In this article, we discuss the top 10 stock picks of Mason Morfit’s ValueAct Capital. If you want to skip our detailed analysis of these stocks, go directly to the Top 5 Stock Picks of ValueAct Capital.
ValueAct Capital was co-founded by Jeffrey Ubben in 2000. ValueAct is an investment management firm based in San Francisco, managing the capital of multiple clients including private and institutional investors. With a top ten holdings concentration of 98.97%, the firm’s investments are focused on the real estate, information technology, industrials, healthcare, and finance sectors.
Mr. Ubben left the firm in June of 2020 to found Inclusive Capital Partners. Currently, Mason Morfit is leading the hedge fund.
The most notable stock picks of ValueAct Capital include Bausch Health Companies Inc. (NYSE:BHC), Citigroup Inc. (NYSE:C), and Fiserv, Inc. (NASDAQ:FISV), in addition to others discussed at length below.
Jeffrey Ubben, Founder of ValueAct Capital and Inclusive Capital Partners
Our Methodology
We used the Q3 portfolio of ValueAct Capital to list down the firm’s top 10 stock picks, ranking the securities according to the firm’s stake value in each holding. For further context on each company, we mentioned the Q3 earnings, analyst ratings, and the hedge fund sentiment around each stock.
Top Stock Picks of ValueAct Capital
10. SLM Corporation (NASDAQ:SLM)
ValueAct Capital’s Stake Value: $297,663,000
Percentage of ValueAct Capital’s 13F Portfolio: 3.44%
Number of Hedge Fund Holders: 27
SLM Corporation (NASDAQ:SLM), commonly known as Sallie Mae, is a government sponsored consumer banking company, offering private student loans, credit cards, college planning tools, and retail banking. ValueAct Capital owns approximately 17 million SLM Corporation (NASDAQ:SLM) shares as of Q3 2021, worth $297.6 million, representing 3.44% of the firm’s total investments.
On October 20, SLM Corporation (NASDAQ:SLM) posted earnings for the third quarter, announcing an EPS of $0.24, beating estimates by $0.09. The Q3 revenue totaled $357.52 million, outperforming estimates by $14.99 million.
SLM Corporation (NASDAQ:SLM), on October 20, declared a $0.11 per share quarterly dividend, which reflects a 266.7% increase from the prior dividend of $0.03. The dividend was paid on December 15 to shareholders of record on December 3.
As of Q3 2021, 27 hedge funds tracked by Insider Monkey were long SLM Corporation (NASDAQ:SLM), holding stakes worth $891.5 million. One of the leading stakeholders of SLM Corporation (NASDAQ:SLM) is Impactive Capital, with almost 10 million shares worth $175.2 million.
In addition to Bausch Health Companies Inc. (NYSE:BHC), Citigroup Inc. (NYSE:C), and Fiserv, Inc. (NASDAQ:FISV), SLM Corporation (NASDAQ:SLM) is a notable stock from ValueAct Capital’s third quarter portfolio.
9. Insight Enterprises, Inc. (NASDAQ:NSIT)
ValueAct Capital’s Stake Value: $299,501,000
Percentage of ValueAct Capital’s 13F Portfolio: 3.56%
Number of Hedge Fund Holders: 16
Insight Enterprises, Inc. (NASDAQ:NSIT), a company focusing on B2B technology solutions like cloud and data center transformation, workforce integration, and digital innovation, is one of the top stock picks of ValueAct Capital. In the third quarter of 2021, the hedge fund increased its position in Insight Enterprises, Inc. (NASDAQ:NSIT) by 17%, holding a $299.5 million stake in the company. The stock accounts for 3.56% of ValueAct Capital’s total Q3 investments.
Insight Enterprises, Inc. (NASDAQ:NSIT) announced its Q3 results on November 4, posting earnings per share of $1.87, beating estimates by $0.20. The quarterly revenue gained 26.39% year-over-year, equaling $2.45 billion, outperforming estimates by $286.10 million.
Barrington analyst Vincent Colicchio on November 11 raised the price target on Insight Enterprises, Inc. (NASDAQ:NSIT) to $122 from $116 and kept an Outperform rating on the shares after the Q3 earnings beat. The analyst believes that Insight Enterprises, Inc. (NASDAQ:NSIT) is well positioned to generate solid revenue and earnings growth in 2022, citing good planning with clients, solid demand for devices and cloud solutions, and growing interest in infrastructure technology.
A total of 16 hedge funds in the Q3 database of Insider Monkey were bullish on Insight Enterprises, Inc. (NASDAQ:NSIT), down from 19 funds in the prior quarter. Royce & Associates is one of the leading Insight Enterprises, Inc. (NASDAQ:NSIT) stakeholders, with an approximately $21 million position in the company.
Here is what L1 Capital has to say about Insight Enterprises, Inc. (NASDAQ:NSIT) in its Q2 2021 investor letter:
“Insight Enterprises, a previous top-ten holding, was divested in full during the quarter. In conjunction with inline Q1 2021 results, Insight announced the intention for CEO, Ken Lamneck to retire by the end of this year. A new CEO has not yet been announced. Ken Lamneck has been CEO of Insight for over 11 years and is currently 65 years old, so his retirement was not a shock. However, we do consider Lamneck to have been central to shareholder value creation, including through successful acquisitions. A period of uncertainty while leadership transitioned to an unknown new CEO, as well as share price appreciation led us to conclude more attractive risk adjusted opportunities lay elsewhere in our Portfolio and Bench of potential investments.”
9. Trinity Industries, Inc. (NYSE:TRN)
ValueAct Capital’s Stake Value: $407,709,000
Percentage of ValueAct Capital’s 13F Portfolio: 4.72%
Number of Hedge Fund Holders: 17
Trinity Industries, Inc. (NYSE:TRN) is an American conglomerate that provides services like manufacturing barges, designing tank heads and tank containers, fleet management, maintenance, and leasing services. Trinity Industries, Inc. (NYSE:TRN) also produces construction materials, serving clients from the industrial, energy, transportation, and construction sectors. ValueAct Capital holds a $407.7 million stake in Trinity Industries, Inc. (NYSE:TRN) as of the third quarter, which represents 4.72% of the fund’s total 13F portfolio.
On December 10, Trinity Industries, Inc. (NYSE:TRN) declared a quarterly cash dividend of $0.23 per share, up from $0.21 per share in the prior quarter, representing the company’s 231st consecutively paid dividend. The dividend is payable on January 31, 2022 to shareholders of record on January 14, 2022.
In the third quarter earnings report published on October 21, Trinity Industries, Inc. (NYSE:TRN) posted an EPS of $0.29, beating estimates by $0.11. The $503.50 million revenue exceeded estimates by $49.53 million.
Monomoy Capital Partners, a New York-based private equity firm, announced on November 3 that it has signed a definitive agreement to acquire Trinity Highway Products from Trinity Industries, Inc. (NYSE:TRN) for approximately $375 million. The transaction remains subject to customary closing conditions and regulatory approval.
Cardinal Capital is one of the leading Trinity Industries, Inc. (NYSE:TRN) stakeholders as of Q3 2021, with over 2 million shares worth $55.5 million. Overall, 17 hedge funds were long Trinity Industries, Inc. (NYSE:TRN) in the third quarter, down from 20 funds in the preceding quarter.
7. Bausch Health Companies Inc. (NYSE:BHC)
ValueAct Capital’s Stake Value: $499,674,000
Percentage of ValueAct Capital’s 13F Portfolio: 5.58%
Number of Hedge Fund Holders: 39
Bausch Health Companies Inc. (NYSE:BHC) is a multinational pharmaceutical company that provides medication for skin diseases, gastrointestinal disorders, eye health, and neurology. ValueAct Capital owns roughly 18 million Bausch Health Companies Inc. (NYSE:BHC) shares, worth $499.6 million, representing 5.58% of the fund’s total third quarter investments.
The Q3 results were reported on November 2 by Bausch Health Companies Inc. (NYSE:BHC). The company posted an EPS of $1.15, exceeding estimates by $0.08. The $2.11 billion revenue was down 1.26% year-over-year, missing estimates by $41.53 million.
JPMorgan analyst Chris Schott on November 3 recommended taking advantage of the post-earnings selloff in shares of Bausch Health Companies Inc. (NYSE:BHC). The analyst stated that it is not surprising that the shares sold off but said his sum-of-the-parts analysis “supports a very favorable risk/reward” at current share levels. Schott kept an Overweight rating on Bausch Health Companies Inc. (NYSE:BHC) with a $38 price target.
Icahn Capital LP is the largest Bausch Health Companies Inc. (NYSE:BHC) stakeholder as of Q3 2021, with 34.1 million shares worth approximately $950 million. Overall, 39 hedge funds were long Bausch Health Companies Inc. (NYSE:BHC) in the third quarter, down from 45 funds in the preceding quarter.
Here is what Miller Value Partners has to say about Bausch Health Companies Inc. (NYSE:BHC) in its Q1 2021 investor letter:
“Bausch Health Companies (BHC) climbed 55% during the period. Glenview (6% owner) sent a letter to the company in early February arguing the company has not acted to unlock shareholder value and urging the company to sell its eye care business. Shortly after, activist investor Carl Icahn disclosing a 7.83% stake in the company. The company responded to the filing saying that they remain committed to splitting the business into two parts, but are open to pursuing all opportunities. The company reported strong 4Q results with better-than-expected 2021 guidance. 4Q revenue came in at $2,213M slightly ahead of consensus of $2,165M and EPS of $1.34 beat consensus of $1.12. The company guided for 2021 revenue of $8.6-8.8B coming in ahead of expectations of $8.55B with EBITDA of $3.4-3.55B ahead of $3.46B estimated. The company announced the transition of Paul Herendeen to an advisory role to be succeeded by Sam Eldessouky, previously senior vice president, controller and chief accounting officer. Finally, the company announced the sale of Amoun Pharmaceutical for $740M, which was relatively in line with estimates and should help support debt reduction targets ahead of the planned spin-off of Bausch + Lomb eye care business.”
6. CBRE Group, Inc. (NASDAQ:CBRE)
ValueAct Capital’s Stake Value: $898,887,000
Percentage of ValueAct Capital’s 13F Portfolio: 10.41%
Number of Hedge Fund Holders: 37
CBRE Group, Inc. (NASDAQ:CBRE), the largest real estate company in the world, is one of the top stock picks of ValueAct Capital in the third quarter. The hedge fund holds 9.23 million CBRE Group, Inc. (NASDAQ:CBRE) shares, worth $898.8 million, accounting for 10.41% of the total securities.
Keefe Bruyette analyst Jade Rahmani upgraded CBRE Group, Inc. (NASDAQ:CBRE) on November 23 to Outperform from Market Perform with an unchanged price target of $115.
On October 28, CBRE Group, Inc. (NASDAQ:CBRE) reported third quarter results, posting earnings per share of $1.39, beating estimates by $0.19. The $6.80 billion revenue was up 20.43% year-over-year, exceeding estimates by almost $144 million.
Of the 37 hedge funds that reported owning stakes in CBRE Group, Inc. (NASDAQ:CBRE) as of Q3 2021, Harris Associates is the largest company stakeholder, with 10.2 million shares worth over $1 billion.
CBRE Group, Inc. (NASDAQ:CBRE) is a notable stock from ValueAct Capital’s Q3 portfolio, in addition to Bausch Health Companies Inc. (NYSE:BHC), Citigroup Inc. (NYSE:C), and Fiserv, Inc. (NASDAQ:FISV).
Here is what Ariel Investments has to say about CBRE Group, Inc. (NASDAQ:CBRE) in its Q3 2021 investor letter:
“CBRE Group (NYSE: CBRE) is the world’s largest commercial real estate services and investment firm, with leading global market positions in leasing, property sales, occupier outsourcing and valuation businesses. Founded in San Francisco in 1906, CBRE Group operates in more than 100 countries and its diversified client base includes more than 90 of the Fortune 100 companies. As of June 30, 2021, CBRE Investment Management reported $129.1 billion in assets under management.
CBRE Group demonstrated resilience through the pandemic—stabilizing its revenue base by expanding into new lines of business and categories of clients. The company’s strong fundamentals will support its continued growth, as we expect CBRE to benefit from industry tailwinds during a sustained period of recovery…” (Click here to see the full text)
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Disclosure: None. Top 10 Stock Picks of Mason Morfit’s ValueAct Capital is originally published on Insider Monkey.
The article was corrected at 4:10 PM ET on January 5, 2022, to reflect that ValueAct is led by Mason Morfit.
