In this article, we discuss the 5 best stocks to buy according to billionaire Mason Hawkins. For Hawkins’ investment philosophy and his comments on certain stocks, please see 10 Best Stocks to Buy According to Billionaire Mason Hawkins.
5. Mattel, Inc. (NASDAQ: MAT)
Value: $303,931,000
Percent of Mason Hawkins’ 13F Portfolio: 6.8%
Number of Hedge Fund Holders: 25
Ranking 5th on the list of 10 best stocks to buy according to billionaire Mason Hawkins is Mattel, Inc. The California-based toy manufacturer owns renowned brands such as Barbie, Hot Wheels, and Thomas & Friends. In 2020, Barbie’s brand gross sales amounted to $1.35 billion, increasing by $1.16 billion from 2019. During the COVID-19 pandemic, 30% of MAT’s retail stores shut down, affecting their overall revenue performance. However, the company was quick to recover with e-commerce as a platform to reach their audience. Evidently, in the third quarter of 2020, online sales rose 50% compared to the same period of 2019.
The company has a market cap of $7.15 billion and a revenue of $4.58 billion in 2020. Shares of MAT surged 123% over the past twelve months. Southeastern Asset Management currently owns 17.4 million shares of MAT, worth $30 million. Mattel, Inc. occupies 6.8% of Southeastern Asset Management’s overall equity. Hedge fund interest in Mattel, Inc. fell at the end of last quarter. The number of long hedge fund bets declined by one lately. Mattel, Inc. was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to 26 positions in the previous quarter.
Longleaf Partners Fund mentioned that in March, MAT responded to store closures by successfully pivoting to e-commerce sales in its Q4 2020 investor letter:
“Mattel (29%, 2.04%; 49%, 3.15%), the global toy and media company, was also a top performer for the year as well as for the quarter. The company’s third quarter was excellent across the board. Barbie’s resurgence continued with 30% growth, leading consolidated Mattel revenues up 10%. Gross margins expanded by 400 basis points, and the quarter’s EBITDA came in remarkably high at $470 million (for an $8.6 billion EV company), partially due to shifting advertising spending back towards the end of the year. Mattel typically earns all its annual profit during the fourth quarter holiday rush, and we expect another excellent sequential performance to result in over $100 million FCF for the year. CEO Ynon Kreiz has delivered extraordinary improvements to revenues, expenses and culture since he took over in 2018. This year the company reacted to store closures in March with a successful quick pivot towards e-commerce sales. Mattel has also continued to build out its intellectual property assets with 10 feature films under development, as well as over 25 TV projects and video games. These high-margin projects have not yet begun to boost the company’s financial results and should prove transformative over the next several years. In the COVID environment, Mattel worked to manufacture PPE for donation to medical professionals and launched a “Thank You Heroes” collection with all net proceeds being donated to First Responders First. The company gave grants to Feed the Children and Save the Children and donated art supplies, games and toys to students in need.”
4. Hyatt Hotels Corporation (NYSE: H)
Value: $305,407,000
Percent of Mason Hawkins’ 13F Portfolio: 6.8%
Number of Hedge Fund Holders: 27
Hyatt Hotels Corporation ranks 4th on the list of 10 best stocks to buy according to billionaire Mason Hawkins. The worldwide luxury hotel and resort operator has over 1,000 properties globally. By 2023, the company plans to grow its hotel presence in India by adding more than 50 Hyatt-brand hotels across the country, including Park Hyatt, Hyatt Place brands, and Alila. The hotel will add more than 3,600 keys to its existing 32 Hyatt-owned hotels in the country. In February, Evercore ISI Group kept its Hold rating on Hyatt Hotels and raised its price target to $90.
The company has a market cap of $8.5 billion and total revenue of $2.06 billion in 2020. Shares of Hyatt increased 55.89% over the past twelve months. Mason Hawkins’ Southeastern Asset Management currently holds 4.13 million shares of Hyatt, worth $305 million. Hyatt occupies 6.8% of Southeastern Asset Management’s total portfolio.
Baron Partners Fund mentioned that Hyatt continues to be a major player in the hospitality business in its Q4 2020 investor letter:
“Global hotelier Hyatt Hotels Corp. contributed to results on investor expectations that travel will increase as several newly developed COVID-19 vaccines work to help bring an end to the pandemic. While it may take time for Hyatt’s business and group customers to return, a strong leisure business is aiding recovery in revenue per available room. Hyatt has also successfully lowered its breakeven occupancy levels by reducing fixed costs and has cut its capital budget to preserve cash. Hyatt’s strong balance sheet is allowing it to weather the pandemic-generated disruption.”
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3. General Electric Company (NYSE: GE)
Value: $349,656,000
Percent of Mason Hawkins’ 13F Portfolio: 7.8%
Number of Hedge Fund Holders: 69
World energy leader provider General Electric Company ranks 3rd on the list of 10 best stocks to buy according to billionaire Mason Hawkins. Headquartered in Boston, Massachusetts, General Electric Company produces vast products and services ranging from aircraft engines, power generation, and oil and gas production. The company recently made a deal with Invenergy, a US-based energy production company, to provide onshore wind turbines to three wind farms in Oklahoma. Once completed, American Electric Power Company Inc (NASDAQ:AEP) will own the farms, with a total capacity of 1485MW.
In March, Deutsche Bank raised its price target for General Electric from $13 to $14 and reiterated its Hold rating. The company has a market cap of $117.6 billion and a full-year 2020 revenue of $75.62 billion. Shares of GE surged 95% over the last twelve months. As of the end of the fourth quarter of 2020, Southeastern Asset Management owns 32.3 million shares of GE worth $349 million. General Electric accounts for 7.8% of Mason Hawkins’ total portfolio.
The number of bullish hedge fund positions increased by 24 in the fourth quarter. Southeastern Asset Management was in 69 hedge funds’ portfolios at the end of December.
Longleaf Partners Fund mentioned that thanks to strict cost control, GE Aviation made a phenomenal $356 million profit in the third quarter in its Q4 2020 investor letter:
“General Electric (GE) (-2%, 0.17%; 74%, 3.56%), the Aviation, Healthcare and Power conglomerate, was the top contributor in the fourth quarter, taking its YTD performance into slightly positive territory after a very difficult first half. The company’s crown jewel Aviation business sells and maintains commercial and military jet engines. With air travel frozen, this year’s second quarter was its worst in over a century of operating history with a $680 million operating loss. 3Q revenues improved sequentially as some flights resumed but still declined 39% year-over-year. Yet GE Aviation earned a remarkable $356 million in the third quarter due to extreme cost discipline. With fewer expenses, the same world-class competitive position and favorable long-term air-travel growth prospects, Aviation should keep improving incrementally with the potential to emerge stronger than ever within several years. GE Healthcare revenues, excluding non-recurring ventilator sales for COVID treatment, also improved 3% year-over-year in an encouraging performance. GE also took steps to give back in 2020 by working to help develop thousands of ventilators to aid coronavirus patients. The stock has roughly doubled from its March low as business results improved, in large part due to CEO Larry Culp’s excellent management. Please stay tuned for the next episode of the Price-to-Value Podcast in which Vice-Chairman Staley Cates interviews Larry Culp on Lean manufacturing, GE’s culture, navigating COVID and his outlook for the business.”
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2. CNX Resources Corporation (NYSE: CNX)
Value: $383,486,000
Percent of Mason Hawkins’ 13F Portfolio: 8.6%
Number of Hedge Fund Holders: 25
Securing the second spot on the list of 10 best stocks to buy according to billionaire Mason Hawkins is CNX Resources Corporation. Headquartered in Canonsburg, Pennsylvania, CNX Resources Corporation is one of the leading natural gas companies and the first company to use an electric fracking fleet located in the Appalachian Basin. Truist Securities recently downgraded CNX Resources from Buy to Hold, with a $16 price target.
The company has a market cap of $3.01 billion. The company’s revenue in full-year 2020 came in at $1.24 billion. The stock has gained 29% in the last twelve months. Southeastern Asset Management currently owns 35.5 million shares of CNX, worth $383 million. CNX occupies 8.6% of Mason Hawkins’ Southeastern Asset Management’s overall equity. Overall, hedge fund sentiment decreased significantly. The stock was in 25 hedge funds’ portfolios at the end of December compared to 33 in the previous quarter.
Longleaf Partners Global Fund mentioned that compared to the S&P 500, where Energy was by far the lowest performing sector in the year, CNX had been a good relative contributor in its Q4 2020 investor letter:
“CNX (22%, 1.57%; 14%, 0.58%), the natural gas company, was also a strong contributor, after having been noted in our 2019 year-end letter as a “problem child.” The company reported strong free-cash flow and earnings before interest rate, tax, depreciation and amortization (EBITDA) growth in the first half. In addition to its positive absolute performance, CNX has been a strong relative contributor versus the S&P 500 for which Energy was by far the worst performing sector in the year. In October, Bloomberg reported that Appalachian neighbor EQT approached CNX with a merger offer. CEO Nick DeIuliis and Chairman Will Thorndike are focused on their company’s value per share and will do the right thing for shareholders. CNX has the potential to both pay down debt with its hedged FCF and resume repurchases to grow FCF/share during an extreme energy bear market.”
Copyright: vyacheslavsvetlichnyy / 123RF Stock Photo
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.
