In this article, we discuss the 6 best stocks to buy according to Adam Wyden’s ADW Capital. To skip the detailed analysis and investment philosophy of ADW Capital, go directly to 3 Best Stocks to Buy According to Adam Wyden’s ADW Capital.
Adam Wyden is the son of renowned US senator Ron Wyden. He received his bachelor’s in Economics from The Wharton School in 2006. Wyden later completed his MBA in Finance from Columbia Business School. Wyden started his career in 2005 as an intern research analyst at DE Shaw’s $700 million long-short tech group, where he worked for four months. After his internship, Wyden became a merchant banking analyst at SMH Capital till July 2008.
Philosophy
Wyden’s greatest inspiration is his grandmother, who was a great believer in blue-chip stocks. According to him, he learned compounded interest from her checkbook when he was young. He also mentioned that he tries to find ideas that he can explain to his 93-year-old Jewish grandmother. He was also inspired by his great-uncle, a well-known investor who taught him to invest with people “who have more to lose than you do”. He lives by the words “chance favors the prepared mind”.
Furthermore, Adam Wyden’s most significant investment philosophy was utilizing technology to find stocks that “nobody knows existed”. When it comes to investing in recessive market conditions, Wyden recalls his story of investing in penny stocks that were coming out right after the great financial crisis of 2008. He bought those stocks early for nearly a dollar and sold them all when they reached $6-$7.
Regarding position sizing, Adam Wyden believes in adding a higher concentration to his top stocks and giving single-digit concentration to the stock that he feels is mispriced and could later become remarkable.
ADW Capital
ADW Capital is based in Miami, Florida, and was founded in 2010 by Adam Wyden from the second floor of his mother’s basement with $400,000 in seed capital. According to Business Insider, the fund’s philosophy and structure are modeled on the investment partnership that Warren Buffett had before starting Berkshire Hathaway. According to the management, the fund aims to produce high risk-adjusted returns through “conservative equity investing” in lesser-known stocks in the U.S., Canada, and Western Europe. The fund became successful soon after its inception and returned 91.31% in its first year. From 2011 to 2021, the fund’s annualized rate of return was around 24%. 2020 was the most profitable year for ADW Capital, where it returned 119.2%. Conversely, the most significant loss for the fund occurred in 2018, which was 33%.
Investments ADW Capital Avoids
In an interview, Adam Wyden said that he mostly avoids commodity-based stocks and healthcare. He said:
“We avoid financials, energy or anything commodity-based, and healthcare and biotech. With financials, I learned the hard way in 2008 the dangers of their balance sheet opacity and natural levels of leverage. With businesses tied to commodities, I’ve concluded I don’t want to invest in situations where I can get the micro story dead on but not get paid at all because a commodity price goes against me.
With healthcare, maybe it’s tied to my personal background and the fact I grew up in Washington, D.C., but I’m not comfortable with businesses where the government is actively trying to see that they make less money. I’ve also found that for smaller companies in this field outcomes are too often binary. I run a very concentrated portfolio, and I can’t make a big bet when the potential downside is a catastrophe.”
As of the second quarter of 2022, ADW Capital had discretionary assets under management of $389.16 million. The fund had six stocks in its 13F portfolio, valued at around $211.91 million, down from $257.6 million in the prior quarter. Moreover, in Q2 2022, ADW Capital added over $36 million worth of call options divided between 2 stocks and reduced holdings in 2 businesses.
PAR Technology Corporation (NYSE:PAR), APi Group Corporation (NYSE:APG), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK) are some of the most notable names in ADW capital’s 13F portfolio.
Our Methodology
We analyzed ADW Capital’s Q2 13F portfolio and added all six of its current holdings, while Call and Put options were not added to the list. For a better understanding of the readers, analyst ratings, growth catalysts, and dividend history of the stocks was also added along with their recent financial results.
The hedge fund sentiment around each stock was taken from Insider Monkey’s Q2 2022 database of 895 elite hedge funds.
Best Stocks to Buy According to Adam Wyden’s ADW Capital
6. PLBY Group, Inc. (NASDAQ:PLBY)
Number of Hedge Fund Holders: 17
PLBY Group, Inc. (NASDAQ:PLBY), formerly known as Playboy Enterprises, Inc., started as a media company. Later, the company further diversified its portfolio into gaming, lifestyle, and apparel segments. It was a publicly traded company for 40 years before the founder, Hugh Hefner, succeeded in a bid to take the company private in 2011. PLBY Group, Inc. (NASDAQ:PLBY) began trading publicly again in February 2021. PLBY Group, Inc. (NASDAQ:PLBY) suffered a significant blow since the beginning of the pandemic as total net revenues that were attributable to Chinese markets were around 48% at the time. However, the company has started to make acquisitions outside of China to become less dependent on the segment. Resultantly, the company’s TTM revenue has reached $288.847 million as of June 30, from $246.58 million realized in December 2021.
On August 10, Canaccord analyst Jason Tilchen maintained a Buy rating on PLBY Group, Inc. (NASDAQ:PLBY) and lowered the price target to $14 from $18. Tilchen mentioned that it would take a few quarters for investors to realize that the company is making progress on its strategic initiative. He further added that he views the current valuation as attractive.
As of the June quarter, 17 hedge funds held stakes in PLBY Group, Inc. (NASDAQ:PLBY), compared to 19 in the previous quarter. ADW Capital held 410,000 shares in the company in the second quarter, valued at $2.6 million, representing 1.23% of the firm’s portfolio.
PAR Technology Corporation (NYSE:PAR), APi Group Corporation (NYSE:APG), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK) are some of the major businesses that make up ADW Capital’s 13F portfolio, along with PLBY Group, Inc. (NASDAQ:PLBY).
5. FAT Brands Inc. (NASDAQ:FAT)
Number of Hedge Fund Holders: 1
FAT Brands Inc. (NASDAQ:FAT) is a California-based multi-brand restaurant franchising company. As of August 2022, the company owned 17 brands in 2300 locations. Out of the 895 hedge funds tracked by Insider Monkey, only ADW Capital held a stake in the company in the second quarter of 2022. The firm owned 587,400 shares worth $4.376 million, representing 2.06% of its portfolio.
FAT Brands Inc. (NASDAQ:FAT) has been focusing highly on acquisitions in the past couple of years. Starting from the burger chain Johnny Rockets for $25 million in 2020, it later made several acquisitions in 2021 at a combined value of $900 million. In May 2022, the company acquired Nestle Toll House Café for an undisclosed amount. In addition, FAT Brands Inc. (NASDAQ:FAT) started its operations in Mexico in mid-August after opening a Fatburger and Buffalo’s Express chain and plans to open another Fatburger chain by the end of 2022.
FAT Brands Inc. (NASDAQ:FAT) posted exceptional results in the second quarter of 2022. The company reported a net loss of $0.19 per share, outperforming the estimates by $0.69. The company’s revenue surged by a whopping 1138.4% to $102.79 million, exceeding the estimates by $0.79 million.
On July 12, FAT Brands Inc. (NASDAQ:FAT) declared a 7.7% increase in its quarterly dividend to $0.14, paid out on September 1 to the shareholders of record on August 16. As of September 8, the company has a dividend yield of 6.74%.
4. GFL Environmental Inc. (NYSE:GFL)
Number of Hedge Fund Holders: 25
GFL Environmental Inc. (NYSE:GFL) is a Canadian waste management company. The company also provides infrastructure and soil remediation services. In Q2 2022, Samlyn Capital held the most significant stake in the company, with shares worth $131.139 million. The firm increased its holdings in the company by 22% in the quarter. Similarly, the second biggest stakeholder, Highbridge Capital Management increased its position by 179%, and Citadel Investment Group increased its stake by 19%. ADW Capital held 659,000 shares of GFL Environmental Inc. (NYSE:GFL) valued at $17 million in the second quarter.
GFL Environmental Inc. (NYSE:GFL) expanded its solid waste footprint in the United States in May after acquiring Sprint Waste Services for an undisclosed sum. Furthermore, the company made 21 acquisitions in 2022, representing approximately $300 million in incremental annualized revenue.
According to GFL Environmental Inc. (NYSE:GFL)’s Q2 reports, the company recorded an EPS of $0.24 against the $0.06 consensus. Additionally, the revenue of $1.71 billion was 30.5% higher than the previous year and outperformed the analyst estimates by $500 million. GFL Environmental Inc. (NYSE:GFL) also raised its revenue outlook for FY2022 to the range of $6.43 billion-$6.48 billion, from the previous guidance of $6.0 billion-$6.1 billion.
On August 2, TD Securities analyst Tim James reiterated a Buy rating on GFL Environmental Inc. (NYSE:GFL) shares and raised his price target to C$55 from C$53.
GFL Environmental Inc. (NYSE:GFL) is one of the significant stocks in ADW Capital’s portfolio, along with PAR Technology Corporation (NYSE:PAR), APi Group Corporation (NYSE:APG), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK)
Here is what Ave Maria said about GFL Environmental Inc. (NYSE:GFL) in its Q2 2022 investor letter:
“GFL Environmental Inc. (NYSE:GFL) is a growing solid waste management company. In the first quarter of 2022, revenue increased 11.3% on an organic basis and 27.4% including acquisitions. At the company’s investor day in May, the management provided increased free-cash-flow guidance for 2022, 2023 and 2024., which looks very positive.”
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Disclosure. None. 6 Best Stocks to Buy According to Adam Wyden’s ADW Capital is originally published on Insider Monkey.
