In this article, we discuss the top 10 stock picks of Brian Higgins’ King Street Capital. If you want to skip our detailed analysis of these stocks, go directly to Brian Higgins’ King Street Capital Portfolio: Top 5 Stock Picks.
Brian Higgins co-founded King Street Capital in 1995, and currently serves as the managing partner and co-portfolio manager at the investment management firm. King Street Capital has a portfolio valued at $1.18 billion, and discretionary assets under management of $21.88 billion as per the 13F filings from September this year.
Higgins completed his bachelor’s in business administration from Villanova University in 1987, and started his career with First Boston’s Merchant Banking Group the same year. He worked in the Special Situations Fund and the Distressed Securities Group at First Boston. In 1995, he moved on to establish his own investment management firm.
King Street Capital primarily focuses on credit markets, and is a registered investment adviser in the US, the UK, Japan, and Singapore. The firm has several funds that it manages on behalf of its customers. Two flagship funds at King Street Capital follow a long/short multi-strategy and look out for event-driven investments to capitalize on market dislocations, offering long-term risk-adjusted returns with minimal volatility to stakeholders. Other funds at the firm specialize in real estate, collateralized loan obligations, dislocations in the credit markets, and investment opportunities arising from the economic impact of the COVID-19 pandemic and energy crises.
The Q3 portfolio at King Street Capital comprises stocks from the real estate, information technology, consumer discretionary, finance, energy, and utilities and telecommunications sectors, with a top ten holdings concentration of 54.23%.
The most notable stocks in Brian Higgins’ portfolio as of September 2021 include Booking Holdings Inc. (NASDAQ:BKNG), The Wendy’s Company (NYSE:WEN), T-Mobile US, Inc. (NASDAQ:TMUS), and Vornado Realty Trust (NYSE:VNO), among others discussed below.
Our Methodology
With this context in mind, let’s discuss the top 10 stock picks of Brian Higgins’ King Street Capital. We used the Higgins’ Q3 portfolio to select these stocks, ranking them according to his stake value in each holding.
Brian Higgins’ King Street Capital Portfolio: Top Stock Picks
10. KKR Acquisition Holdings I Corp. (NYSE:KAHC)
King Street Capital’s Stake Value: $44,910,000
Percentage of King Street Capital’s 13F Portfolio: 3.79%
Number of Hedge Fund Holders: N/A
KKR Acquisition Holdings I Corp. (NYSE:KAHC) is a blank check company that was created with the intention of carrying out different business combinations including mergers, share exchanges, asset acquisition, and corporate restructuring. KKR Acquisition Holdings I Corp. (NYSE:KAHC) has not engaged in a business combination yet, since its IPO on March 17.
As of Q3 2021, Higgins’ King Street Capital holds 4.5 million shares in KKR Acquisition Holdings I Corp. (NYSE:KAHC), worth $44.91 million, representing 3.79% of the firm’s total investments.
As of September, Alec Litowitz and Ross Laser’s Magnetar Capital is the leading stakeholder of the company, with 6.68 million shares valued at $66.67 million.
In addition to Booking Holdings Inc. (NASDAQ:BKNG), The Wendy’s Company (NYSE:WEN), T-Mobile US, Inc. (NASDAQ:TMUS), and Vornado Realty Trust (NYSE:VNO), KKR Acquisition Holdings I Corp. (NYSE:KAHC) is a notable stock in Brian Higgins’ Q3 portfolio.
9. Arch Capital Group Ltd. (NASDAQ:ACGL)
King Street Capital’s Stake Value: $47,343,000
Percentage of King Street Capital’s 13F Portfolio: 3.99%
Number of Hedge Fund Holders: 31
Arch Capital Group Ltd. (NASDAQ:ACGL), an American insurance, reinsurance, and mortgage insurance provider, is one of Brian Higgins’ top stock picks from the third quarter. As of the third quarter, King Street Capital holds a $47.3 million stake in Arch Capital Group Ltd. (NASDAQ:ACGL), which accounts for 3.99% of the firm’s total 13F securities.
Bob Peck and Andy Raab’s FPR Partners is the leading stakeholder in Arch Capital Group Ltd. (NASDAQ:ACGL), with 14.4 million shares valued at $551.6 million. The Q3 database maintained by Insider Monkey reported that 31 hedge funds were bullish on Arch Capital Group Ltd. (NASDAQ:ACGL), with stakes amounting to $1.21 billion.
Arch Capital Group Ltd. (NASDAQ:ACGL), on October 27, posted its Q3 results. EPS in the period equaled $0.74, beating estimates by $0.39. The $2.08 billion revenue, however, failed to meet analysts’ forecasted revenue by -$145.25 million.
Jefferies analyst Yaron Kinar on November 18 initiated coverage of Arch Capital Group Ltd. (NASDAQ:ACGL) with a Buy rating and a $50 price target. Arch Capital Group Ltd. (NASDAQ:ACGL) is one of Kinar’s top stock picks in the insurance industry, and he expects the stock to grow significantly.
Here is what Baron Partners Fund has to say about Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q1 2021 investor letter:
“Arch Capital Group Ltd. is a specialty insurance company based in Bermuda. The stock increased on quarterly earnings that exceeded investor estimates and 15% growth in its book value per share. Pricing trends are favorable in the property & casualty insurance market, and the outlook for the mortgage insurance business has substantially improved as the economy recovers from last year’s pandemic-related uncertainty. We continue to own the stock because we expect earnings growth to resume and admire Arch’s strong management team and underwriting discipline.”
8. MGIC Investment Corporation (NYSE:MTG)
King Street Capital’s Stake Value: $49,144,000
Percentage of King Street Capital’s 13F Portfolio: 4.14%
Number of Hedge Fund Holders: 27
MGIC Investment Corporation (NYSE:MTG) offers insurance products and services to protect mortgage investors from credit losses. Brian Higgins owns 3.28 million MGIC Investment Corporation (NYSE:MTG) shares, worth $49.1 million as of September this year. The stock accounts for 4.14% of Higgins’ Q3 portfolio.
MGIC Investment Corporation (NYSE:MTG) posted its Q3 earnings on November 3. EPS in the quarter totaled $0.46, beating estimates by $0.01. The revenue was down 0.09% year-over-year, missing analysts’ consensus estimates by -$3.90 million at $295.75 million.
As of the third quarter, 27 hedge funds monitored by Insider Monkey were bullish on MGIC Investment Corporation (NYSE:MTG), with a total stake value of $298 million. The leading stakeholder of the company is Arrowstreet Capital, with 3.47 million shares valued at $51.95 million.
As part of a broader research on the mortgage insurance industry, BofA analyst Mihir Bhatia on November 17 downgraded MGIC Investment Corporation (NYSE:MTG) to Neutral from Buy with a price target of $16.50, up from $16.
7. 8×8, Inc. (NYSE:EGHT)
King Street Capital’s Stake Value: $56,136,000
Percentage of King Street Capital’s 13F Portfolio: 4.73%
Number of Hedge Fund Holders: 27
8×8, Inc. (NYSE:EGHT) is a company offering voice over IP products, that represents 4.73% of Higgins’ Q3 portfolio. Higgins, via King Street Capital, holds 2.4 million shares in 8×8, Inc. (NYSE:EGHT), worth $56.1 million as of Q3 2021.
On November 2, the Q3 EPS for 8×8, Inc. (NYSE:EGHT) came in at -$0.38, missing estimated EPS by -$0.05. Revenue for the quarter equaled $151.56 million, up 17.37% from the prior-year quarter, outperforming estimates by $3.55 million.
Barclays analyst Ryan MacWilliams revealed in an October 20 report that ever since 8×8, Inc. (NYSE:EGHT) changed its senior management, investors were becoming interested in the stock despite the industry headwinds. However, he intimated investors about competitive companies offering extensive financial stability, advanced technology, and better partnerships. He initiated coverage of 8×8, Inc. (NYSE:EGHT) with an Equal Weight rating and a $25 price target.
As of the third quarter, 27 hedge funds in the database of Insider Monkey reported owning stakes in 8×8, Inc. (NYSE:EGHT), worth $787.1 million. This is compared to 29 funds in the preceding quarter, with a total stake value of $928 million. Daniel Patrick Gibson’s Sylebra Capital Management is the leading stakeholder in 8×8, Inc. (NYSE:EGHT), with over 13.6 million shares worth $318.3 million.
6. Wells Fargo & Company (NYSE:WFC)
King Street Capital’s Stake Value: $56,852,000
Percentage of King Street Capital’s 13F Portfolio: 4.79%
Number of Hedge Fund Holders: 88
A California-based multinational financial services corporation, Wells Fargo & Company (NYSE:WFC) offers services including asset and wealth management, private equity, commodities trading, insurance, and banking. As one of the top stock picks of Brian Higgins, Wells Fargo & Company (NYSE:WFC) accounts for 4.79% of his Q3 portfolio. Higgins’ King Street Capital holds a $56.8 million position in the company as of September this year.
The leading Wells Fargo & Company (NYSE:WFC) stakeholder as of Q3 2021 is Boykin Curry’s Eagle Capital Management, with a $1.56 billion stake. Overall, 88 hedge funds monitored by Insider Monkey were long Wells Fargo & Company (NYSE:WFC) as of the third quarter, down from 94 funds in the preceding quarter.
JPMorgan analyst Vivek Juneja on November 3 kept a Neutral rating on Wells Fargo & Company (NYSE:WFC), stating that the company negatively changed the language in its Q3 filing regarding its regulatory issues, and it would take a lot of time to satisfy regulators after this occurrence.
The Q3 earnings were posted by Wells Fargo & Company (NYSE:WFC) on October 14, with EPS in the period being $1.22, beating estimates by $0.28. The $18.83 billion revenue for Q3 also outperformed estimated revenue by $542.17 million.
In addition to Booking Holdings Inc. (NASDAQ:BKNG), The Wendy’s Company (NYSE:WEN), T-Mobile US, Inc. (NASDAQ:TMUS), and Vornado Realty Trust (NYSE:VNO), Wells Fargo & Company (NYSE:WFC) is a notable stock in Brian Higgins’ Q3 portfolio.
Here is what L1 Capital has to say about Wells Fargo & Company (NYSE:WFC) in its Q2 2021 investor letter:
“Wells Fargo (Long +16%) was the strongest contributor to portfolio performance over the quarter. Wells Fargo shares rallied given a better outlook for bad debts driven by improving employment and house price trends. The company had been very undervalued due to excessive fears around likely bad debts due to the pandemic, the continued regulatory “asset cap” (a punishment that was put in place in 2017 for numerous compliance failures) and an inability to commence buybacks. The share price has subsequently recovered strongly in recent months as the company has progressed its turnaround program under the leadership of the well-regarded CEO, Charles Scharf (former CEO of Visa and BNY Mellon). Wells Fargo is now closer to getting the asset cap lifted and has announced a huge cost out program (US$8b+) as well as an $18b buyback program to be completed over the next 12 months. Wells Fargo shares have rallied more than 50% since we initiated the position in late 2020. Given the strong rally, we elected to exit our position and rotate into stocks with larger valuation upside.”
Click to continue reading and see Brian Higgins’ King Street Capital Portfolio: Top 5 Stock Picks.
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Disclosure: None. Brian Higgins’ King Street Capital Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.
