Below are billionaire Louis Bacon’s top 5 stock picks. For a comprehensive list please see Billionaire Louis Bacon’s Top 10 Stock Plays.
5. Magna International Inc. (NYSE: MGA)
Louis Bacon’s Moore Capital initiated a position in Magna International Inc (NYSE: MGA) during the fourth quarter. It appears that the stock-picking strategy worked for the hedge fund. This is because shares of Magna International surged 22% this year, thanks to improving demand for auto parts and equipment. Magna International has generated 12% revenue growth in the December quarter while EBIT reached a $1.1 billion level compared to the consensus for $780 million.
Hedge fund manager Dan Niles recently said in an interview that he likes Magna International as an attractively priced way to get exposure to the EV market.
4. Amazon.com (NASDAQ: AMZN)
The world’s largest e-commerce platform Amazon.com (NASDAQ: AMZN) is trading in the red this year amid concerns that economic reopening will reduce demand for online products. It is the fourth largest stock holding in the list of billionaire Louis Bacon’s top 10 stock picks.
Mairs & Power, an investment management firm, stated in a Q4 investor letter that Amazon’s rising margins and advertising business are among the catalysts. Here is what Mairs & Power stated:
“We did acquire AMZN in the fourth quarter. But not owning it till then cost the Fund in performance relative to the S&P 500 TR Index. We had held off taking a position in Amazon largely due to concerns about the company’s slim margins. But in 2020, we saw its core margins nearly double as more consumers shopped online, which in turn led to greater utilization and route density within Amazon’s delivery network. In addition, Amazon’s advertising business, which represents a small portion of its overall sales, has been growing quickly. Advertising could become a third leg of growth for the company along with e-commerce and Amazon Web Services. In short, Amazon checks all of our boxes — it has a strong management team, great growth prospects, and a strong competitive advantage. And last year, we initiated our position at an intriguing valuation.”
3. Bunge Limited (NYSE: BG)
Moore Capital has been holding a position in Bunge Limited (NYSE: BG) since 2017. The firm raised its stake in BG by 10% in the fourth quarter of 2020 to 2.17% of the overall portfolio. Shares of Bunge rallied 15% year to date, extending the twelve-month gains to 115%. Bunge Limited operates as an agribusiness and food company worldwide.
Bunge has experienced an increase in hedge fund interest of late. It was in 51 hedge funds’ portfolios at the end of December compared to the all-time high for this statistic of 44. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high. There were 41 hedge funds in our database with BG holdings at the end of September.
2. JD.com (NASDAQ: JD)
The Chinese e-commerce platform JD.com (NASDAQ: JD) is ranked second in the list of billionaire Louis Bacon’s top 10 stock plays for 2021. Billionaire Bacon’s firm looks bullish over the fundamentals of JD.com. Moore Capital has raised its stake in the Chinese platform by 134% in the latest quarter to 2.42% of the overall portfolio.
Argosy Investors, which returned 29.8% in select accounts for 2020, highlighted a few stocks including JD.com in the fourth quarter investors’ letter. Here is what Argosy Investors stated:
“JD.com (JD) is worth spending some time on because it is doing some very interesting things and there are some risks worth mentioning. As a refresher, JD.com is a leading Chinese eCommerce retailer that competes with Alibaba, Pinduoduo, and others. Most large tech-oriented businesses globally operate as conglomerates. Think about Google. They own YouTube, Waze, Google Cloud, and Waymo Self-Driving, just to name a few. Amazon owns its first-party retail division, its third-party marketplace, Amazon Video, Kindle, Audible, Amazon Web Services, and Alexa, to name a few. Alibaba has Taobao, TMall, Alibaba Cloud, Alipay, Ant Financial, and more.
JD.com has been making conscious decisions to break its business up into its component parts, which in our opinion helps surface the value of each business. JD’s enterprise value is about USD $120 billion today. JD spun off its JD Health business worth USD $28 billion (like Teladoc in the US), may spin off its JD Cloud business (similar to AWS in the US), has sold shares in its JD Logistics business and is shooting for a valuation of USD$40 billion in 2021 via an IPO, and JD Digits which provides supply chain and consumer loans was expected to be valued at nearly USD $30 billion before Ant Financial was prevented by the Chinese government from completing its IPO. The combined values of these business segments within JD is about $98 billion, leaving $22 billion for JD’s core retail business (and its cloud business) which is on track for over USD $100 billion in sales this year and growing over 20% per year. Assuming a 5% long-term margin for JD Retail, that segment is generating USD $5 billion of operating profit (EBIT). Given their strong market position, investors could value JD’s retail business alone at 20x EBIT, valuing JD retail at $100 billion. By comparison, Amazon was valued at over $175 billion during the year in which it earned USD $100 billion in revenue, so we continue to believe JD is being undervalued, despite a more competitive environment with Alibaba in China than Amazon faces in the US.”
1. Tesla, Inc. (NASDAQ: TSLA)
Moore Capital initiated a put option position in Tesla (NASDAQ: TSLA) during the fourth quarter, accounting for 2.71% of the overall portfolio. Tesla stock price is trading in red so far this year amid investors move towards value stocks from growth stocks.
Tesla was in 68 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to the all-time high for this statistic of 67. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high. TSLA investors should pay attention to an increase in hedge fund interest recently. There were 67 hedge funds in our database with TSLA positions at the end of the third quarter. Our calculations also showed that TSLA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
You can also take a peek at Billionaire Paul Tudor Jones’ Top 10 Stock Picks and Latest Portfolio and Cathie Wood’s Thoughts on the Future, ARK’s Portfolio and Latest Stock Picks.
