We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where CBRE Group, Inc. (NYSE:CBRE) stands against the other best stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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A downtown skyline, highlighting a successful real estate services company.
CBRE Group, Inc. (NYSE:CBRE)
Hosking Partners’ Stake Value: $54,262,465
Percentage of Hosking Partners’ 13F Portfolio: 2%
Number of Hedge Fund Holders: 54
CBRE Group, Inc. (NYSE:CBRE), headquartered in Dallas, is the world’s largest commercial real estate services and investment firm by revenue in 2023. As a Fortune 500 and S&P 500 company, CBRE employs over 130,000 people and operates in more than 100 countries, offering a comprehensive range of services, including property management, investment management, leasing, and development.
In the recent quarter, CBRE’s free cash flow improved significantly to $220 million, with a conversion rate of nearly 90%. The company has raised its annual free cash flow outlook to just over $1 billion and expects to end the year with around 1 turn of net leverage, despite spending $1.3 billion on M&A and co-investments in 2024.
Advisory net revenue increased by 9%, with growth across all business lines except property sales. Leasing revenue exceeded expectations, especially in the U.S., where office leasing saw a nearly 30% increase, driven by strong performance in New York. Retail also showed strength, while industrial activity declined. Global property sales revenue stabilized, with only a slight decline. Sales conversion was strong, with the pipeline growing over 6%, driven by technology and energy sectors. Additionally, Product Management and Facilities Management saw significant revenue growth, supported by strategic acquisitions, including a major move to expand data center management. The company expects continued growth, with substantial profits anticipated from development asset sales and ongoing M&A activities.
Overall CBRE ranks 13th on our list of the best stocks to buy according to Hosking Partners. While we acknowledge the potential of CBRE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CBRE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.