In this article, we discuss the 5 best stocks to buy according to Don Morgan’s Brigade Capital. If you want our detailed analysis of Brigade Capital’s history, investment philosophy, and hedge fund performance, go directly to 10 Best Stocks to Buy According to Don Morgan’s Brigade Capital.
5. Chesapeake Energy Corporation (NYSE:CHK)
Brigade Capital’s Stake Value: $9,406,000
Percentage of Brigade Capital’s 13F portfolio: 1.05%
Number of Hedge Fund Holders: 67
Chesapeake Energy Corporation (NYSE:CHK), an independent exploration and production firm, acquires, explores, and develops assets in the United States for the production of oil, natural gas, and natural gas liquids from subterranean reservoirs. Don Morgan’s Brigade Capital owned 115,975 shares of Chesapeake Energy Corporation (NYSE:CHK) as of June 30, worth $9.4 million, and representing a 1.05% chunk of its 13F portfolio’s weighting.
Benchmark analyst Subash Chandra on August 1 commenced coverage of Chesapeake Energy Corporation (NYSE:CHK) with a Buy rating and a $137 price target. Chesapeake has risen from bankruptcy to pursue a long-term return-of-capital strategy “that is not fully reflected in the company’s discount multiple to the E&P industry,” according to Chandra. Chesapeake has bought $5 billion in assets in the previous six months, which has enhanced the company’s capital intensity and requires “proportionately less capital to sustain greater production levels,” according to the analyst.
Among the hedge funds tracked by Insider Monkey, 67 were long Chesapeake Energy Corporation (NYSE:CHK) in Q2 2022, with combined stakes worth $3.5 billion. Howard Marks’ Oaktree Capital Management is a leading position holder in the company, with 10.5 million shares worth $851 million.
Here is what ClearBridge Investments Dividend Strategy has to say about Chesapeake Energy Corporation (NYSE:CHK) in its Q1 2022 investor letter:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
4. Bowlero Corp. (NYSE:BOWL)
Brigade Capital’s Stake Value: $9,531,000
Percentage of Brigade Capital’s 13F portfolio: 1.06%
Number of Hedge Fund Holders: 18
Bowlero Corp. (NYSE:BOWL) owns and operates bowling alleys under the AMF and Bowlero brand names. The firm also hosts and manages professional and amateur bowling competitions, as well as associated programming. Don Morgan’s Brigade Capital owned 904,227 shares of Bowlero Corp. (NYSE:BOWL) as of Q2 2022 worth $9.5 million, representing 1.06% of the total holdings.
JPMorgan analyst Kevin Heenan on September 16 raised his price target on Bowlero Corp. (NYSE:BOWL) to $18 from $17 and kept an Overweight rating on the shares following the Q4 beat.
According to Insider Monkey’s data, 18 hedge funds were bullish on Bowlero Corp. (NYSE:BOWL) in Q2 2022, down from 23 funds in the prior quarter.
3. Noble Corporation (NYSE:NE)
Brigade Capital’s Stake Value: $17,118,000
Percentage of Brigade Capital’s 13F portfolio: 1.91%
Number of Hedge Fund Holders: 31
Noble Corporation (NYSE:NE) is an offshore drilling company headquartered in London, England. As of February 16, 2022, it operated a fleet of 20 offshore drilling units, comprising 12 floaters and 8 jackups. In Q2 2022, Brigade Capital held 675,270 shares of Noble Corporation (NYSE:NE) worth over $17.12 million, representing 1.91% of its portfolio.
DNB Markets analyst Martin Huseby Karlsen on July 6 boosted his price objective on Noble Corporation (NYSE:NE) to $49 from $43 and maintained the stock’s Buy rating.
Among the hedge funds tracked by Insider Monkey, 31 funds were long Carvana Co. (NYSE:CVNA) at the end of Q2 2022, with combined stakes worth $457 million.
2. Magnachip Semiconductor Corporation (NYSE:MX)
Brigade Capital’s Stake Value: $18,768,000
Percentage of Brigade Capital’s 13F portfolio: 2.1%
Number of Hedge Fund Holders: 27
Magnachip Semiconductor Corporation (NYSE:MX) designs and produces analog and mixed-signal semiconductor platform solutions for communications, Internet of Things (IoT), consumer, computer, industrial, and automotive applications. Securities filings for Q2 2022 reveal that Brigade Capital owned 1.29 million shares of Magnachip Semiconductor Corporation (NYSE:MX) worth $18.7 million, representing 2.1% of the total 13F holdings.
On August 10, Needham Analyst Rajvindra Gill highlighted his confidence for Magnachip Semiconductor Corporation (NYSE:MX). He maintained a ‘Buy’ rating on the stock with a $22 price target.
Among the hedge funds tracked by Insider Monkey, 27 funds were bullish on Magnachip Semiconductor Corporation (NYSE:MX) at the end of Q2 2022, with combined stakes worth $210 million. Stephen Perkins’s Toronado Partners is the leading position holder in the company, with 2.5 million shares valued at around $37 million.
1. Valaris Limited (NYSE:VAL)
Brigade Capital’s Stake Value: $25,922,000
Percentage of Brigade Capital’s 13F portfolio: 2.9%
Number of Hedge Fund Holders: 40
Valaris Limited (NYSE:VAL) is an offshore contract drilling company that serves the international oil and gas sector. The firm has a fleet of 56 offshore drilling rigs, which includes 11 drill ships, 4 dynamically positioned semisubmersible rigs, 1 moored semisubmersible rig, and 40 jackup rigs.
BTIG analyst Gregory Lewis on June 1 increased his price objective on Valaris Limited (NYSE:VAL) from $60 to $80 and maintained a Buy recommendation on the stock. According to the 13F filings for the second quarter of 2022, Brigade Capital had around 613,690 shares of Valaris Limited (NYSE:VAL), totaling more than $25.92 million and accounting for 2.9% of the fund’s portfolio.
By the end of the second quarter of 2022, 40 hedge funds owned Valaris Limited (NYSE:VAL), up from 39 hedge funds the previous quarter. Alec Litowitz and Ross Laser’s Magnetar Capital is one of the biggest stakeholder of the company with an approximately $953.61 million investment.
You can also take a look at the Top 10 Stock Picks of Mark Kleiman’s Factorial Partners and Top 10 Stock Picks of Minerva Advisors.
