In this piece, we will take a look at the top ten stocks to invest in according to Jamie Zimmerman’s Litespeed Capital.
Litespeed Management is an American hedge fund based out of New York, United States. It is one of the few hedge funds out there that has a female executive at its helm of affairs. The firm was founded by and is also run by Ms. Jamie Zimmerman.
Like several other hedge fund managers out there, Ms. Zimmerman also has an educational background in the humanities, as opposed to the financial sector. The executive received her Bachelor’s in Arts from Amherst College in 1981, following which she would go on to pursue a career in the legal world. After graduation, Ms. Zimmerman took up the role of a clerk for a judge in a Federal Bankruptcy Court in New York. After working in the role for a year, she would go on to become a second-year associate in the law firm LeBoeuf Lamb Leiby & MacRae. She also has a Juris Doctorate from the University of Michigan’s law school and a Master’s degree in English Literature from UoM’s Horace Rackham Graduate School.
Her stint in the financial world started in 1988 when she worked at the firm Dillion Reach & Co. as a risk arbitrator for two years. Following this, she joined the famed research firm Oppenheimer, to work in its distressed debt security department, which involves analyzing the borrowings of financially struggling firms. Ms. Zimmerman worked at Oppenheimer for seven years, from 1990 to 1997, after which she would go on to become the head of distressed debt research at the Toronto-Dominion bank, leaving the role in 2000 to create Litespeed Management in the latter half of the year.
Her investment firm is known for conducting fundamental research on firms that can be described as having bitten off more than they could chew. This builds upon Ms. Zimmerman’s experience in distressed debt. The firm’s research work involves taking a look at both the acquirer and the acquiree.
Some of the large and well-known holdings in Litespeed Management’s portfolio are investments in AMC Networks Inc. (NASDAQ:AMCX), Houghton Mifflin Harcourt Company (NASDAQ:HMHC), and Pitney Bowes Inc. (NYSE:PBI). When compared to other heavy-hitting hedge funds, Ms. Zimmerman’s investment firm has a relatively modest portfolio that was worth $90 million as of the third quarter of last year.
Our Methodology
In order to decipher the inner workings of Ms. Zimmerman’s mind, we took a look at Litespeed Management’s 13F filings with the Securities and Exchange Commission for Q3 2021. This enabled us to find out her top ten investments, and these selected companies were then analyzed through their quarterly earnings, investor letters, analyst coverage and overall hedge fund sentiment gleaned through an Insider Monkey survey of 867 funds for Q3 2021.
10 Stocks To Invest In According To Jamie Zimmerman’s Litespeed Capital
10. Macquarie Infrastructure Holdings, LLC (NYSE:MIC)
Litespeed Capital Management’s Stake Value: $2.38 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 2.62%
Number of Hedge Fund Holders: 23
Macquarie Infrastructure Holdings, LLC (NYSE:MIC) is an infrastructure and related services investor that targets all kinds of customers, which include governments, corporations, and private entities. The company targets the aviation and energy sectors, by providing aircraft hangers, natural gas, and other products and services.
As Q3 2021 came to an end, Ms. Zimmerman’s investment firm had held a stake of $2.38 million in the infrastructure firm. This came through owning 58,779 shares and represented 2.62% of its portfolio. During the same time period, an Insider Monkey poll of 867 hedge funds revealed that 23 also held shares of Macquarie Infrastructure Holdings, LLC.
Macquarie Infrastructure Holdings, LLC’s largest investor is Thomas Steyer’s Farallon Capital which owns 4.3 million shares worth $176 million.
Macquarie Infrastructure Holdings, LLC joins Houghton Mifflin Harcourt Company, AMC Networks Inc. and Pitney Bowes Inc. in the list of Jamie Zimmerman’s favorite stocks.
9. Turtle Beach Corporation (NASDAQ:HEAR)
Litespeed Capital Management’s Stake Value: $5.32 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 5.87%
Number of Hedge Fund Holders: 15
Turtle Beach Corporation (NASDAQ:HEAR) is an entertainment technology products provider which targets the audio segment by providing products such as gaming headsets for a wide variety of consumer electronics devices. The company is headquartered in White Plains, New York.
Litespeed Capital Management held 191,465 Turtle Beach Corporation shares which were worth $5.32 million and represented 5.87% of its portfolio during the third quarter of last year. An Insider Monkey Q3 2021 survey of 867 hedge funds indicated that 15 had owned the company’s shares.
Lake Street lowered the company’s price target to $32 from $40 in January 2022, highlighting that the video gaming market had performed weaker than expected, and that future headwinds might impact the headset company’s revenue.
Turtle Beach Corporation’s largest investor according to Insider Monkey’s data is Raymond J. Harbert’s investment firm Harbert Management. It has a stake of $16.2 million through owning 585,816 shares.
8. W&T Offshore, Inc. (NYSE:WTI)
Litespeed Capital Management’s Stake Value: $5.33 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 5.87%
Number of Hedge Fund Holders: 17
W&T Offshore, Inc. is a Texas-based company that develops natural gas exploration fields. It also sells crude oil and natural gas alongside having access to millions of barrels of proven reserves.
During the third quarter of last year, Ms. Zimmerman’s Litespeed Capital owned 1.4 million W&T Offshore, Inc. shares. These were worth $5.33 million and made up 5.87% of its portfolio. Insider Monkey’s survey of 867 hedge funds for last year’s Q3 outlined that 17 owned stakes in the oil company.
Israel Englander’s Millennium Management is W&T Offshore, Inc.’s largest investor. It owns a $6 million stake through holding 1.6 million shares.
7. AMC Networks Inc. (NASDAQ:AMCX)
Litespeed Capital Management’s Stake Value: $7.16 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 7.89%
Number of Hedge Fund Holders: 24
AMC Networks Inc. is a television channel owner that has several platforms in the United States and globally. Some of the channels that it owns include AMC and BBC AMERICA.
Macquarie lowered the company’s price target to $42 from $57 in December 2021, citing worries about the impact of the competition in global video streaming.
For Q3 2021, Ms. Zimmerman’s investment firm owned 153,764 AMC Networks Inc. shares which represented 7.89% of its portfolio through a $7.16 million stake. 24 of 867 hedge funds part of Insider Monkey’s research in the third quarter of 2021 also held the company’s shares.
AMC Networks Inc.’s largest investor is Stephen Mildenhall’s Contrarius Investment Management which owns 1.97 million shares worth $92 million.
ClearBridge Investments mentioned AMC Networks Inc. in its first quarter 2021 investor letter. The hedge fund outlined that:
“Media has been another bright spot for the Strategy, boosted by the return of live events and subsequent rebound in advertising as well as good initial traction for several of our companies new streaming services. AMC Networks has seen strong initial subscriber growth to their over-the-top services.”
6. NeoPhotonics Corporation (NYSE:NPTN)
Litespeed Capital Management’s Stake Value: $7.17 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 7.9%
Number of Hedge Fund Holders: 17
NeoPhotonics Corporation (NYSE:NPTN) is an enterprise technology product provider which sells only to companies. Its products allow large-scale data centers and telecommunications network providers to operate their systems via high-speed data transmission over thousands of kilometers. Lumentum (NASDAQ: LITE), another optical and photonics equipment manufacturer, is set to acquire NeoPhotonics Corporation in the second half of this year.
Litespeed Capital’s stake in NeoPhotonics Corporation equaled $7.17 million for Q3 2021. During this period, Ms. Zimmerman’s investment firm had owned 823,000 shares of the company, and the investment constituted 7.9% of its portfolio. Insider Monkey’s Q3 2021 survey of 867 hedge funds revealed that 17 had also owned the company’s shares.
Northland downgraded the company to Market Perform in November 2021, sharing optimism about the Lumentum acquisition. The firm also kept a $16 price target for the company.
Jim Simons’ Renaissance Technologies is NeoPhotonics Corporation’s largest investor, through a $17 million stake by owning 1.9 million shares.
Pitney Bowes Inc., Houghton Mifflin Harcourt Company, and AMC Networks Inc. are met by NeoPhotonics Corporation in the list of Ms. Zimmerman’s top stock picks.
5. SPX FLOW, Inc. (NYSE:FLOW)
Litespeed Capital Management’s Stake Value: $7.43 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 8.19%
Number of Hedge Fund Holders: 28
SPX FLOW, Inc. (NYSE:FLOW) is an industrial products and services provider, whose products allow customers to conduct several different kinds of manufacturing operations. These operations include air filtration, heat separation, and pumping fluids. The company is headquartered in Charlotte, North Carolina, United States.
Barclays increased the company’s price target to $86 from $75 in January 2022, indicating that inflation in the U.S. will benefit the company.
Ms. Zimmerman’s Litespeed Capital Management owned 101,645 SPX FLOW, Inc. shares as the third quarter of 2021 came to an end. This resulted in a stake that was worth $7.43 million and represented 8.19% of the firm’s portfolio. During the same time period, 28 of the 867 hedge funds surveyed by Insider Monkey had owned stakes in the company, for an all-time high holding since Q3 2016.
Ian Simm’s Impax Asset Management is SPX FLOW, Inc.’s largest investor with a $129 million stake that comes through owning 1.7 million shares.
4. AfterNext HealthTech Acquisition Corp. (NYSE:AFTR)
Litespeed Capital Management’s Stake Value: $8.46 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 9.33%
Number of Hedge Fund Holders: N/A
AfterNext HealthTech Acquisition Corp. (NYSE:AFTR) is a special purpose acquisition company (SPAC), which, as the name suggests, aims to merge with a firm in the healthcare sector. This SPAC was founded in 2021 and is headquartered in Fort Worth, Texas, United States.
By the end of the third quarter of last year, Litespeed Capital had held 850,000 AfterNext HealthTech Acquisition Corp. shares which were worth $8.46 million and represented 9.3% of its portfolio.
AfterNext HealthTech Acquisition Corp. announced its initial public offering (IPO) on August 11th, 2021. Soon after, the IPO closed within a handful of days, on August 16th. This netted the company a cool $250 million in proceeds to combine with what it terms as a firm ‘combining technology and innovation.’
AfterNext HealthTech Acquisition Corp. is backed by the venture capital group TPG Capital LP.
3. ADT Inc. (NYSE:ADT)
Litespeed Capital Management’s Stake Value: $9.01 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 10.03%
Number of Hedge Fund Holders: 18
ADT Inc. (NYSE:ADT) is a home security and automation services provider located in the United States. The company serves all kinds of customers and allows them to address environmental control hazards, such as fire suppression. It also allows customers to control their home security and automation systems through personal computing gadgets such as laptops and smartphones.
Litespeed Capital owned 1.12 million ADT Inc. shares during Q3 2021. These were worth $9 million and represented 10% of its investment portfolio. Insider Monkey’s 867 hedge fund survey for the same time period revealed that 18 had also held a stake in the automation and security company.
ADT Inc.’s largest shareholder is John W. Rogers’s Ariel Investments which owns 24 million shares worth $196 million.
Investment firm Ariel Investments mentioned ADT Inc. in its second-quarter 2021 investor letter, outlining that:
“During the quarter, we initiated a position in ADT, Inc. (ADT) in Ariel Fund and Ariel Appreciation Fund. Buying the same position across both strategies is rare but shows our enthusiasm for the name. Here, we have a 140-year old company that has been in and out of public ownership and as a result, everyone has looked right past it. In our view, ADT’s brand and national presence in the security industry is unmatched, resulting in leading market share, a high recurring revenue base and attractive free cash flow generation. While some are concerned do-it-yourself competition will erode the installation and technology-driven moat around the business, we believe the company is well-positioned to benefit from the secular growth of smart home adoption along with strategic partnerships with companies including Google.”
2. Pitney Bowes Inc. (NYSE:PBI)
Litespeed Capital Management’s Stake Value: $11.1 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 12.3%
Number of Hedge Fund Holders: 24
Pitney Bowes Inc. is a shipping services provider that covers the postage segment by providing services such as delivery and sorting. It also provides applications for tracking products in transit.
Ms. Zimmerman’s hedge fund owned 1.5 million Pitney Bowes Inc. shares during Q3 2021. This translated into an $11.1 million stake which represented 12.3% of its investment portfolio. An Insider Monkey survey of 867 hedge funds for the same period revealed that 24 had owned the company’s shares.
Maxim slashed the company’s price target to $7 from $12 in February 2022, stating that the company’s sorting segment performed well but its global e-commerce business had a tough quarter.
Chuck Royce’s Royce & Associates is Pitney Bowes Inc.’s largest shareholder. It has a $15 million stake through owning 2 million shares.
Miller Value Partners mentioned Pitney Bowes Inc. in its third-quarter 2021 investor letter. It stated that:
“Pitney Bowes (PBI) was also a recent laggard off nearly 20% during the quarter. The company has been building out an E-commerce business for the past 10 years that is approaching $2B in revenue and growing revenues longer-term at a double digit pace. With the E-commerce segment approaching scale, management has significant new initiatives underway to help improve the segment’s profitability to normalized levels (8-12% EBIT margins) over the next couple of years. Success on achieving normalized profitability for the segment would dramatically enhance Pitney Bowes earnings (>$1 in EPS) and annual free cash flow generation (>$250M). Last quarter we highlighted, the digital service business within Pitney’s E-commerce segment and the significant embedded value that was suggested by recent acquisition of a direct competitor Stamps.com at 8x revenue. However, another recent market transaction suggests the E-commerce business has even greater embedded value. At the end of the second quarter, Global-e (GLBE), a UK company that focuses on cross-border business came public at $25/share or approx. $4B market capitalization. The initial IPO price suggested, 2021 Enterprise value to Revenue >20x. Since the IPO, GLBE has climbed to greater than $50/share. Within Pitney Bowes’s E-commerce segment there is a much larger cross border business representing approximately $500M in revenue. The current valuation of Global-e suggests Pitney’s cross border business is worth significantly more than the company’s current market cap. With the marketplace valuing many businesses in excess of 10x revenue, we believe that Pitney Bowes shares remain significantly mispriced at only .35x of revenue and >30% normalized earnings and free cash flow yield. In our opinion, the shares are becoming increasing attractive as their E-commerce segment appears to be significantly undervalued and has the potential to unlock significant equity value over the next couple of years.”
1. Houghton Mifflin Harcourt Company (NASDAQ:HMHC)
Litespeed Capital Management’s Stake Value: $22.2 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 24.57%
Number of Hedge Fund Holders: 28
Houghton Mifflin Harcourt Company is an educational services provider which offers products such as digital and physical textbooks, assessment services, book publishing rights, and online courseware.
As its fiscal Q4 came to an end, Houghton Mifflin Harcourt Company had raked in $417 million in revenue and $0.72 in GAAP EPS, beating analyst estimates for both. The company’s price target was raised to $20 from $19 by BMO Capital in January 2022, who highlighted that stimulus funding and the growing shift to remote learning will benefit the company.
Houghton Mifflin Harcourt Company’s largest shareholder is Arnaud Ajdler’s Engine Capital which owns 3 million shares worth $40 million.
In its Q2 2021 investor letter, Laughing Water Capital LP mentioned Houghton Mifflin Harcourt Company. It stated that:
“HMHC is the leading provider of instructional materials to students in grades K-12 in the U.S. At the end of this letter you will find a longer writeup, but in brief I believe the combination of a newly cleaned up balance sheet, slimmed down operating structure, a Covid induced acceleration of digital learning, and billions of dollars in federal stimulus set to flood the education world has put HMHC in position to gush cash over the next few years… but the market has failed to appreciate these changes. Given the pending onslaught of federal stimulus dollars I think it will be very difficult to lose money in this investment, and if the company reinvests this cash wisely and the market recognizes how this business has evolved, there is a path to multi-bagger returns looking out a few years.”
Suggested Articles:
- Top 10 Stock Picks of Billionaire Nicholas Pritzker
- 10 Dividend Stock Picks of Billionaire Mario Gabelli
- 10 Large-Cap Stocks to Buy According to Claes Fornell’s CSat Investment
This article is originally published at Insider Monkey.
