In this article we will list Hosking Partners’ top 15 stocks picks.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
A large shipping container vessel with cranes in motion on the open sea.
Our Methodology
Stocks mentioned in this article were picked from the investment portfolio of Hosking Partners at the end of the second quarter of 2024. In order to provide readers with a more comprehensive overview of the companies, the analyst ratings for each firm are mentioned alongside other details. A database of around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2024 was used to quantify the popularity of each stock in the hedge fund universe.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
15. International Seaways, Inc. (NYSE:INSW)
Hosking Partners’ Stake Value: $52,096,664
Percentage of Hosking Partners’ 13F Portfolio: 1.92%
Number of Hedge Fund Holders: 34
International Seaways, Inc. (NYSE:INSW) provides global shipping services through voyage charters, commercial pools, and time charters. The company, established in 2016, provides energy transportation services for crude oil and petroleum products across international markets. International Seaways owns and operates a fleet of 82 vessels, including crude, product, and chemical tankers in addition to Very Large Crude Carriers (VLCCs), Suezmaxes, Aframaxes, and Medium Range (MR) tankers.
It became the first NYSE-listed shipowner to include a sustainability-linked pricing mechanism in a credit facility. Recently, Seaways has benefited by geopolitical events (Russian-Ukraine conflict) that have caused disruptions to both crude and product tanker trade, as these events have not just defined tanker earnings but merely boosted a fundamentally strong market. Due to strong tanker market the order book has grown to about 11% of the total fleet but the current order book only represents about 11% of the total fleet, which is insufficient to replace the aging fleet. With the average tanker now over 13 years old, fleet efficiency and utilization are declining. However, International Seaways has more than $500 million in available credit to fuel our growth. Its net debt is only 14% of the current fleet’s value, and its wholly-owned 34 tankers are entirely debt-free.
During Q2 2024, the company acquired six modern MR vessels for $232 million, funding 85% of the purchase with cash and the rest with common shares. It also sold three older vessels, generating $73 million in net proceeds, and entered into three new time charter agreements, increasing future contracted revenues by $86 million. Additionally, the company ordered six dual-fuel LR1 vessels for $359 million, with deliveries expected between late 2025 and mid-2026. These vessels will be added to the Panamax International Pool, which has consistently outperformed the market.
14. JPMorgan Chase & Co (NYSE:JPM)
Hosking Partners’ Stake Value: $52,396,262
Percentage of Hosking Partners’ 13F Portfolio: 1.93%
Number of Hedge Fund Holders: 111
JPMorgan Chase & Co (NYSE:JPM) is an American multinational financial services corporation serving millions of consumers, small businesses and corporate, institutional, and government clients in the US and around the world. It is one of the largest banks in the US by customers. On August 9, CNBC reported that JPMorgan Chase & Co. (NYSE:JPM) has launched a generative AI assistant, named LLM Suite, that is already supporting over 60,000 employees in various tasks such as drafting emails and compiling reports. This initiative marks the first step in a larger plan to incorporate AI technology throughout the bank’s operations to enhance productivity while ensuring data security. The LLM Suite has been designed to be a portal to utilize external large language models. It has been launched with ChatGPT maker OpenAI’s LLM. JPMorgan Chase & Co. (NYSE:JPM) is leveraging AI for diverse applications, from marketing content creation to fraud prevention in its global payments sector.
Currently, it operates globally in sectors including Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management. Recently, Piper Sandler maintained its Overweight rating and $220 price target for the bank following an optimistic revenue update for Q2 2024. Co-CEO Troy Rohrbaugh shared revised revenue guidance for investment banking and markets segments at an industry conference, leading Piper Sandler to raise its EPS estimates for 2024 from $16.76 to $16.95 and for Q2 2024 from $4.54 to $4.63. Analysts have a positive outlook on JPMorgan’s financial performance, expecting a stable ROTCE target of 17% and projected Net Interest Income of around $91 billion for 2024.
Jim Cramer is optimistic about JPMorgan Chase & Co (NYSE:JPM) stating in a recent program that he believes the stock could reach a $1 trillion market cap. He praised JPMorgan as one of the “best banks in the world” and noted that it sells at only 12 times earnings. Cramer emphasized that this multiple is significantly lower than the average stock in the S&P 500, indicating that the stock is undervalued.
13. CBRE Group, Inc. (NYSE:CBRE)
Hosking Partners’ Stake Value: $54,262,465
Percentage of Hosking Partners’ 13F Portfolio: 2%
Number of Hedge Fund Holders: 54
CBRE Group, Inc. (NYSE:CBRE), headquartered in Dallas, is the world’s largest commercial real estate services and investment firm by revenue in 2023. As a Fortune 500 and S&P 500 company, CBRE employs over 130,000 people and operates in more than 100 countries, offering a comprehensive range of services, including property management, investment management, leasing, and development.
In the recent quarter, CBRE’s free cash flow improved significantly to $220 million, with a conversion rate of nearly 90%. The company has raised its annual free cash flow outlook to just over $1 billion and expects to end the year with around 1 turn of net leverage, despite spending $1.3 billion on M&A and co-investments in 2024.
Advisory net revenue increased by 9%, with growth across all business lines except property sales. Leasing revenue exceeded expectations, especially in the U.S., where office leasing saw a nearly 30% increase, driven by strong performance in New York. Retail also showed strength, while industrial activity declined. Global property sales revenue stabilized, with only a slight decline. Sales conversion was strong, with the pipeline growing over 6%, driven by technology and energy sectors. Additionally, Product Management and Facilities Management saw significant revenue growth, supported by strategic acquisitions, including a major move to expand data center management. The company expects continued growth, with substantial profits anticipated from development asset sales and ongoing M&A activities.
12. Elevance Health, Inc. (NYSE:ELV)
Hosking Partners’ Stake Value: $56,076,008
Percentage of Hosking Partners’ 13F Portfolio: 2.07%
Number of Hedge Fund Holders: 73
Elevance Health, Inc. (NYSE: ELV) operates as a health benefits company in the United States through its subsidiaries, managing Blue Cross and Blue Shield plans in 14 states and holding licenses to sell health insurance nationwide. The company offers various health plans, including employer-sponsored and individual plans, Medicare Advantage, Medicare supplements, and Medicaid. Recently, Elevance partnered with private equity firm Clayton, Dubilier & Rice (CD&R) to expand its primary care services.
Elevance Health, Inc. (NYSE:ELV) for the second quarter reported GAAP diluted earnings per share of $9.85 and adjusted diluted earnings per share of $10.12, which indicates a year-over-year growth of 12%. At the conclusion of the second quarter, the company had 45.8 million members, primarily due to a decline in Medicaid membership.
The commercial fee-based segment experienced an increase of 354,000 lives compared to the previous year, underscoring the significant value offered to self-insured employers and the robust reputation of the Blue Cross Blue Shield brand. Furthermore, the strategic positioning of Elevance Health, Inc.’s (NYSE:ELV) individual ACA products has effectively facilitated strong and profitable growth.
Baron Health Care Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q2 2024 investor letter:
“We added to the position in Elevance Health, Inc. (NYSE:ELV), a leading managed care company. We think Elevance Health is well positioned to grow earnings double digits driven in part by its growing health care services business. Managed health care stocks continued to be weighed down by Medicare Advantage utilization and reimbursement concerns. Lack of near-term visibility on utilization trends was exacerbated by the Change Healthcare cyberattack, which disrupted payors’ normal utilization review and claims adjudication processes while new CMS rules are restricting the number of lower cost hospital observation stays in favor of full inpatient admissions. We believe our managed care holdings are likely to perform better in the second half of the year as investors look to 2025.
Elevance Health, Inc., with its more balanced member mix, has its own unique and unappreciated growth drivers which include the ongoing scaling of its PBM and Specialty Pharmacy and the continued growth of its Carelon Services. We note a Republican win in the upcoming election could result in a more favorable environment for Medicare Advantage companies after two years of adverse Medicare Advantage rate updates under the Biden administration.”
11. Broadcom Inc (NASDAQ:AVGO)
Hosking Partners’ Stake Value: $58,198,857
Percentage of Hosking Partners’ 13F Portfolio: 2.15%
Number of Hedge Fund Holders: 130
Broadcom Inc (NASDAQ:AVGO) recently reported a 43% year-over-year increase in second-quarter revenue, with AI revenue surging by 280%. The company’s diverse revenue streams span enterprise, networking, storage, data center/hyperscaler, industrial, and consumer sectors. For 2024, Broadcom has raised its annual revenue guidance to over $51 billion, anticipating growth of more than 40%. A substantial part of this growth is expected to come from software, which will also improve margins.
BofA Securities considers Broadcom Inc. (NASDAQ:AVGO) a top tech stock offering an attractive entry point after the recent market selloff. TD Cowen also highlighted Broadcom as a major beneficiary of increasing AI spending, noting that the company has raised its full-year AI revenue outlook to $11 billion for 2024, with no signs of declining AI demand.
In its recent second-quarter results, Broadcom reported a 43% year-over-year revenue increase, with AI-related revenue surging 280%. The company’s revenue is diversified across sectors like enterprise, networking, storage, data centers, industrial, and consumer markets. Broadcom raised its annual revenue guidance for 2024 to over $51 billion, expecting over 40% growth, driven largely by its expanding software business, which also boosts profit margins.
Broadcom’s Ethernet business remains robust, supported by partnerships with companies like Arista Networks, Dell, Juniper, and Super Micro. The company has also developed custom AI chips in collaboration with Google and Meta Platforms.
As a leading semiconductor company, Broadcom is heavily invested in AI, making it a smart stock pick for investors, particularly with its growth in AI semiconductors and the acquisition of VMware. These factors contributed to the company’s strong second-quarter earnings, and Broadcom is dominating in the market for hyper-scale custom compute and networking chips. With high-profile clients like Google and Meta, Broadcom’s involvement in the AI sector is a key driver of its growth, making it a popular choice among investors.
Hosking Partners also holds NVIDIA’s shares in its portfolio with a c. 0.5% weight but a 3.5% weight in the benchmark and cost the strategy 0.9% following strong results that demonstrated its dominance of the artificial intelligence (AI) space. According to its Quartely Commentary of Q2 2024, Hosking Partners said, “We own Nvidia because its combination of both hardware and software (its Cuda platform) make it likely that it will take the lion’s share of the profit pool from parallel processing, of which generative AI is just one application.”
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
10. Freeport-McMoRan Inc. (NYSE:FCX)
Hosking Partners’ Stake Value: $62,059,381
Percentage of Hosking Partners’ 13F Portfolio: 2.29%
Number of Hedge Fund Holders: 79
Freeport-McMoRan (NYSE:FCX) is a leading global metals company with a primary focus on copper. Founded on November 10, 1987, and based in Phoenix, Arizona, the company operates extensive, long-lived assets across diverse geographic locations, boasting significant proven and probable reserves of copper, gold, and molybdenum. Key assets in their portfolio include the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits, as well as major operations in the Americas, such as the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.
As one of the largest copper producers in America, Freeport-McMoRan Inc. (NYSE:FCX) enjoys a significant competitive edge, especially since expanding production in the mining industry typically requires substantial capital investment, making it hard for competitors to keep up in the short term. However, this also makes the stock vulnerable to economic downturns, as seen with the reduced demand in China. On the flip side, any economic recovery, particularly through lower interest rates, tends to boost the stock’s performance. This was demonstrated in July 2024 when revised payroll data for May suggested potential Fed rate cuts, leading to a more than 1% increase in Freeport-McMoRan’s stock. Its Grasberg mine is one of the largest globally, giving the company a significant advantage in meeting rising demand. The high setup costs and long lead times in the mining industry allow Freeport-McMoRan to establish key industrial partnerships ahead of potential competitors.
Another mining stock in Hosking Partners’ portfolio, namely, Anglo American performed better in the second quarter of 2024 by 14% when a rival miner BHP proposed a takeover bid. However, Anglo American’s share price has stumbled by 48% since April 2022 due to operational issues at its Los Bronces copper miner in Chile and constant logistical problems at its Kumba iron mine in South Africa.
Hosking Partners, on takeover bid by BHP, stated in its Q2 2024 Quarterly Commentary that,
“Anglo American’s strong contribution was the result of a bid approach by rival miner BHP, and while we are not holders of BHP, it is encouraging that a leading industry participant clearly sees the merit of a “buy rather than build” strategy, suggesting that disciplined capital allocation will continue to support the generation of steady returns on capital by companies in this sector to which we have broad exposure.”
9. Bank of America Corporation (NYSE:BAC)
Hosking Partners’ Stake Value: $65,278,001
Percentage of Hosking Partners’ 13F Portfolio: 2.41%
Number of Hedge Fund Holders: 92
Bank of America Corporation (NYSE:BAC) in Q2 of 2024 reported net income of $6.9 billion after tax, or $0.83 in diluted EPS. Earnings were evenly split between consumer and GWIM businesses, and institutional-focused global banking and markets business. Revenue growth from the second quarter of 2023 was driven by a rise in non-interest income, which offset the decline in net interest income. Fees increased by 6% year-over-year, making up 46% of total revenue, with a notable 14% rise in asset management fees in our wealth management sector.
Bank of America Corporation (NYSE:BAC) was able to add 278,000 net new checking accounts this quarter, totaling over 500,000 in the first half of 2024. Wealth management gained 6,100 new relationships, and the commercial sector expanded by thousands of small business accounts and hundreds of commercial banking relationships. Bank of America Corporation (NYSE:BAC) now manages $5.7 trillion in client balances, loans, deposits, and investments in the consumer and wealth management segments, with $58 billion in flows over the past year. Investment banking fees grew by 29% year-over-year, sales and trading revenue increased by 7%, and card and service charge revenue in its consumer business also grew by 6%.
While the analysts expect BAC’s EPS to decline by 4.7% to $3.26 on a diluted basis for the current fiscal year, the company has consistently exceeded consensus estimates over the past four quarters. On July 30, analyst Betsy Graseck of Morgan Stanley maintained a “Buy” rating for Bank of America with a $49 price target, suggesting a 21.6% upside potential
8. Booking Holdings Inc. (NASDAQ:BKNG)
Hosking Partners’ Stake Value: $70,003,667
Percentage of Hosking Partners’ 13F Portfolio: 2.59%
Number of Hedge Fund Holders: 96
Booking Holdings Inc. (NASDAQ:BKNG) is a leading provider of online travel and related services, offering hotel bookings, car rentals, flight reservations, and dining options through well-known brands like Booking.com, Priceline, Agoda, Kayak, and OpenTable. The company benefits from a large user base, boasting over 100 million users of its software application in 2023, and 563 million site visits in May 2023. This extensive user data allows the company to employ AI solutions like Trip Planner and Penny to enhance customer service.
The company is well-positioned for continued growth, driven by a shift in travellers preferences toward booking entire trips online, particularly among Millennials and Gen Z. In Q2, Booking Holdings reported a 7.3% year-over-year revenue increase, reaching $5.86 billion, surpassing Wall Street’s expectations. The company saw a 7% rise in room nights booked, totaling 287 million, and gross travel bookings grew by 4% to $41.4 billion. Earnings per share (EPS) increased by 27% year-over-year to $44.38.
Booking Holdings continues to expand its diverse service offerings, with a strong focus on integrating artificial intelligence (AI) and technology. Innovations like a generative AI-assisted trip planner and upgraded mobile apps have streamlined booking processes and improved user experiences. The company has also expanded its revenue streams with advancements in flights, ground transportation, and restaurant reservations via OpenTable.
Despite the popularity of platforms like Airbnb, Inc. (NASDAQ:BKNG), there remains strong demand for traditional hotel accommodations and the convenience of OTAs, suggesting a thriving market where Booking Holdings will continue to benefit from providing comprehensive and efficient booking solutions.
Wedgewood Partners stated the following regarding Booking Holdings Inc. (NASDAQ:BKNG) in its Q2 2024 investor letter:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed to performance as travel spending across the U.S. and Europe remains quite healthy, whereas the Company took share in alternative accommodations, and looks set to expand margins after a few years of reinvestment. The Company has also been aggressively reducing its share count at reasonably attractive valuation multiples. Booking should be able to compound earnings at an attractive, double-digit rate for the next few years given these various initiatives.”
7. American Express Company (NYSE:AXP)
Hosking Partners’ Stake Value: $72,296,625
Percentage of Hosking Partners’ 13F Portfolio: 2.67%
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) operates through multiple segments—U.S. Consumer Services, Commercial Services, International Card Services, and Global Merchant and Network Services—contributing to its diversified revenue streams. The company continues to showcase strong financial performance, making it an attractive investment due to its solid fundamentals. In Q2 2024, American Express reported impressive earnings per share (EPS) of $4.15, significantly exceeding expectations of $3.26, demonstrating its ability to generate strong earnings even in challenging economic conditions.
The company achieved a 9% year-over-year revenue growth, driven by strong performance across all major segments and regions. This growth is largely attributed to its premium customer base, known for high spending and excellent credit profiles. American Express has consistently attracted and retained these customers, evidenced by 24 consecutive quarters of double-digit growth in card fee revenue. Strategic investments in marketing, product innovation, and technology further enhance customer loyalty and engagement.
The sale of Accertify in Q2 2024 added an after-tax gain of $479 million, which American Express plans to reinvest into its core business, emphasizing its commitment to sustainable growth. The company’s disciplined expense management and ability to scale operations efficiently allow for substantial investment in growth initiatives while still delivering strong earnings. With an increased EPS guidance range of $13.30 to $13.80 for the full year, American Express is well-positioned for continued growth, making it a strong buy for investors seeking reliable returns.
Artisan Select Equity Fund highlighted American Express Company (NYSE:AXP), in the first quarter 2024 investor letter in the following words:
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.”
6. Citigroup Inc. (NYSE:C)
Hosking Partners’ Stake Value: $76,074,642
Percentage of Hosking Partners’ 13F Portfolio: 2.81%
Number of Hedge Fund Holders: 85
Citigroup Inc. (NYSE:C) is a global financial services company operating in over 100 countries, with two main segments: global consumer banking and the institutional clients group. The company’s restructuring efforts are progressing well, with nine out of fourteen consumer franchises sold or wound down by March. Its Mexico consumer business is on track for a planned IPO next year. Citigroup’s stock, trading at about 10.7 times its forward earnings—below the sector average of 16.5 times—offers an attractive investment opportunity.
CEO Jane Fraser announced on June 18 that the bank is shifting from its expansive 1990s model to a more focused vision. The company is scaling back operations, divesting businesses, and reducing its workforce to enhance stock performance and streamline operations. CFO Mark Mason described 2024 as an “inflection year,” with goals to boost full-year revenue by at least $6 billion by 2026 and cut expenses by at least $500 million.
In Q2 2024, Citigroup reported a net income of $3.2 billion and earnings per share of $1.52, with revenues increasing by 4%, driven by strong growth in its Services, Markets, Wealth, and US Personal Banking divisions. The company is working to normalize credit costs and expects reduced losses in the medium term, along with a decline in expenses in the second half of 2024, indicating a promising outlook.
Piper Sandler analysts recently initiated coverage of Citigroup, raising the price target from $70.00 to $73.00 and giving the stock an “Overweight” rating on July 15.
Silver Beech Capital stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Since the beginning of 2023, Citigroup Inc. (NYSE:C) has been one of the Fund’s largest holdings. In our Q3 2023 investor letter, we laid out our core investment thesis for Citi: although the bank was an underperformer (weak returns on equity), Citi was (1) less risky than it had ever been and (2) cheaper than it had ever been. The Fund’s investment thesis for Citi featured in a November 2023 Euromoney article Citi 2.0: If she builds it, will they come?The market narrative has started to converge on our investment thesis. During the first quarter, Citi was the best-performing bank stock in the S&P 500 index. However, improvements in Citi’s operating performance have come more slowly than its share price gains. Due to this converging market perception with our own thesis, the Fund exited its position in Citi. The Fund’s stake in Citi generated a 34% gross IRR over our 14-month investment period.”
5. Costco Wholesale Corporation (NASDAQ:COST)
Hosking Partners’ Stake Value: $77,227,541
Percentage of Hosking Partners’ 13F Portfolio: 2.85%
Number of Hedge Fund Holders: 71
Costco Wholesale Corporation (NASDAQ:COST) operates a global network of membership warehouses under the “Costco Wholesale” brand, offering high-quality, brand-name products at reduced prices. Costco showed steady adjusted U.S. core comparable sales growth of 5.7%, supported by increased customer traffic both in the U.S. and globally. The discretionary segment saw same-store sales growth in the mid- to high-single digits in June, slightly improving from the previous month. Additionally, e-commerce sales increased by 15.4%, up from 14.8% in April.
Costco Wholesale Corporation (NASDAQ:COST) is a strong investment opportunity, backed by its solid financial performance and strategic advantages. In Q4 2024, the company met market expectations with earnings per share of $5.09. Despite a challenging retail environment, Costco saw robust sales growth, especially in membership fees and net sales, which drove revenue. On June 7, Deutsche Bank reiterated its Buy rating on Costco with a price target of $925, citing the company’s resilience in a volatile consumer market.
Costco’s membership model is a significant asset, generating $4.3 billion in profit from fees in FY 2023, with a high renewal rate of about 90%, indicating strong customer loyalty. The company’s expansion plans, including the annual opening of around 30 new warehouses and a focus on international markets like China, offer substantial growth potential.
Moreover, Costco has proven resilient during economic downturns, such as the COVID-19 pandemic, and its e-commerce business grew by 9.7% in FY 2023. These factors underscore Costco’s potential for continued revenue growth and leadership in the retail sector.
ClearBridge Sustainability Leaders Strategy stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2024 investor letter:
“Consumer staples holdings were also standouts in the quarter, such as Costco Wholesale Corporation (NASDAQ:COST), which continues to execute well and delivered better than expected earnings, helped by strong traffic driving better expense leverage. Customers also looked to be shifting toward more discretionary purchases.”
4. American International Group, Inc. (NYSE:AIG)
Hosking Partners’ Stake Value: $85,237,023
Percentage of Hosking Partners’ 13F Portfolio: 3.15%
Number of Hedge Fund Holders: 61
American International Group (AIG) is a global finance and insurance corporation operating in over 80 countries. The company has three main business segments: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary. The General Insurance division covers Commercial and Personal Insurance, as well as U.S. and International operations. The Life & Retirement segment includes Group and Individual Retirement, Life Insurance, and Institutional Markets.
American International Group, Inc. (NYSE:AIG) is an insurance products provider for commercial, institutional, and individual customers. It reported strong results in Q2 2024, with a 38% year-over-year increase in adjusted after-tax income, reaching $775 million. The company’s homeowners insurance benefits from its scale, offering features like high deductibles up to $10,000. AIG is focused on achieving a return on equity (ROE) of over 10% through disciplined underwriting, expense management, and capital optimization.
The company has also made strategic progress by selling its stake in life insurer Corebridge and repositioning its portfolio through various divestitures. This business turnaround is expected to support AIG’s future growth. The company’s earnings growth is anticipated to come from its emphasis on underwriting excellence and strict expense control. The repositioning of its underwriting portfolio has allowed AIG to achieve high-quality growth in both admitted and non-admitted markets, with multiple avenues to deploy capital towards the best risk-adjusted returns. Analysts at BMO Capital Markets have raised their price target for AIG from $88.00 to $89.00 and rated the company as “Outperform” on May 13th.
ClearBridge Value Equity Strategy stated the following regarding American International Group, Inc. (NYSE:AIG) in its first quarter 2024 investor letter:
“One example of our internal return engine is our continued large position in American International Group, Inc. (NYSE:AIG), which we have owned for roughly 10 years. We originally bought AIG at a greater than 30% discount to our initial estimate of business value. This entry point assumed minimal improvements in the business but allowed us to absorb some inevitable downdrafts along the way that we took advantage of to build our position. The key, however, is that during this period AIG management dramatically improved their business. The company has compounded intrinsic business value per share at a double-digit rate by reducing risks as management overhauled their underwriting process, strengthened their balance sheet, cut expenses and operational complexity and structurally improved returns on equity. A major source of added lift came from intelligent capital allocation: shares outstanding have been more than cut in half during this period, as management bought back roughly 5% of the company annually below intrinsic business value.
However, this valuation-driven return engine can only create so much lift on its own. We are always looking for big opportunities to create external lift in our returns from dramatic shifts in markets. The first comes from exploiting market extremes, where the long-term probabilities are very much in our favor, while the second comes from investor underreactions to big shifts in pricing power that can be exploited through our valuation-driven lens.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Hosking Partners’ Stake Value: $93,446,617
Percentage of Hosking Partners’ 13F Portfolio: 3.45%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is strengthening its leadership in AI, driven by its AWS business, which achieved over 37% operating margins in Q1 and has consistently exceeded 30% for the past five quarters. Amazon’s first-quarter revenue grew by 12.5% year-over-year, and its adjusted EPS more than tripled. JPMorgan reiterated its Overweight rating on Amazon with a price target of $240, following an analysis of the U.S. e-commerce market. The research indicates that Amazon is on track to surpass Walmart as the largest U.S. retailer by 2024, with long-term e-commerce penetration potentially exceeding 40%.
This stock is highly favored by customers due to its extensive diversification in AI and cloud computing, making its products and services top choices among cloud users. During Amazon.com, Inc.’s (NASDAQ:AMZN) Q2 2024 earnings call, CEO Andy Jassy highlighted the rapid growth of the company’s AI business, driven by Amazon’s belief that no single AI tool can dominate the market. As a result, Amazon offers a wide range of AI tools, ensuring that developers and consumers can find the best fit for their needs.
The company’s impressive growth and rising investor interest are also fueled by the profitability of its Amazon Web Services (AWS) business. The increasing demand for AWS, particularly due to Amazon’s investments in generative AI projects, led to an 18.8% year-over-year increase in AWS revenue in the second quarter.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
2. Micron Technology Inc (NASDAQ:MU)
Hosking Partners’ Stake Value: $98,559,243
Percentage of Hosking Partners’ 13F Portfolio: 3.64%
Number of Hedge Fund Holders: 120
Micron Technology, Inc. (NASDAQ:MU) originally specialized in designing and manufacturing DRAM for PCs before expanding into the NAND flash memory market. The company’s management expects to generate “several hundred million dollars” in revenue from high-bandwidth memory (HBM) in FY24 and is optimistic about earning “multiple billions of dollars” in FY25. Micron has already sold out its HBM capacity for this year and the next.
The company is now focused on increasing its market share in the HBM segment by expanding its customer base and developing more efficient HBM chips. The growth in HBM is closely linked to the rising demand for AI chips, which could drive earnings growth for Micron.
A rebound in memory prices and favorable inventory conditions have also contributed to Micron’s strong revenue performance. In Q3 2024, the company reported a 17% sequential revenue growth, reaching $6.81 billion, surpassing its guidance, driven by strong AI demand and effective execution. On June 25th, Rosenblatt Securities issued a “Buy” rating for Micron’s shares, with a price target of $225.00.
Micron Technology Inc. (NASDAQ:MU) is witnessing increased profitability due to strong demand for its memory and storage products. The company exceeded profit expectations for Q3 2024, with sales surging, and plans to increase capital expenditures to meet the growing demand. Furthermore, Micron Technology Inc (NASDAQ:MU) is investing heavily in high bandwidth memory (HBM) production that is expected to generate billions in sales by fiscal 2025 compared with just hundreds of millions in 2024.
After the earnings, Bank of America analyst Vivek Arya reiterated a Buy rating and gave a $170 price target on Micron Technology Inc (NASDAQ:MU).
“Management emphasized both CY24 and CY25 volumes are now fully sold out with pricing generally secured, providing visibility to its healthy sales and margin expansions (HBM is GM accretive),” Arya said.
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
1. Alphabet Inc. (NASDAQ:GOOGL)
Hosking Partners’ Stake Value: $116,400,350
Percentage of Hosking Partners’ 13F Portfolio: 4.3%
Number of Hedge Fund Holders: 216
The parent company of Google, Alphabet Inc. (NASDAQ:GOOGL), provides a variety of platforms and services through its Google Services, Google Cloud, and Other Bets segments. Known globally for products like Google Search, YouTube, and Gmail, Alphabet’s success is largely due to its dominance in the search engine market and lucrative deals with companies like Apple, making Google Search the default on many devices. Additionally, Alphabet is a significant player in the AI software industry, competing with major entities like Microsoft-backed OpenAI.
Alphabet Inc. (NASDAQ:GOOGL) experienced significant growth in Q2 2024, with a 15% year-over-year revenue increase and a 31% rise in diluted EPS. The Google Cloud Platform (GCP) grew nearly 29% YoY, strengthening its position in the cloud market. The company’s first dividend and share buyback program further enhance its attractiveness. Despite a recent 14% drop in its stock price, it is valued at 20-25x FY2024 earnings, indicating a potential buying opportunity. Analysts have set a price target of $203.74, projecting a 25.03% upside as of August 16. Although regulatory challenges and AI competition pose risks, Alphabet’s strong data capabilities and innovation provide resilience.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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