In this article, we discuss the 5 best stock picks of Mason Hawkins’ Southeastern Asset Management. If you want to see more of the top holdings of the hedge fund, check out 10 Best Stock Picks of Mason Hawkins’ Southeastern Asset Management.
5. Hyatt Hotels Corporation (NYSE:H)
Southeastern Asset Management’s Stake Value: $312,401,000
Percentage of Southeastern Asset Management’s 13F Portfolio: 5.24%
Number of Hedge Fund Holders: 38
Hyatt Hotels Corporation (NYSE:H) was founded in 1957 and is headquartered in Chicago, Illinois. It operates as a hospitality company in the United States and internationally, via Owned and Leased Hotels, Americas Management and Franchising, ASPAC Management and Franchising, EAME/SW Asia Management and Franchising, and Apple Leisure Group segments.
Securities filings for the fourth quarter of 2021 reveal that Mason Hawkins’ Southeastern Asset Management owned 3.25 million shares of Hyatt Hotels Corporation (NYSE:H), worth $312.4 million, representing 5.24% of the total 13F portfolio. The hedge fund cut its Hyatt Hotels Corporation (NYSE:H) stake by 21% in the December quarter.
On March 23, Truist analyst Patrick Scholes raised the price target on Hyatt Hotels Corporation (NYSE:H) to $111 from $106 and kept a Buy rating on the shares. The analyst stated that the combination of the Apple Leisure Group acquisition and the $2 billion worth of planned asset disposals is a “game changer” in how he values Hyatt Hotels Corporation (NYSE:H).
According to Insider Monkey’s Q4 data, Hyatt Hotels Corporation (NYSE:H) was found in the public stock portfolios of 38 hedge funds, compared to 37 funds in the earlier quarter. Gabriel Plotkin’s Melvin Capital Management is the biggest shareholder of the company, with 4.95 million shares worth $474.70 million.
Here is what Baron Partners Fund has to say about Hyatt Hotels Corporation (NYSE:H) in its Q4 2021 investor letter:
“Higher inflation made many of the Fund’s investments in Real/Irreplaceable Assets more valuable. Hyatt Hotels Corp. has used its strong financial positioning to acquire assets in the faster growing leisure travel segment. It has also divested assets at favorable prices while retaining lucrative management contracts.
Shares of global hotelier Hyatt Hotels Corp. increased as the company continued to pivot towards a more asset-light business and greater focus on leisure with the acquisition of Apple Leisure Group. The acquisition increases the company’s leisure exposure from 25% to 50% of its business. Together with the planned sale of $2 billion of owned real estate over the next two years, this acquisition should result in a business that is 80% fee-based and 20% owned-based. Hyatt plans to use proceeds from the sale of owned assets to pay down debt incurred to complete the acquisition.”
4. FedEx Corporation (NYSE:FDX)
Southeastern Asset Management’s Stake Value: $374,336,000
Percentage of Southeastern Asset Management’s 13F Portfolio: 6.28%
Number of Hedge Fund Holders: 64
FedEx Corporation (NYSE:FDX) is an American multinational conglomerate based in Memphis, Tennessee, offering transportation, e-commerce, and business services. Mason Hawkins’ Southeastern Asset Management portfolio had 1.4 million FedEx Corporation (NYSE:FDX) shares, worth $374.3 million, representing 6.28% of the total investments. The hedge fund increased its FedEx Corporation (NYSE:FDX) stake by 27% in Q4 2021.
On March 29, Morgan Stanley analyst Ravi Shanker said the promotion of Raj Subramaniam, current President and COO, to President and CEO is “not likely to surprise the market at all” since there has been some speculation on a succession plan for a few years now. He maintained an Equal Weight rating and a $250 price target on FedEx Corporation (NYSE:FDX) shares.
Among the hedge funds tracked by Insider Monkey, 64 funds reported owning stakes in FedEx Corporation (NYSE:FDX) at the end of December 2021, worth about $2.5 billion. Bill & Melinda Gates Foundation Trust is a prominent shareholder of the company, with 1.4 million shares worth $386.3 million.
Here is what Artisan Value Fund has to say about FedEx Corporation (NYSE:FDX) in its Q3 2021 investor letter:
“Our weakest Q3 performers included FedEx. Shares of FedEx Corporation (NYSE:FDX), a global shipping and logistics firm, were held back by disappointing business results as labor cost headwinds and air network disruptions overshadowed solid top-line trends. We think the company should be able to overcome these near-term issues. Importantly, FedEx Corporation (NYSE:FDX) has strong pricing power as it operates in a consolidated global shipping industry. In September, the company announced it would increase its shipping rates by an average of 5.9% across most of its services, which is the first time in several years that its annual increase would exceed 5.0%. The industry’s renewed pricing discipline is a welcome change, reflecting a broader commitment to earn better returns on invested capital. FedEx Corporation (NYSE:FDX) is also closer to fully integrating TNT, a European-focused parcel company it acquired in 2016. The market is beginning to incorporate a higher probability FedEx will fully integrate TNT, which will provide a significant boost to profits. The stock now trades at a near-trough multiple of less than 12X 2022 earnings, so we added to our position on weakness.”
3. CNX Resources Corporation (NYSE:CNX)
Southeastern Asset Management’s Stake Value: $377,605,000
Percentage of Southeastern Asset Management’s 13F Portfolio: 6.33%
Number of Hedge Fund Holders: 36
CNX Resources Corporation (NYSE:CNX) is an independent natural gas and midstream company operating in the Appalachian Basin. The company was founded in 1860 and is headquartered in Canonsburg, Pennsylvania. Mason Hawkins’ hedge fund owned 27.4 million shares of CNX Resources Corporation (NYSE:CNX) in Q4 2021, worth $377.60 million, representing 6.33% of the total holdings.
On April 28, Stifel analyst Jane Trotsenko raised the price target on CNX Resources Corporation (NYSE:CNX) to $33 from $29 and reiterated a Buy rating on the shares after the quarterly results, which the analyst perceives as positive. Margins continued to expand while inflation was modest, the analyst noted. Management remains committed to returning capital to shareholders via share buybacks, the analyst added.
According to Insider Monkey’s Q4 data, 36 hedge funds were long CNX Resources Corporation (NYSE:CNX), compared to 34 funds in the last quarter. D E Shaw is a notable shareholder of the company, with more than 5 million shares worth $70.6 million.
Here is what Longleaf Partners Small-Cap Fund Commentary has to say about CNX Resources Corporation (NYSE:CNX) in its Q4 2021 investor letter:
“CNX Resources (27%, 2.14%; 9%, 0.46%), the Appalachian natural gas producer, was another top contributor. With higher strip gas prices, another strong year of FCF and a 13% annualized repurchase pace last quarter, our appraisal of the value increased over 20%. However, the company’s conservative hedging program that has helped it withstand prior bear markets also held back earnings growth this year. The board, led by chairman Will Thorndike, recently authorized another $1 billion of repurchase, representing nearly one third of outstanding shares at today’s price. Despite higher absolute FCF than Appalachian comps with inferior inventory positions, CNX trades at less than half of their enterprise values.”
2. Mattel, Inc. (NASDAQ:MAT)
Southeastern Asset Management’s Stake Value: $436,123,000
Percentage of Southeastern Asset Management’s 13F Portfolio: 7.31%
Number of Hedge Fund Holders: 29
Mattel, Inc. (NASDAQ:MAT) is a California-based children’s entertainment company that designs and sells toys, games, and consumer products worldwide, under the Barbie, Monster High, American Girl, Polly Pocket, Spirit, and Enchantimals brands. Mason Hawkins’ hedge fund boosted its Mattel, Inc. (NASDAQ:MAT) stake by 11% in Q4 2021, holding 20.2 million shares worth over $436 million, representing 7.31% of the total 13F portfolio.
On April 27, Mattel, Inc. (NASDAQ:MAT) reported its Q1 financial results, posting earnings per share of $0.08, ahead of analysts’ predictions by $0.12. Revenue for the period climbed 19.11% year-over-year to $1.04 billion, above Street consensus by $123.35 million.
According to the fourth quarter database of Insider Monkey, Mattel, Inc. (NASDAQ:MAT) was found in the public stock portfolios of 29 hedge funds, compared to 34 funds in the earlier quarter. John W. Rogers’ Ariel Investments is a significant position holder in the company, with 18.2 million shares worth $394 million.
Here is what Longleaf Partners Small-Cap Fund Commentary has to say about Mattel, Inc. (NASDAQ:MAT) in its Q4 2021 investor letter:
“Mattel (24%, 1.40%; 16%, 0.96%), the global toy and media company, was a strong contributor in the fourth quarter and for the year. Despite store closures in Asia causing -20% regional revenues during the third quarter, Mattel’s consolidated sales still grew 8% due to its strong North American recovery. Barbie sales remain impressive as they have been for years, American Girl is finally returning to growth and Fisher Price is also recovering. The company is successfully passing through inflated costs with higher pricing and without losing volume. Despite the impressive results, the stock trades too low at less than 14x forward earnings, and that is before Mattel begins to monetize its massive non-earning asset Intellectual Property portfolio. Our appraisal of the value grew by more than 30% this year.”
1. Lumen Technologies, Inc. (NYSE:LUMN)
Southeastern Asset Management’s Stake Value: $808,886,000
Percentage of Southeastern Asset Management’s 13F Portfolio: 13.57%
Number of Hedge Fund Holders: 39
Lumen Technologies, Inc. (NYSE:LUMN) is the largest holding in the fourth quarter portfolio of Mason Hawkins’ Southeastern Asset Management. The hedge fund owned 64.45 million shares of the company in Q4 2021, worth $808.8 million, representing 13.57% of the total 13F portfolio. Lumen Technologies, Inc. (NYSE:LUMN) is an American technology and communications company, offering integration solutions and services under the Lumen, Quantum Fiber, and CenturyLink brands.
Lumen Technologies, Inc. (NYSE:LUMN) posted its Q1 results on May 4, reporting earnings per share of $0.59, beating market estimates by $0.14. The $4.68 billion revenue missed Street forecasts by $5.54 million.
Among the hedge funds tracked by Insider Monkey, 39 funds were long Lumen Technologies, Inc. (NYSE:LUMN) at the end of Q4 2021, up from 25 funds in the preceding quarter. The total stakes owned in the fourth quarter amounted to more than $1 billion, compared to $941.3 million in the last quarter.
Here is what Longleaf Partners Global Fund has to say about Lumen Technologies, Inc. (NYSE:LUMN) in its Q4 2021 investor letter:
“In a year that saw various times when the stock market acted like the pre-COVID, during-COVID and post-COVID “environments” (not necessarily in that order), the good news was that our two largest holdings – which we feel can thrive in all three of these environments – Lumen and EXOR, were among our top contributors for the year. We believe that both remain underappreciated by the market and offer significant upside from today’s discounted prices.
Lumen (40%, 3.06%; 3%, 0.31%), the global fiber company, was the top contributor for the year. CEO Jeff Storey took two actions this year to substantially increase the business’s value and address the stock’s enormous discount (it trades below 35% of our appraisal value). First, during the third quarter, Lumen sold its Latin American fiber for a good price [9x earnings before interest, taxes and depreciation (EBITDA)] and the weaker half of its US consumer business for an encouraging 5.5x EBITDA. Both multiples came in above our appraisals and demonstrate how cheap the consolidated Lumen RemainCo is today at less than 6x P/FCF and EV/EBITDA. The majority of Lumen’s remaining EBITDA comes from its US Enterprise and Small and Medium Business (SMB) segments, which grow faster than Lumen’s disposed LatAm fiber and are worth higher multiples. The weakest segment of the new Lumen, the western half of Consumer, is superior to the assets the company just sold for 5.5x EBITDA. Second, Storey quickly repurchased 7% of Lumen’s shares, adding meaningfully to value per share and free cash flow per share. When the dispositions close, proceeds will reduce debt meaningfully, putting net debt right at the company’s leverage ratio target even though that target was based on the prior, inferior business mix. We are pleased that our engagement since filing an amended 13D helped the company begin to deliver positive corporate actions. The market has fixated on the potential for another dividend cut, but Lumen’s FCF is more than sufficient to cover the $1/share payout while investing aggressively into high-return, edge-out capex to grow revenues.”
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