In this article, we will discuss the 5 stocks billionaire Dan Loeb is adding to his portfolio. If you want to read about Dan Loeb’s investment philosophy and his hedge fund’s performance, you can go to Billionaire Dan Loeb is Adding These 9 Stocks in his Portfolio.
5. The Mosaic Company (NYSE:MOS)
Third Point’s Stake Value: $85.12 million
Percentage of Third Point’s 13F Portfolio: 1.1%
Number of Hedge Fund Holders: 66
The Mosaic Company (NYSE:MOS) is a Florida-based agriculture and fertilizer company. As of 2022, it ranks 305th on the Fortune 500 list. The company is currently the largest producer of potash and phosphate fertilizer in the United States. On top of that, The Mosaic Company (NYSE:MOS) produces around 12% of the world’s phosphate and potash supply.
In the first quarter of 2022, The Mosaic Company (NYSE:MOS) reported missing EPS and revenue estimates by 0.25% and 3.09%, respectively. Nonetheless, for FY2022, the company expects a free cash flow of $3.7 billion and $7.7 billion in EBITDA. In addition, the company is planning to expand its production by the second half of 2023.
On July 14, Credit Suisse analyst John Roberts initiated coverage of The Mosaic Company (NYSE:MOS) with a $60 price target and an Outperform rating on its shares. According to Roberts, more than 50% of the company’s sales are in Brazil, which is the fastest growing large fertilizer market.
Here is what Carillon Tower Advisers had to say about The Mosaic Company (NYSE:MOS) in its Q1 2022 investor letter:
“Despite a rally near the end of the quarter, major equity indexes closed lower as fear of U.S. Federal Reserve (FED) balance sheet tapering, interest rate hikes, and war in the Ukraine sent the bulls into retreat. Supply chains eased for some goods, but remained challenged for many commodities including energy, agriculture, and fertilizer due to war and general scarcity, and also in many consumer products as semiconductors remained in short supply. Potash and phosphate fertilizer producer Mosaic (NYSE:MOS) performed strongly as war exacerbated already short supplies of key oil and gas exploration.”
4. Suncor Energy Inc. (NYSE:SU)
Third Point’s Stake Value: $114.12 million
Percentage of Third Point’s 13F Portfolio: 1.48%
Number of Hedge Fund Holders: 41
Suncor Energy Inc. (NYSE:SU) is a Canadian oil and gas company. It produces synthetic crude from the world’s largest crude oil deposit situated in the Canadian oil sands. In the first quarter of 2022, Suncor Energy Inc. (NYSE:SU) was part of 41 hedge fund portfolios with a combined value of $2.07 billion.
According to the most recent reports, Suncor Energy Inc. (NYSE:SU) has over $3.1 billion worth of liquid assets, which include close to $1.6 billion in cash and cash equivalents. In Q1 2022, the company reduced its net debt to approximately $11.6 billion and plans to reduce it even further to roughly $9.3 billion by the second half of FY2022. In the first quarter, the company returned close to $1.43 billion to its shareholders in the form of dividends and share buybacks.
On July 18, National Bank analyst Travis Wood lowered Suncor Energy Inc. (NYSE:SU)’s price target to $64 from $73 and maintained a Sector Perform rating on the company shares.
ClearBridge Investments mentioned Suncor Energy Inc. (NYSE:SU) in its first-quarter 2022 investor letter. Here is what the firm said:
“Also within the structural bucket, we added to our commodity exposure with the purchase of Suncor Energy (NYSE:SU). Suncor, a past holding, is a Canadian integrated oil company where we capitalized on attractive valuation due to a COVID-19-induced slowdown. We expect recovery in oil demand and strong pricing will result in faster than expected free cash flow growth and financial deleveraging.
The structural bucket has the shortest investment horizon across the spectrum of growth companies we target in the Strategy. We closely monitor the macro impacts and turnaround progress of these companies and will be disciplined sellers when the thesis for a holding plays out.”
3. Ovintiv Inc. (NYSE:OVV)
Third Point’s Stake Value: $121.658 million
Percentage of Third Point’s 13F Portfolio: 1.58%
Number of Hedge Fund Holders: 44
Ovintiv Inc. (NYSE:OVV) is an American hydrocarbon exploration company headquartered in Denver. In 2021, the company’s average petroleum, natural gas liquids, and natural gas production was around 533.9 thousand BOE per day. Furthermore, the company owns approximately 1.3 million net acres of land in Canada and close to 929,000 net acres of land in the United States.
On May 9, Ovintiv Inc. (NYSE:OVV) announced its second dividend raise in six months. Previously, the company increased its quarterly dividend from $0.14 to $0.20 in March. The most recent quarterly dividend of $0.25 was paid out on June 30 to the shareholders of record on June 14. As of July 21, the company has a dividend yield of 2.20%.
On July 19, BofA analyst Doug Leggate upgraded Ovintiv Inc. (NYSE:OVV)’s shares to Buy from Hold. However, the analyst reduced his price target for the firm to $60 from $65. The analyst added that he sees justifications for defensive positioning in the US oils.
Here is what Miller Value Partners said about Ovintiv Inc. (NYSE:OVV) in its fourth-quarter 2022 investor letter:
“The outlook for high multiple favorites depends to a great degree on interest rates. Warren Buffett likened interest rates to the force of gravity for asset prices. At current low levels, high valuations on long-duration assets can be justified. If interest rates move up, the adjustment will be painful. Market action early in the new year, with the swift moves up in interest rates and down in the Nasdaq, offers a taste of the medicine.
We underwrite all our names to have sufficient upside even if risk-free rates move up to 3% (a scenario, not a forecast!). As we evaluate the opportunity set, we find more attractive prospects in the classic value names. We often hear that people think value investing is dead, which only strengthens our conviction. Our gross exposure to classic value has risen from 44% a year ago to 62% currently.
One new name that illustrates the potential we see is Ovintiv (OVV), an oil and gas producer. We’ve seen a huge shift in the industry away from growth towards returns on capital, cash generation, and capacity discipline. OVV exemplifies the change.
OVV’s new CEO Brendan McCracken says: “We are at the forefront of driving innovation to produce oil and gas from shale both profitably and sustainably. We will generate superior returns and free cash flow by continuously improving capital efficiency and expanding margins while driving down emissions. We will deliver that value to our shareholders through disciplined capital allocation.”
Based on crude at $65 (well below the current $83.82 as of 1/14/22), the company guides to free cash flow generation of $11B over the next 5 years and $21B in the next 10 years. The company’s market cap is currently $10B and its enterprise value is $16B. It’s returning a significant portion of the capital to shareholders. If crude averages $70 in 2022, the company will return $700M to shareholders (in addition to paying down a significant amount of debt), which implies a yield of 7% at the current $39.53 price. In other words, there’s a good shot the company will return nearly its entire market cap to shareholders over the next 5 years.”
2. Alcoa Corporation (NYSE:AA)
Third Point’s Stake Value: $213.8 million
Percentage of Third Point’s 13F Portfolio: 2.78%
Number of Hedge Fund Holders: 50
Alcoa Corporation (NYSE:AA) is the world’s eighth-largest aluminum producer and operates in 10 countries. In the first quarter of 2022, 50 out of the 912 hedge funds tracked by Insider Monkey were bullish on Alcoa Corporation (NYSE:AA), up from 41 in the previous quarter.
According to Alcoa Corporation (NYSE:AA)’s Q1 reports, the company’s non-GAAP adjusted EPS surged by 22% compared to the previous quarter and YoY growth was recorded at 287%. The main catalyst behind it was the price surge in aluminum from $2.3 billion per metric tonne to $3.68 billion. The company’s proportional net debt was around $1.3 billion. However, Alcoa Corporation (NYSE:AA) expects to generate over $4 billion of EBITDA at the end of FY 2022. Furthermore, the company has no debt maturities till 2027.
Credit Suisse analyst Curt Woodworth expects a weaker Q2 performance by the company and lowered the firm’s price target to $63 from $82, maintaining a Neutral rating on its shares on July 19. The analyst also expects a weaker result in the third quarter, insinuating a successive decline in EBITDA due to lower alumina/aluminum average selling price.
1. CSX Corporation (NASDAQ:CSX)
Third Point’s Stake Value: $213.8 million
Percentage of Third Point’s 13F Portfolio: 2.78%
Number of Hedge Fund Holders: 50
CSX Corporation (NASDAQ:CSX) is an American rail transportation holding company. The company operates over a 19000-mile rail network and owns close to 3500 locomotives. Apart from that, the company also deals in real estate.
In the past decade, CSX Corporation (NASDAQ:CSX)’s dividend payout leaped by 114%, and the company bought back 30% of its shares. Nearly $4 billion worth of shares were bought back in 2021. The company has a dividend yield of 1.29% with a quarterly dividend of $0.10.
Hedge funds were loading up on CSX Corporation (NASDAQ:CSX) stock in the first quarter of 2022. According to the Insider Monkey database, 72 hedge funds had stakes worth $6.3 billion in the company, compared to 56 hedge funds in the previous quarter with a combined stake value of $5.3 billion.
Here is what ClearBridge investments had to say about CSX Corporation (NASDAQ:CSX) in its Q4 2021 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor to quarterly performance, of which U.S. rail operators CSX was among the lead performers. CSX is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX performed well during the quarter after the company beats market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”
You can also take a look at 10 Blue Chip Stocks to Buy Now According to Billionaire Andreas Halvorsen and Michael Hintze’s 2022 Portfolio : Top 10 Stock Picks.
