1. Post Holdings, Inc. (NYSE:POST)
Baupost Group’s Stake Value: $26.2 million
Percentage of Baupost Group’s 13F Portfolio: 0.28%
Number of Hedge Fund Holders: 35
Increase in Stake: New Addition To Portfolio
Legendary value investor Seth Klarman initiated a $26 million position in Post Holdings, Inc. (NYSE:POST) in the first quarter consisting of 378,000 shares. This represented 0.28% of the famed investor’s total Q1 2022 portfolio.
Post Holdings, Inc. (NYSE:POST) operates as a consumer packaged goods company which sells a range of frozen food, food ingredient, refrigerated food, and cereal food products across the United States.
Investors were eager on Post Holdings, Inc. (NYSE:POST) shares at the close of the fourth quarter, with 35 hedge funds holding stakes in the firm with a combined value of $1.54 billion. This is up from 27 hedge funds at the end of the third quarter with $1.43 billion worth of positions in the food goods company. William Duhamel’s Route One Investment Company was the largest shareholder of the firm in the first quarter, with a significant stake worth $484.9 million.
On May 9, Piper Sandler analyst Michael Lavery raised the firm’s price target on Post Holdings, Inc. (NYSE:POST) to $96 from $84 and maintained an ‘Overweight’ rating on the company shares. He remains bullish on the firm and raised the price target to reflect a faster recovery in Foodservice margins. Citi analyst Wendy Nicholson was also positive on Post Holdings, Inc. (NYSE:POST), with a ‘Buy’ rating and a $92 price target.
Heartland Advisors, an investment firm, discussed Post Holdings, Inc. in its Q1 2021 investor letter. The fund said:
“The run up in equity prices over the past several months has narrowed the pool of attractively valued businesses. Economically sensitive areas of the market, in particular, have seen valuations stretched—but the impact of investor exuberance is evident in share prices of companies throughout the broader market. In response, we continue to focus on finding and owning companies that are poised to succeed against a variety of backdrops or those that are priced at significant discounts to peers regardless of the sector or industry. Recent addition Post Holdings, Inc. (POST) is an example of the type of business we’ve found attractive.
Post manufactures and markets food products through five business lines including a breakfast cereals unit, a food service division, refrigerated retail products, and active nutrition. Shares of the company came under pressure due to the severe impact the COVID-19 economic shutdown had on its food service segment.
Additionally, investors were wary of the company’s use of debt given the uncertainty surrounding how long the economic pullback would last. The bear case against the stock, in our view, is overblown.
In recent years, Post has transformed itself into a higher-growth packaged food enterprise with a diversified portfolio that, taken as a whole, possesses superior growth and free cash flow characteristics vs. its peers. Despite this, shares sell at a meaningful discount to the peer group based on enterprise value/earnings before interest taxes depreciation and amortization, as well as our estimates of the company’s intrinsic value. As the economy returns to normal, Post’s food service line should rebound, and we believe investors will gain a greater appreciation of the company and its stock.”
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