In this article, we examined Joe Milano’s portfolio management strategy and approach to investing in stocks. We also reviewed the top 10 stock picks of Joe Milano’s Greenhouse Funds. You can skip our detailed discussion about Joe Milano’s investment philosophy and portfolio management strategies and jump directly to the Top 5 Stock Picks of Joe Milano’s Greenhouse Funds.
Joe Milano is a leading stock picker who has beaten S&P 500 by about 2% a year over his career. After earning a BA from Duke University in 1994, he joined T Rowe Price where he managed the $4 billion New America Growth Fund from 2002 to May 2013 and earned an average annual return of 9.15%. In June 2013, Joe Milano founded Subadvisor and is currently serving as portfolio manager of Greenhouse Funds LP. His investment strategy includes buying stakes in small caps that are undervalued and run by strong management.
Investing in small-cap stocks is a great idea due to their potential to produce large returns in a short timeframe compared to larger companies. In addition, small caps with a strong business model are often acquired by large caps, which could yield hefty profits for shareholders. As an example, Greenhouse Funds’ largest holding, Zynga Inc (NASDAQ:ZNGA), was recently acquired at a 64% premium by Take-Two Interactive (NASDAQ:TTWO).
As of March 31, Joe Milano’s Greenhouse held stakes in 45 companies worth $990 million, with the top 10 stocks accounting for over 52% of the portfolio. Its top 10 stock holdings include Valmont Industries, Inc. (NYSE:VMI), nVent Electric plc (NYSE:NVT), Verisk Analytics, Inc. (NASDAQ:VRSK), Evolent Health, Inc. (NYSE:EVH) and Blackbaud, Inc. (NASDAQ:BLKB). Moreover, Joe Milano appears to be taking advantage of the stock market volatility in 2022. During the first quarter, he initiated positions in 10 new stocks and added to 19 existing positions. In addition, he shorted stocks like Electronic Art (NASDAQ:EA) and Palantir Technologies (NASDAQ:PLTR) which are experiencing tough times as a result of changing market conditions.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology:
We made use of Greenhouse Funds’ 13F portfolio for the second quarter for this analysis.
Top 10 Stock Picks of Joe Milano’s Greenhouse Funds
10. Valmont Industries, Inc. (NYSE:VMI)
Greenhouse Funds’ stake value: $40M
Joe Milano’s strategy of initiating a stake in Valmont Industries, Inc. (NYSE:VMI) appears to be working as the company’s fabricated metal products are benefiting from favorable pricing. Shares of Valmont Industries, Inc. (NYSE:VMI) more than doubled since Greenhouse initiated a position in the final quarter of 2020. The company’s strategy of returning cash to investors in the form of dividends also makes it a good pick for the long-term. Besides past performance, the future fundamentals of Valmont Industries, Inc. (NYSE:VMI) look solid amid double-digit revenue and earnings growth expectations for this year. Valmont Industries, Inc. (NYSE:VMI) expects to generate net sales growth in the range of 11% to 17% for the full year while earnings per share are anticipated to hover around $13-$13.50.
Hedge funds are also showing confidence in Valmont Industries, Inc. (NYSE:VMI). Of the 912 hedge funds tracked by Insider Monkey, 23 were bullish about Valmont Industries, Inc. (NYSE:VMI) as of March 2022 compared to 17 positions in the previous quarter. Impax Asset Management and Royce & Associates were among the leading stakeholders in Valmont Industries, Inc. (NYSE:VMI).
9. nVent Electric plc (NYSE:NVT)
Greenhouse Funds’ stake value: $39M
Joe Milano’s Greenhouse first invested in nVent Electric plc (NYSE:NVT) in the first quarter of 2021 and the firm added to its existing stake by 4% in the first quarter of 2022. In the second quarter, the fund increased its stake by 6%. The hedge fund’s strategy of buying a stake in nVent Electric plc (NYSE:NVT) has also been paying off as shares of the company rallied sharply in 2021 and continue to outperform the broader market index in 2022. Higher investors’ confidence in its stock is attributed to robust demand for its electrical connection and protection solutions from end markets like data solutions, industrial automation, power utilities, renewable energy, and smart buildings. In the March quarter, nVent Electric plc (NYSE:NVT) posted revenue growth of 27% over the same quarter last year and it expects to grow sales by a mid-teen percentage for the full year.
Like Valmont Industries, Inc. (NYSE:VMI), dividend investors may also consider nVent Electric plc (NYSE:NVT). Currently, nVent Electric plc (NYSE:NVT) offers a dividend yield of nearly 2.17%. Further, the company’s low payout ratio of 34% to net income combined with forecasts for solid earnings growth in the quarters ahead hints at room for dividend growth.
In the first quarter investor letter, Fiduciary Management, an investment management firm, mentioned a few stocks including nVent Electric plc (NYSE:NVT). Here’s what Fiduciary management stated about nVent Electric plc (NYSE:NVT):
“nVent is a global provider of electrical connection and protection solutions. It was spun out of Pentair in 2018. The company is headquartered in Minneapolis, MN, although it’s incorporated in Ireland, and reports three segments: Enclosures (51% of sales and 40% of EBITA3), Electrical & Fastening Solutions (27% of sales and 36% of EBITA), and Thermal Management (22% of sales and 24% of EBITA). By geography, sales are split 63% U.S. and Canada, 23% Developed Europe, 11% Developing, and 3% Other Developed. By vertical, sales are split 43% Industrial, 28% Commercial & Residential, 21% Infrastructure, and 8% Energy…” (Click here to see the full text)
8. Verisk Analytics, Inc. (NASDAQ:VRSK)
Greenhouse Funds’ stake value: $40.4M
Milano took advantage of the dip in Verisk Analytics, Inc. (NASDAQ:VRSK) stock price during the first quarter. Greenhouse increased its stake in a data analytics company by 41% to 4.22% of the entire portfolio. In the second quarter, the fund further upped its stake in the company by 20%.
Shares of Verisk Analytics, Inc. (NASDAQ:VRSK) are still trading in a buy zone. Currently, its share price is trading at $180, down nearly 20% from its 52-week high of $231. A broader market trend is mainly responsible for the company’s share price volatility. Besides that, the fundamentals of Verisk Analytics, Inc. (NASDAQ:VRSK) look promising with expectations for mid-single-digit revenue growth in 2022. The median price target for Verisk Analytics, Inc. (NASDAQ:VRSK) stock is $202, while the high price target is $230.
In the first quarter investor letter, Baron Funds, an asset management firm, expressed confidence in the business strategies of Verisk Analytics, Inc. (NASDAQ:VRSK). Here is what Baron Funds stated:
“Outperformance of the Fund’s investments in Communication Services, Financials, and Industrials and lower exposure to the lagging Consumer Discretionary sector added the most value. Strength in Industrials was driven by data and analytics vendor Verisk Analytics, Inc. (NASDAQ:VRSK) Verisk reported solid quarterly earnings results led by ongoing strength in its core Insurance segment. Management also stated its intention to focus on expanding its products to the insurance industry, leading to a likely divestiture of its Financial Services and Energy segments.”
7. Evolent Health, Inc. (NYSE:EVH)
Greenhouse Funds’ stake value: $45.5M
Evolent Health, Inc. (NYSE:EVH) is one of the best recession-resistant stocks in the list of top 10 stock picks of Joe Milano’s Greenhouse Funds. Evolent Health, Inc. (NYSE:EVH ) operates in the healthcare sector that is generally immune to economic cycles, interest rate volatility, and political instability. The company’s performance is also reflected in its share price, which has shot up 34% year to date. Evolent Health, Inc. (NYSE:EVH) generated 38% year-over-year revenue growth in the March quarter while its recent acquisition of Georgia-based IPG would further bolster revenue growth and accelerate its entry into the commercial line of business.
6. Blackbaud, Inc. (NASDAQ:BLKB)
Greenhouse Funds’ stake value: $50.5M
Blackbaud, Inc. (NASDAQ:BLKB) has been a part of Joe Milano’s portfolio over the past year. In the March quarter, the hedge fund raised its stake in the company by 7% to 4.81% of the overall portfolio. In the second quarter, the hedge fund increased its stake in the company by 10%.
Since the beginning of this year, shares of Blackbaud, Inc. (NASDAQ:BLKB) have been under pressure due to concerns about looming recession and interest rate hikes. However, Blackbaud, Inc. (NASDAQ:BLKB) appears in a strong financial position. In the first quarter, the company generated 17% revenue growth on a YoY basis, and it expects to cross the billion dollar mark in 2022.
As of the end of the June quarter, 15 hedge funds had stakes in the company, according to Insider Monkey’s database of 895 hedge funds.
Click to continue reading and see Top 5 Stock Picks of Joe Milano’s Greenhouse Funds.
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Disclosure: None. Top 10 Stock Picks of Joe Milano’s Greenhouse Funds is originally published on Insider Monkey.
