In this article, we discuss the 5 best stocks to buy according to Angela Aldrich’s Bayberry Capital Partners. If you want to read about some more stocks in the Aldrich portfolio, go directly to 10 Best Stocks to Buy According to Angela Aldrich’s Bayberry Capital Partners.
5. Berry Global Group, Inc. (NYSE:BERY)
Bayberry Capital Partners Stake Value: $17 million
Percentage of Bayberry Capital Partners 13F Portfolio: 5.34%
Number of Hedge Fund Holders: 37
Berry Global Group, Inc. (NYSE:BERY) is a top producer and marketer of engineered materials and value-added plastic consumer packaging worldwide.
The company beat market expectations on earnings per share in the third fiscal quarter. On August 4, Truist analyst Michael Roxland maintained a Buy rating on Berry Global Group, Inc. (NYSE:BERY) stock and slashed his price target to $70 from $77. Roxland noted that due to higher pricing from the pass-through of inflation, the company’s Q3 results showed segments above his model.
By the end of the second quarter, Berry Global Group, Inc. (NYSE:BERY) was part of 37 hedge fund portfolios. The consolidated stakes these funds had in the company were worth $933.6 million, down from $1 billion the prior quarter. Canyon Capital Advisors is the most significant stakeholder of Berry Global Group, Inc. (NYSE:BERY), with a $150.5 million position in the company.
Here is what Bonhoeffer Capital Management has to say about Berry Global Group, Inc. (NYSE:BERY) in its Q2 2022 investor letter:
“As described in previous letters, our investment universe has been extended beyond value-oriented special situations to include growth-oriented firms using a value framework. This includes companies that generate growth through transition and consolidation. There have been modest changes within the portfolio in the last quarter in line with our low historical turnover rates. We sold some of our slowergrowing names and invested some of our cash into Thryv (described in the case study below) and Berry Global Group, as well as to fund the Millicom rights offering and oversubscription. There are also some interesting developments in the US digital marketing market that I discuss below.
One example of public LBO firms you have in your portfolio is Berry Global (Berry). Berry is a plastic and engineering materials packaging firm that provides packaging solutions to health, hygiene products, and consumer products firms in the United State and Europe. Berry’s growth model focuses on plastic and engineered materials continuing to take more shares of packaging from other materials, specifically in the health, hygiene, and consumer products realm where the growth is the strongest which provides 2- 3% annual growth. Synergistic M&A is adding an additional 3-4% per year to growth. These sources of growth are enhanced by opportunistic operational leverage from scale and share repurchases (5% annual growth). Over the past eight years, Berry’s net income margins doubled, with a 3x increase in revenues. These factors should lead to 10-12% EPS growth going forward. Berry has had 18% and 28% EPS growth over the past five and 10 years, respectively. Part of Berry’s strategy is to lever up to purchase a geographically expanding or complementary product packaging firm and pay the debt down with cash flows post acquisition, similar to private equity funds. Berry has done this three times since its IPO in 2011. Once debt is paid down a reasonable level, Berry has been repurchasing stock if another reasonably priced acquisition cannot be found. This strategy is similar to that of Asbury, described in previous letters. Compared to other packaging firms, Berry has amongst the highest inventory turns and margins. This has resulted in 25% to 40% returns on equity over the past five years. Berry currently trades for a FCF multiple of about 7.6x and a free cash flow yield of 13%. Berry’s BBBrated debt (with an EBITA coverage ratio of 6.2x) is currently yielding 6.2%, for a FCF-debt yield of 6.8%, which is high compared to the current market equity risk premium of about 5% and the projected growth in excess of the market. Given the projected EPS growth of 10% per year, Berry should trade at 29x earnings using Grahams’ formula of 8.5 + 2 * growth rate. Even at half this multiple—15x—Berry would trade at two times its current price.”
4. Arthur J. Gallagher & Co. (NYSE:AJG)
Bayberry Capital Partners Stake Value: $26.6 million
Percentage of Bayberry Capital Partners 13F Portfolio: 8.31%
Number of Hedge Fund Holders: 31
Arthur J. Gallagher & Co. (NYSE:AJG) is a world leader in consulting, risk management, and insurance services. The company is one of the best stocks to buy according to Angela Aldrich’s Bayberry Capital Partners.
Given its scale, the company has shown strong profits. In the second fiscal quarter, Arthur J. Gallagher & Co. (NYSE:AJG) reported an EPS of $1.33, beating estimates by $0.13. Its revenue for the quarter came in at $2.04 billion, which showed an 5.7% growth from the same period last year.
For the past 10 years Arthur J. Gallagher & Co. (NYSE:AJG) has continuously increased its dividends. As of September 2022, the company has a quarterly dividend of $0.51 per share with a dividend yield of 1.19%.
Adage Capital Management owned roughly $128 million worth of stakes in Arthur J. Gallagher & Co. (NYSE:AJG), becoming the company’s leading stakeholder in Q2 2022. Overall, 31 hedge funds tracked by Insider Monkey owned stakes in the company in Q2, growing from 24 in the previous quarter. These stakes hold a combined value of over $744.6 million.
Here is what Cooper Investors has to say about Arthur J. Gallagher & Co. (NYSE:AJG) in its Q1 2022 investor letter:
“In terms of underlying businesses, the portfolio holdings are going well and largely reported solid numbers during earnings season with positive language around the outlook for 2022. Our insurance broker Arthur J Gallagher is a stand-out performer, delivering low-double-digit organic revenue growth at the same time as margin expansion – this is a business that benefit from higher interest rates, emerging risks and inflating premiums. While rising rates, supply chain constraints and war in Europe represent a myriad of challenges for many industries, our view is that our management teams are highly experienced focused operators. They are well equipped to deal with these challenges, having shown great resilience and flexibility during many crises, the most recent example (COVID) proving yet again the power of their business models.”
3. Hillman Solutions Corp. (NASDAQ:HLMN)
Bayberry Capital Partners Stake Value: $27 million
Percentage of Bayberry Capital Partners 13F Portfolio: 8.47%
Number of Hedge Fund Holders: 18
Hillman Solutions Corp. (NASDAQ:HLMN) is a supplier of hardware-related goods and associated merchandising services. Hillman Solutions Corp. (NASDAQ:HLMN) was in 18 hedge fund portfolios at the end of the second quarter of 2022, compared to 20 in the previous quarter.
In the second fiscal quarter, Hillman Solutions Corp. (NASDAQ:HLMN) reported an EPS of $0.14 and surpassed expectations by $0.04. The company generated a revenue of $394.1 million, up 4.9% year over year. Compared to the same quarter last year, Adjusted EBITDA came to $62.3 million, down from $64.5 million. The firm said that Adjusted EBITDA for the fiscal 2022 will fall within the lower end of the initial range of $207 million to $227 million.
Securities filings reveal that Bayberry Capital Partners owned 3 million shares of Hillman Solutions Corp. (NASDAQ:HLMN) at the end of June 2022, worth $27 million and representing 8.47% of the fund’s portfolio. Angela Aldrich’s Bayberry Capital Partners has kept a stake in Hillman Solutions Corp. (NASDAQ:HLMN) since the third quarter of 2021. Leucadia National, with a position worth $71 million, is the most notable stakeholder of the company.
2. Janus International Group, Inc. (NYSE:JBI)
Bayberry Capital Partners Stake Value: $41 million
Percentage of Bayberry Capital Partners 13F Portfolio: 12.89%
Number of Hedge Fund Holders: 11
Janus International Group, Inc. (NYSE:JBI) produces turn-key self-storage building solutions. The business offers facility automation systems, self-storage and commercial industrial doors, relocatable storage units, and door replacement and self-storage restoration services. In Q2 2022, Bayberry Capital Partners increased its holdings in Janus International Group, Inc. (NYSE:JBI) by 12% and now holds shares worth $41 million. It is one of the top stocks to buy according to Angela Aldrich’s Bayberry Capital Partners.
This September, CJS Securities analyst Daniel Moore initiated coverage of Janus International Group, Inc. (NYSE:JBI), assigning an Outperform rating to the stock and a $15 price target.
When looking at the institutional investors followed by Insider Monkey at the end of Q2, Rima Senvest Management, managed by Richard Mashaal, holds the biggest position in Janus International Group, Inc. (NYSE:JBI). Rima Senvest Management has over a $47 million position in the stock, comprising 1.62% of its 13F portfolio.
Here is what Wasatch Global Investors has to say about Janus International Group, Inc. (NYSE:JBI) in its Q1 2022 investor letter:
“Companies with international exposure in terms of both sourcing and customers were hurt by increased supply-chain disruptions. Fund holding felt some of these pressures in the first quarter, as did Janus International Group, Inc. (NYSE:JBI). We maintained holdings in the company on the view that it is well-positioned to grow once shorter-term issues have dissipated.”
1. Burford Capital Limited (NYSE:BUR)
Bayberry Capital Partners Stake Value: $42.6 million
Percentage of Bayberry Capital Partners 13F Portfolio: 13.31%
Number of Hedge Fund Holders: 12
Burford Capital Limited (NYSE:BUR) is a finance and professional services company.
Bayberry Capital Partners is the biggest shareholder of Burford Capital Limited (NYSE:BUR), with over 4 million shares worth $42.6 million. According to Insider Monkey’s data, 12 hedge funds were long Burford Capital Limited (NYSE:BUR) at the end of the second quarter of 2022, with aggregate stakes valued at about $106 million.
Burford Capital Limited (NYSE:BUR) stands first on the list of 10 best stocks to buy according to Angela Aldrich’s Bayberry Capital Partners. According to the latest 13F filings, Bayberry Capital Partners owns more than 4 million shares worth $42.6 million in Burford Capital Limited (NYSE:BUR). The hedge fund increased its holdings in the company by 43% in the second quarter of 2022.
Here is what Alphyn Capital has to say about Burford Capital Limited (NYSE:BUR) in its Q2 2022 investor letter:
“The most significant event affecting Burford will be the outcome of its YPF case against Argentina. Should Burford win, it could receive net proceeds between $1.1bn and $5.6bn. These numbers are derived from a formula written in YPF’s prospectus and bylaws and depend on several assumptions, hence the wide range, but in any case, are significant when compared to Burford’s current market capitalization of approximately $3bn. In a recent lengthy interview, an Argentinian legal expert concluded that based on what we know, the case should be a home run for Burford, but “we don’t know 70% of what is said, we don’t know the private documents, we don’t know the private positions. We don’t know lots of things. Experts have testified in both sides; we don’t know what’s there.” Hardly conclusive.
Nevertheless, I believe Burford remains an attractive investment regardless of the outcome of this one case. To understand why it is helpful to consider how Burford’s litigation finance works. Each case Buford funds has one of three outcomes, a win, a loss, or a settlement. A loss typically results in Buford losing its entire investment. Which has, historically, occurred 10% of the time. Given this risk, Buford actively assesses a case’s merits and potential return. A high payout on wins, typically 5x, increases the expected payout of the whole portfolio. In this way, litigation financing somewhat resembles venture capital investing, where VCs expect only a handful of big wins to make up for lost investments and still provide a reasonable return on the overall portfolio…” (Click here to see the full text)
You can also take a look at 11 Best Big Data Stocks To Invest In and 15 Best Gambling Stocks To Buy.
