and casinos around the world.
On September 14, Wells Fargo analyst Daniel Politzer began coverage of Las Vegas Sands Corp. (NYSE:LVS) with an Equal Weight rating and $50 price target.
According to its second quarter report, Las Vegas Sands Corp. (NYSE:LVS) declared revenues amounting to more than $1.17 billion, an increase of 1,096.94% on a year-over-year basis.
King Street Capital currently holds over 485,000 shares of Las Vegas Sands Corp. (NYSE:LVS), worth $25.5 million and accounting for 2.09%% of the fund’s total portfolio value. At the end of the second quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes worth $1.75 billion within Las Vegas Sands Corp. (NYSE:LVS). This is compared to 62 hedge funds in the preceding quarter with stakes worth roughly $2.4 billion.
Just like Wells Fargo & Co. (NYSE:WFC), QUALCOMM Inc. (NYSE:QCOM) and T-Mobile US Inc. (NYSE:TMUS), Las Vegas Sands Corp. (NYSE:LVS) has a notable position in King Street Capital’s portfolio.
In its Q2 2021 investor letter, Baron Funds expressed a positive outlook for Las Vegas Sands Corp. (NYSE:LVS). Here is what the fund said:
“The shares of Las Vegas Sands Corporation, a leading developer of luxury casino resorts in Macau and Singapore, declined in the most recent quarter in large part due to COVID-19 travel-related restrictions. We believe the shares are attractively valued and will recover sharply when travel restrictions are lifted.”
8. Wells Fargo & Company (NYSE:WFC)
Higgins’ Stake Value: $33.9 million
Percentage of Brian Higgins’ 13F Portfolio: 2.79%
Number of Hedge Fund Holders: 94
Stock Price as of October 6: $47.87
Wells Fargo & Company (NYSE:WFC) is a financial services company that provides a range of products and services, including banking, insurance, mortgage and leasing services, among numerous others. Ranked eighth on our list of the 10 stocks to buy under $50 according to Brian Higgins’ King Street Capital, the California-based company has a market capitalization of $197.60 billion.
The hedge fund managed by Brian Higgins owns 750,000 shares in Wells Fargo & Company (NYSE:WFC) worth over $33.9 million, representing 2.79% of its portfolio value. At the end of the second quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $7.08 billion in Wells Fargo & Company (NYSE:WFC). This is compared to 96 hedge funds in the preceding quarter with stakes worth roughly $7.4 billion.
On September 1, Deutsche Bank analyst Matt O’Connor raised the price target of Wells Fargo & Company (NYSE:WFC) to $55 from $48 and maintained a “Buy” rating on the shares of the company.
L1 Capital, in its second-quarter 2021 investor letter declared Wells Fargo & Company (NYSE:WFC) as the strongest contributor to its portfolio. Here is what the fund said:
“Wells Fargo (Long +16%) was the strongest contributor to portfolio performance over the quarter. Wells Fargo shares rallied given a better outlook for bad debts driven by improving employment and house price trends. The company had been very undervalued due to excessive fears around likely bad debts due to the pandemic, the continued regulatory “asset cap” (a punishment that was put in place in 2017 for numerous compliance failures) and an inability to commence buybacks. The share price has subsequently recovered strongly in recent months as the company has progressed its turnaround program under the leadership of the well-regarded CEO, Charles Scharf (former CEO of Visa and BNY Mellon). Wells Fargo is now closer to getting the asset cap lifted and has announced a huge cost out program (US$8b+) as well as an $18b buyback program to be completed over the next 12 months. Wells Fargo shares have rallied more than 50% since we initiated the position in late 2020. Given the strong rally, we elected to exit our position and rotate into stocks with larger valuation upside.”
7. UWM Holdings Corporation (NYSE:UWMC)
Higgins’ Stake Value: $37.3 million
Percentage of Brian Higgins’ 13F Portfolio: 3.06%
Number of Hedge Fund Holders: 20
Stock Price as of October 6: $6.64
UWM Holdings Corporation (NYSE:UWMC) operates as a wholesale mortgage lender, engaged in the origination and sale of residential mortgage loans. The company ranks seventh on our list of the 10 stocks to buy under $50 according to Brian Higgins’ King Street Capital.
On July 9, investment advisory Barclays reiterated an Overweight rating on UWM Holdings Corporation (NYSE: UWMC) stock and raised the price target to $9 from $8.
Based on the recent 13F Filings, Brian Higgins owns over 4.4 million shares of UWM Holdings Corporation (NYSE:UWMC), worth more than $37.3 million, accounting for 3.06% of his fund’s total investment portfolio. At the end of the second quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $66.7 million in UWM Holdings Corporation (NYSE:UWMC), up from 19 hedge funds in the previous quarter with stakes worth approximately $76.6 million.
Just like Wells Fargo & Co. (NYSE:WFC), QUALCOMM Inc. (NYSE:QCOM) and T-Mobile US Inc. (NYSE:TMUS), UWM Holdings Corporation (NYSE:UWMC) has a notable position in King Street Capital’s portfolio.
6. MGIC Investment Corporation (NYSE:MTG)
Higgins’ Stake Value: $44.6 million
Percentage of Brian Higgins’ 13F Portfolio: 3.67%
Number of Hedge Fund Holders: 27
Stock Price as of October 6: $15.62
MGIC Investment Corporation (NYSE:MTG) is an insurance company based in Wisconsin. Ranked sixth on our list of the 10 stocks to buy according to Brian Higgins’ King Street Capital, the company provides private mortgage insurance services.
The company issued its quarterly earnings report for the second quarter of 2021 on August 4, with reported earnings per share at $0.44, crossing estimates by $0.02. Additionally the revenue for the quarter came in at $297.85 million, surpassing consensus predictions by $6.10 million.
On August 19, B. Riley analyst Cullen Johnson raised his price target on MGIC Investment Corporation (NYSE:MTG) to $18 from $17 and kept a Buy rating on the shares.
Brian Higgins’ King Street Capital currently holds over 3.28 million shares of MGIC Investment Corporation (NYSE:MTG), amounting to $44.6 million in worth and representing 3.67% of the funds total portfolio value. At the end of the second quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $265 million in MGIC Investment Corporation (NYSE:MTG). This is compared to 28 hedge funds in the previous quarter with stakes worth approximately $268.8 million.
Out of the hedge funds being tracked by Insider Monkey, New Jersey-based Redwood Capital Management is among the leading shareholders in MGIC Investment Corporation (NYSE:MTG) with 3.2 million shares worth over $43.9 million.
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Disclosure. None. 10 Stocks to Buy According to Brian Higgins’ King Street Capital is originally published on Insider Monkey.
