1. Lumen Technologies, Inc. (NYSE: LUMN)
Value: $634,768,000
Percent of Mason Hawkins’ 13F Portfolio: 14.2%
Number of Hedge Fund Holders: 29
Topping the list of the 10 best stocks to buy according to billionaire Mason Hawkins is Lumen Technologies, Inc. Based in Monroe, Louisiana, the enterprise technology platform operates various products such as network services, security, cloud solutions, and managed services. In 2019, ransomware attacks on companies nearly doubled to $20 billion. To fight against ransomware, Lumen Technologies, Inc. released its new Ransomware Assessment Program as part of its comprehensive portfolio of Professional Security Services, available to different companies globally. In January, after LUMN shares rallied 58% year to date, Morgan Stanley analyst downgraded Lumen Technologies, Inc. from Equal-weight to Underweight with a price target of $12.10. The change was largely motivated by technical factors such as short covering.
The company has a market cap of $12.94 billion and full-year operating revenue of $20.71 billion in 2020. The stock has gained 24% over the past twelve months. Mason Hawkins’ Southeastern Asset Management currently holds 65.1 million shares of Lumen Technologies, Inc., worth $634 million. LUMN occupies 14.2% of Southeastern Asset Management’s total portfolio. Lumen Technologies, Inc has experienced a decrease in hedge fund sentiment in recent months. LUMN was in 29 hedge funds’ portfolios at the end of December, down two hedge funds from the third quarter.
Longleaf Partners Fund mentioned that Lumen would expand if it continues to invest in fiber in its Q4 2020 investor letter:
“Lumen (-19%, -2.71%; -1%, -0.12%), the fiber telecom company formerly named CenturyLink, was a top detractor for the year and the only (slight) detractor in the fourth quarter. During the last quarter, Enterprise fiber revenues grew 0.8% year-overyear, International and Global declined 2.6% and Small and Medium Business (SMB) shrunk 5.8% due to COVID repercussions. Yet margins slightly increased due to the strong cost controls of CEO Jeff Storey and CFO Neel Dev. Despite significant deleveraging over the last two years and multiple debt issuances this year at low to mid-single digit interest rates, the stock trades at an incredibly low multiple of <5x FCF. We believe Lumen can grow by continuing to invest into fiber, which should outweigh its declining legacy copper landline business. Numerous recent large transactions for fiber peers at double-digit EBITDA multiples and landline peers at mid-single digit EBITDA multiples also suggest that Lumen could monetize several of its segments at good prices well beyond its total market capitalization today. We have stepped up our engagement with the company and signed a non-disclosure agreement (NDA) last month, so unfortunately we cannot say more other than “stay tuned.””
You can also take a peek at Tiger Cub Billionaire Stephen Mandel’s Top 10 Stock Picks and David Einhorn’s Top 10 Stock Picks.
