In this article we present the list of Disney (DIS) and 9 Other Stocks Billionaire Phill Gross Was Buying Up in Q1. Click to skip ahead and check out Disney (DIS) and 4 Other Stocks Billionaire Phill Gross Was Buying Up in Q1.
Walt Disney Co (NYSE:DIS), Dollar Tree, Inc. (NASDAQ:DLTR), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) are three of the stocks that billionaire money manager Phill Gross was captivated by in Q1.
Phill Gross’ Adage Capital Management is a Boston-based hedge fund that was founded by Gross and Robert Atchinson in 2001. Gross spent more than a decade at Harvard Management Company, where he served as the firm’s healthcare and retail analyst, equity research director, and partner, before launching Adage Capital.
From having $3.8 billion in assets in its first year, Adage grew to become one of the biggest hedge funds in the world, managing over $58 billion in assets. The fund counts several major foundations, colleges, and non-profits among its clientele, and became famous for returning money to shareholders during some of its previous periods of underperformance.
Granted, there haven’t been many of those, as Adage Capital enjoyed a 15-year run where it beat the S&P 500 every year, topping it by an average of 3.5 percentage points annually. That outperformance was in line with the co-founders’ time at HMC, where they also beat the market by an average of 4.5 percentage points annually.
The fund has had remarkably consistent exposure to various sectors over the years, including healthcare, consumer discretionary, and finance. One of the few sectors the fund has dramatically shifted its exposure on over the last five years is tech, which Adage’s 13F portfolio now has 22% exposure to, up from less than 14% five years ago. The fund’s exposure to materials stocks has also been cut in half during that time, to 3.66% as of Q1 2022.
Adage Capital’s 13F portfolio contained assets valued at $52.7 billion as of March 31, down from $55.5 billion a quarter earlier after a Q1 in which the fund sold off or reduced its holdings in 544 stocks while initiating 187 new positions and augmenting 252 of its long positions with more shares.
In this article we’ll examine ten of the stocks that the experts at Adage Capital Management were buying heavily during Q1.
Robert Atchinson of Adage Capital Management
Our Methodology
The following data is gathered from Adage Capital Management’s latest 13F filing with the SEC. We follow hedge funds like Adage Capital Management because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
Disney (DIS) and 9 Other Stocks Billionaire Phill Gross Was Buying Up in Q1
10. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Value of Adage Capital Management’s 13F Position: $184 million
Number of Hedge Fund Shareholders: 83
Walt Disney Co (NYSE:DIS), Dollar Tree, Inc. (NASDAQ:DLTR), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) are a few of the stocks that Phill Gross was buying in Q1. Another is Advanced Micro Devices, Inc. (NASDAQ:AMD), which appears prominently in the article Hedge Funds are Buying These 5 Semiconductor Stocks in 2022. Hedge fund ownership of AMD hit an all-time high at the end of the March following a 19% jump during the first quarter. Phill Gross’ Adage Capital Management already had an AMD position heading into 2022, but raised its stake in the company by 155% to over 1.68 million shares during Q1.
Advanced Micro Devices, Inc. (NASDAQ:AMD) shares are down by 51% this year, which recently prompted Northland Capital Markets analyst Gus Richard to upgrade the stock to ‘Outperform’ from ‘Market Perform’, with a $95 price target. The analyst predicts that AMD’s GPY revenue will fall by 7% in 2023, while its PC CPU revenue will decline by 6%. Nonetheless, the analyst believes those macro headwinds are now baked into the stock, given that it’s now trading at just 16x 2023 estimates.
9. Activision Blizzard, Inc. (NASDAQ:ATVI)
Value of Adage Capital Management’s 13F Position: $197 million
Number of Hedge Fund Shareholders: 80
Adage Capital nearly tripled the size of its stake in gaming company Activision Blizzard, Inc. (NASDAQ:ATVI) during Q1, pushing its position to 2.45 million shares, up 195% quarter-over-quarter. Hedge fund ownership of Activision Blizzard is down by over 20% since the early months of the pandemic, though it remains one of the most popular gaming stocks among funds.
The drop in ownership is particularly surprising given that Activision Blizzard, Inc. (NASDAQ:ATVI) has an intriguing share price spread in relation to its proposed takeover from Microsoft (NASDAQ:MSFT). That deal has come under some regulatory scrutiny, particularly in relation to whether Microsoft will cut off competition by blocking Activision Blizzard’s games from rival Sony’s PlayStation 5 console. Nonetheless, Wedbush gaming expert Michael Pachter believes the FTC has little chance to win a court battle against Microsoft over the deal.
FPA U.S. Core Equity Fund’s position in Activision Blizzard, Inc. (NASDAQ:ATVI) was one of its top contributors during the first quarter. The fund cited the company’s upcoming acquisition by Microsoft, as well as its catalog of premium titles while discussing the gaming company in its Q1 2022 investor letter:
“One of the Fund’s biggest winners in the first quarter was Activision Blizzard. On January 18, 2022 Microsoft (NASDAQ:MSFT) agreed to purchase ATVI for $95.00 per share in an all-cash transaction. The Fund has been invested in ATVI since the second quarter of 2018.
The investment thesis was threefold. First, the greater than $200 billion gaming industry is the largest and fastest growing form of entertainment in the world. More than three billion people play games currently and the population of global gamers is expected to grow faster than global population growth this decade.14 Second, ATVI has some of the best intellectual property in the gaming industry including Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush in addition to global eSports activities through Major League Gaming. Third, ATVI has had a pristine balance sheet with net cash over the past four years, generated robust free cash flow and traded at an undemanding valuation.
ATVI closed the quarter at $80.11—a nearly 16% discount to the acquisition price. Assuming it takes about a year for the deal to close, a 18.6% return seems to be good upside relative to the risk of a deal not closing due to anti -trust concerns. If the transaction closes it would make Microsoft the third-largest company in gaming by revenue behind Tencent and Sony. There is plenty of competition from these larger players as well as smaller competitors such as EA, Take-Two Interactive, Roblox and Epic Games’ Fortnite. The Fund remains invested in ATVI given the significant discount, but should the discount narrow in the coming quarters the Fund could reduce or eliminate the position.”
8. Chubb Limited (NYSE:CB)
Value of Adage Capital Management’s 13F Position: $198 million
Number of Hedge Fund Shareholders: 31
One of the 10 stocks Jim Cramer is Recommending in June, Chubb Limited (NYSE:CB) also has a big fan in Adage Capital Management, which hiked its position in the company by 29% during Q1 to 924,783 shares. Jim Simons’ Renaissance Technologies also raised the size of its long position in CB during Q1, by 59%.
One of the world’s largest property and casualty insurers, Chubb Limited (NYSE:CB) has further diversified into several specialty lines of coverage in recent years, including terrorism insurance, marine, environmental, and medical risk. Chubb, which operates in 54 countries worldwide, also bolstered its Asia Pacific operations in recent days with the closing of its acquisition of a group of companies that ran Cigna Corporation (NYSE:CI)’s personal accident, supplemental health and life insurance businesses in that region. Chubb described the businesses as having favorable underwriting margins and believes the region offers great long-term growth potential.
Aristotle Capital Management Global Equity, a long-time shareholder of Chubb Limited (NYSE:CB), believes the company is high-quality. Nonetheless, it decided to sell off its position given the apparent lack of remaining catalysts, as detailed in the fund’s Q1 2022 investor letter:
“Our investment in Chubb began in the fourth quarter of 2015, shortly after ACE Limited announced it would acquire the Chubb Corporation, creating the largest global property and casualty insurance company by underwriting income. During our nearly seven-year holding period, the company’s combination progressed leading to the realization of main catalysts we had identified. These included cost savings, broadened product offerings and an expanded customer base, as well as enhanced distribution capabilities and improved pricing due to scale. In addition, Chubb successfully grew its profitable high-net-worth personal lines. While we still consider Chubb to be a high-quality business, few catalysts remain after what was, in our opinion, a remarkable run of successful business execution. As such, we decided to step aside in favor of what we believe to be a more optimal investment in Blackstone.”
7. Verizon Communications Inc. (NYSE:VZ)
Value of Adage Capital Management’s 13F Position: $202 million
Number of Hedge Fund Shareholders: 70
Adage Capital Management owns 3.96 million shares of Verizon Communications Inc. (NYSE:VZ) as of March 31 after raising the size of its position in the telecom giant by 29% during Q1. Hedge fund ownership of Verizon has rebounded by 19% over the past two quarters after hitting a 4-year low in Q3 of 2021.
Verizon Communications Inc. (NYSE:VZ) looks like a safe value stock to invest in during the current market turbulence, which explains why shares are down just over 1% this year, well ahead of the market. The company generates stable free cash flow that fuels its generous dividend, which currently yields around 5%. It also has intriguing growth potential as 5G networks continue to proliferate.
Verizon Communications Inc. (NYSE:VZ) grew revenue by 2.1% in the first quarter to $33.6 billion. On the downside, sales for the company’s service category, which represents its largest segment at 80% of sales, were off by 2.5% during the quarter. On the positive side, its wireless service segment grew revenue by 28.2% during the quarter to $6.3 billion. Adjusted earnings per share fell slightly year-over-year in Q1, to $1.35. The stock currently trades at around 9.5x forward earnings.
6. Lam Research Corporation (NASDAQ:LRCX)
Value of Adage Capital Management’s 13F Position: $203 million
Number of Hedge Fund Shareholders: 59
Closing out the first half of the list is Lam Research Corporation (NASDAQ:LRCX), which Adage Capital Management owns 378,470 shares of after raising its position in the company by 30% during Q1. Steve Cohen’s Point72 Asset Management was also buying more shares of LRCX during Q1, hiking its stake by 25% to 187,640 shares.
Lam Research Corporation (NASDAQ:LRCX) shares have tumbled by 45% this year, owing in part to a disappointing Q3 earnings report. The semiconductor maker grew revenue by 5.5% year-over-year in its Q3 of fiscal year 2022, which was on the lower end of the company’s guidance range. Supply chain constraints hampered the company’s ability to complete shipments, while materials costs also rose dramatically, pinching the company’s gross margin to 44.7% on a non-GAAP basis, down from 46.3% a year earlier.
Vulcan Value Partners likes Lam Research Corporation (NASDAQ:LRCX)’s strong fundamentals and secular tailwinds, as it detailed in its Q1 2022 investor letter:
“Lam Research Corp. designs and manufactures equipment used in the fabrication of semiconductors. Recent supply chain issues have negatively impacted the industry and has resulted in chip shortages. The industry is performing well, exceeding our expectations, and Lam Research’s fundamentals remain strong. The long-term secular drivers of demand and growth in the industry continue to be very powerful. Lam Research is experiencing increasing returns on capital, higher margins, and more stable results.”
In the second half of this article, we’ll look into Phill Gross’ purchases of Walt Disney Co (NYSE:DIS), Dollar Tree, Inc. (NASDAQ:DLTR), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), among others, in Q1.
Click to continue reading and see the Disney (DIS) and 4 Other Stocks Billionaire Phill Gross Was Buying Up in Q1.
Suggested articles:
- 10 Blue Chip Stocks To Buy According To Billionaire Ken Fisher
- 10 Best CBD Stocks To Buy Now
- 10 Best Recession Stocks To Buy
Disclosure: None. Disney (DIS) and 9 Other Stocks Billionaire Phill Gross Was Buying Up in Q1 is originally published at Insider Monkey.
