In this article, we discuss the 10 stocks to invest in according to Stephen Errico’s Locust Wood Capital. You can skip our detailed analysis of Errico’s history, investment philosophy, and hedge fund performance, and go directly to the 5 Stocks To Invest In According To Stephen Errico’s Locust Wood Capital.
Locust Wood Capital Advisors is a New York-based investment firm that manages hedged equity and unhedged equity, focusing on compound capital across market cycles while maintaining a high margin of safety to mitigate risk. Its founder and chief investment officer Stephen Errico is a graduate of Colgate University, where he earned his B.A in Economics in 1985. He began his career in investment and asset management as a portfolio manager at Morgan Stanley. He left the firm to establish Locust Wood Capital Advisors in 2002.
With 17.8% of the fund’s investment value concentrated in the Finance sector, making it the largest by allocation, Locust Wood Capital oversees more than $1.84 billion in its portfolio as of the end of the third quarter of 2021.
Some of the biggest stocks to consider based on Locust Wood Capital’s investment portfolio for the third quarter of 2021 include Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN) and Salesforce.com, Inc. (NYSE:CRM), among others discussed in detail below.
Our Methodology
With this context in mind, let us now analyze the 10 stocks to invest in according to Stephen Errico’s Locust Wood Capital. We used Locust Wood Capital’s 13F portfolio for the third quarter of 2021 to rank these stocks, placing them according to the value of their holdings.
We have also included analyst’ ratings and hedge fund sentiments while ranking these stocks to better justify our choices.
Why should we pay attention to hedge fund sentiment while choosing 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 S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 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 Invest In According To Stephen Errico’s Locust Wood Capital
10. Honeywell International Inc. (NASDAQ:HON)
Locust Wood Capital’s Stake Value: $53.6 million
Percentage of Locust Wood’s 13F Portfolio: 2.91%
Number of Hedge Fund Holders: 57
Honeywell International Inc. (NASDAQ:HON) is a multinational diversified technology conglomerate operating in business sectors that include aerospace and performance materials, among others.
Honeywell International Inc. (NASDAQ:HON)’s 30th annual Global Business Aviation Outlook forecasts up to 7,400 new business jet deliveries worth $238 billion from the year 2022 to 2031
At the end of the second quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Honeywell International Inc. (NASDAQ:HON), up from 56 the preceding quarter worth $1.7 billion. Stephen Errico’s Locust Wood Capital currently holds 252,583 shares in the company, worth more than $53.6 million, representing 2.91% of the fund’s investment portfolio.
On October 7, Wells Fargo analyst Joseph O’Dea began coverage of Honeywell International Inc. (NASDAQ:HON) with an Equal Weight rating and $229 price target on its shares, noting that the company is expected to grow due to the recoveries in the aerospace market.
Similar to Honeywell International Inc. (NASDAQ:HON), Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN) and Salesforce.com, Inc. (NYSE:CRM) are notable stocks in Stephen Errico’s portfolio.
9. Apple Inc. (NASDAQ:AAPL)
Locust Wood Capital’s Stake Value: $54.49 million
Percentage of Locust Wood’s 13F Portfolio: 2.95%
Number of Hedge Fund Holders: 138
One of the world’s most prominent technology companies, Apple Inc. (NASDAQ:AAPL) is currently in the middle of massive growth as sales of iPhones, iPads and Macs exploded during the pandemic. The company’s annual revenue for its fiscal 2021 was up 33% from 2020 to $366 billion.
By the end of the third quarter of 2021, Locust Wood Capital reported holding held 385,050 shares in Apple Inc. (NASDAQ:AAPL), worth more than $54.49 million. These shares accounted for 2.95% of the investment firm’s portfolio value. According to our database, 138 hedge funds were long in Apple Inc. (NASDAQ:AAPL) in the second quarter of 2021, compared to 127 funds in the preceding quarter.
On November 2, Morgan Stanley analyst Katy Huberty kept an Overweight rating and $164 price target on Apple Inc. (NASDAQ:AAPL) shares.
Out of the hedge funds being tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway is a leading shareholder in Apple Inc. (NASDAQ:AAPL), with over 887 million shares worth more than $121.5 billion.
Just like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN) and Salesforce.com, Inc. (NYSE:CRM), Apple Inc. (NASADQ:AAPL) is a notable stock to buy.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
8. Salesforce.com, Inc. (NYSE:CRM)
Locust Wood Capital’s Stake Value: $58.5 million
Percentage of Locust Wood’s 13F Portfolio: 3.17%
Number of Hedge Fund Holders: 108
Salesforce.com, Inc. (NYSE:CRM) is a cloud-based software company headquartered in San Francisco, California, that provides the world’s leading customer relationship management (CRM) platform, targeting application development, data analytics and marketing automation.
According to the third quarter securities filings, Locust Wood Capital owns 215,702 shares of Salesforce.com, Inc. (NYSE:CRM), amounting to approximately $58.5 million and representing 3.17% of the fund’s portfolio value.
Of the 873 elite funds being tracked by Insider Monkey, 108 held stakes in the company at the end of Q2, worth $11.76 million. Rishi Renjen of ROAM Global Management is the leading shareholder in the company with over 99,069 shares worth more than $24.19 billion.
On October 29, Truist analyst Youssef Squali raised the price target on Amazon.com, Inc. (NASDAQ:AMZN) to $4,000 from $3,800, and kept a Buy rating on the shares of the company.
Polen Capital, in its Q3 2021 investor letter, mentioned Salesforce.com, Inc. (NYSE:CRM). Here is what the fund said:
“Salesforce came under pressure earlier in the year after agreeing to purchase Slack for about $26 billion. Since then, management has articulated well the strategic rationale and integration of Slack into its other software offerings and has demonstrated continued double-digit organic revenue growth within its legacy product offerings. At its recent investor day, the company also outlined long-term growth plans in line with our estimates but probably above what others may have been expecting, especially on margin expansion.”
7. Amazon.com, Inc. (NASDAQ:AMZN)
Locust Wood Capital’s Stake Value: $63.1 million
Percentage of Locust Wood’s 13F Portfolio: 3.42%
Number of Hedge Fund Holders: 271
One of the big five companies in the US technology sector, multinational technology company Amazon.com, Inc. (NASDAQ:AMZN) is the most valuable global brand, and remains the largest U.S. e-commerce player with a market share of about 40%.
On October 21, Baird analyst Colin Sebastian maintained an Outperform rating on Amazon.com, Inc. (NASDAQ:AMZN), alongside a $4000 price target on its shares.
Stephen Errico, as of Q3 2021, holds 19,207 shares in Amazon.com, Inc. (NASDAQ:AMZN), worth more than $63 million, accounting for 3.42% of his hedge fund’s portfolio.
Of the 873 elite funds tracked by Insider Monkey, 271 held stakes in Amazon.com, Inc. (NASDAQ:AMZN) worth $60.49 billion in the second quarter of 2021, compared to 243 funds in the first quarter with total stakes amounting to around $50.4 billion. Ken Fisher’s Fisher Asset Management is among the most notable stakeholders in Amazon.com, Inc. (NASDAQ:AMZN), with over 1.87 million shares worth more than $6.45 billion.
Polen Capital, in its Q3 2021 investor letter, mentioned Amazon.com, Inc. (NASDAQ:AMZN). Here is what the fund said:
“Amazon has also lagged as its revenue growth is slowing on the very difficult comparisons from last year when this behemoth was growing revenue by over 40%. We still expect exceptional long-term growth and significant margin expansion as the fastest growing (and now large) segments of Amazon are also generating the highest margins.”
6. Microsoft Corporation (NASDAQ:MSFT)
Locust Wood Capital’s Stake Value: $63.6 million
Percentage of Locust Wood’s 13F Portfolio: 3.45%
Number of Hedge Fund Holders: 238
On October 20, Wedbush analyst Daniel Ives maintained an Outperform rating on Microsoft Corporation (NASDAQ:MSFT), alongside a price target of $375 on its shares.
According to the 13F Filings for the third quarter of 2021, Locust Wood Capital holds 225,703 shares of Microsoft Corporation (NASDAQ:MSFT), amounting to $63.6 million and representing 3.45% of the hedge fund’s portfolio value. By the end of the second quarter of 2021, 238 hedge funds out of the 873 tracked by Insider Monkey held stakes in Microsoft Corporation (NASDAQ:MSFT), worth roughly $62.46 billion, compared to 251 hedge funds in the previous quarter, with stakes worth approximately $58.9 billion.
Out of the hedge funds being tracked by Insider Monkey, Robert Koehn’s Ivy Lane Capital is the leading stakeholder in Microsoft Corporation (NASDAQ:MSFT), with 86,000 shares worth more than $23.29 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
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Disclosure: None. 10 Stocks To Invest In According To Stephen Errico’s Locust Wood Capital is originally published on Insider Monkey.
