In this article, we discuss top 10 stock picks of Mark Gallogly’s Centerbridge Partners. If you want to skip our detailed analysis of Gallogly’s investment philosophy and performance, go directly to the Top 5 Stock Picks of Mark Gallogly’s Centerbridge Partners.
The most notable stocks in Mark Gallogly’s Centerbridge Partners’ 13F portfolio include First American Financial Corporation (NYSE:FAF), Genco Shipping & Trading Limited (NYSE:GNK), and Cedar Fair, L.P. (NYSE:FUN).
Centerbridge Partners, a multi-strategy private investment firm, focuses chiefly on leveraged buyouts and distressed assets. The hedge fund, which has offices in London and New York City, manages more than $32 billion in assets. Mark Gallogly and Jeffrey Aronson established it in 2005. Centerbridge Partners raised its first fund in September 2006 with $3 billion in investor commitments, concentrating on leveraged buyouts and control investments in distressed assets. Mark Gallogly retired from Centerbridge in 2020. However, he is still the founder of the fund and owns a sizable chunk of Centerbridge Partners which is why Centerbridge Partners and Mark Gallogly are used interchangeably throughout this article.
Centerbridge Partners’ $1.3 billion Special Credit III fund saw a net 8.7% gain in 2020. It generated returns by focusing on consumer-facing businesses hit by market unrest, such as rental cars, airlines, auto components, and entertainment. In 2021, Special Credit III Flex Fund generated a gross return of 51%.
The hedge fund makes investments in both control and non-control possibilities. Non-control investments include public market debt, public market shares, and other publicly traded assets, whereas control investments include private equity and public debt with a “loan-to-own” approach. Gallogly’s first-quarter portfolio is valued at $1.57 billion, as per the latest 13F filings. With a top ten holdings concentration of 97.36%, Gallogly’s first quarter investment securities are concentrated in the Consumer, Financial Services, Healthcare, Industrials, Real Estate, Technology, and Media & Telecom sectors.
Our Methodology
For this analysis, we picked the top 10 stocks from the first quarter 13F portfolio of Mark Gallogly’s Centerbridge Partners.
Top Stock Picks of Mark Gallogly’s Centerbridge Partners
10. GDS Holdings Limited (NASDAQ:GDS)
Centerbridge Partners’ Stake Value: $13,345,000
Percentage of Centerbridge Partners’ 13F Portfolio: 0.85%
Number of Hedge Fund Holders: 26
GDS Holdings Limited (NASDAQ:GDS) is a Chinese independent data center operator. GDS Holdings Limited (NASDAQ:GDS) stock represents 0.85% of Mark Gallogly’s first-quarter holdings, with the hedge fund holding 340,009 shares of the company, worth $13.35 million. GDS Holdings Limited (NASDAQ:GDS) has featured in Centerbridge Partners’ portfolio since the second quarter of 2021.
After GDS Holdings Limited (NASDAQ:GDS)’s Q1 earnings, RBC Capital analyst Jonathan Atkin maintained an ‘Outperform’ rating on the stock but decreased his price objective to $41 from $58. Even though GDS Holdings Limited (NASDAQ:GDS)’s sales and EBITDA ramp were within the previously anticipated range, the analyst was still concerned.
By the end of the first quarter, GDS Holdings Limited (NASDAQ:GDS) was part of 26 hedge funds’ portfolios. The consolidated stakes these funds had in the company were worth $645.90 million, down from $861.73 million the prior quarter, which were held by the same number of funds. 12 West Capital Management is the most significant stakeholder of GDS Holdings Limited (NASDAQ:GDS), with a $288 million stake in the company.
Like First American Financial Corporation (NYSE:FAF), Genco Shipping & Trading Limited (NYSE:GNK), and Cedar Fair, L.P. (NYSE:FUN), Centerbridge Partners also holds significant shares of GDS Holdings Limited (NASDAQ:GDS). As a result, GDS Holdings Limited (NASDAQ:GDS) stands 10th on the list of top stock picks of Mark Gallogly’s Centerbridge Partners.
Here is what Baron Funds said about GDS Holdings Limited (NASDAQ:GDS) in its first quarter 2022 investor letter:
“Following a 66% correction in its share price from a peak of $117 per share in February 2021, we recently reacquired shares in GDS Holdings Limited (GDS) at an average cost of $39 per share. GDS is the leading developer and operator of data centers in China. Following several years of strong share price performance, the shares of GDS corrected sharply in 2021 due to investor concerns about China’s increased regulatory scrutiny of the technology industry and a slowdown in its economy, increased competition, evidence of further tensions with U.S. regulatory agencies, and a substantial correction in technology shares broadly. At our average purchase price of $39, we believe these concerns are sufficiently discounted in the shares and remain optimistic about the company’s long-term potential to generate strong growth and increase the intrinsic value of the business.…. “(Click here to read the full text).”
9. Community Health Systems, Inc. (NYSE:CYH)
Centerbridge Partners’ Stake Value: $17,638,000
Percentage of Centerbridge Partners’ 13F Portfolio: 1.12%
Number of Hedge Fund Holders: 25
Community Health Systems (NYSE:CYH) is a healthcare provider in the United States. The organization oversees 81 acute care hospitals, outpatient clinics, 2 stand-alone rehabilitation hospitals, and 13,289 licensed beds. However, Community Health Systems (NYSE:CYH) posted poor second-quarter results on July 27. Community Health Systems (NYSE:CYH)’s revenue was down 2.3% from the prior-year quarter, amounting to $2.93 billion, missing estimates by $210 million.
Following the “weak” Q2 results, Citi analyst Jason Cassorla reiterated a ‘Buy’ rating on Community Health Systems (NYSE:CYH) but decreased his price target to $6 from $14 on August 4. The analyst said that the share price loss has not been as severe as it first appeared because of the stock’s reset due to the revised outlook.
During the first quarter, Mark Gallogly sold out of 17% of his stake in Community Health Systems, Inc. (NYSE:CYH). His hedge fund first initiated a position in Community Health Systems in 2020. Community Health Systems, Inc. (NYSE:CYH) was in 25 hedge funds’ portfolios at the end of the first quarter compared to 28 in the previous quarter. Eversept Partners is the most significant stakeholder of Community Health Systems (NYSE:CYH), with 7.13 million shares worth $84.59 million.
8. VectoIQ Acquisition Corp. II (VTIQ) (NASDAQ:VTIQ)
Centerbridge Partners’ Stake Value: $19,168,000
Percentage of Centerbridge Partners’ 13F Portfolio: 1.22%
Number of Hedge Fund Holders: N/A
The operations of VectoIQ Acquisition Corp. II (NASDAQ:VTIQ) are minimal. Its targeted results include a merger, share exchange, asset acquisition, stock purchase, or restructuring. VectoIQ Acquisition Corp. II (NASDAQ:VTIQ) plans to concentrate its search efforts on the transportation, smart mobility, and industrial technology sectors.
The managing partner of VectoIQ Acquisition Corp. II (NASDAQ:VTIQ) is Steve Girsky, who has more than 30 years of expertise working with top corporate and board executives, OEM leaders, labor leaders, suppliers and dealers, as well as national and local policymakers. VectoIQ Acquisition Corp. II (NASDAQ:VTIQ)’s initial public offering of 30,000,000 shares for $10.00 per unit was priced and announced on January 6.
According to the 13F filings for the first quarter of 2022, Centerbridge Partners held over 1.95 million shares of VectoIQ Acquisition Corp. II (NASDAQ:VTIQ), amounting to more than $19.2 million in value and representing 1.22% of the fund’s portfolio value. Simon Sadler’s Segantii Capital is VectoIQ Acquisition Corp. II (NASDAQ:VTIQ)’s most notable stakeholder.
7. Garrett Motion Inc. (NASDAQ:GTX)
Centerbridge Partners’ Stake Value: $24,374,000
Percentage of Centerbridge Partners’ 13F Portfolio: 1.55%
Number of Hedge Fund Holders: 20
Garrett Motion Inc. (NASDAQ:GTX), a unique technology supplier for the automotive sector, released its financial results for the second quarter of 2022 on July 28. Compared to the second quarter of 2021, when net sales were $935 million, the latest quarter’s net sales of $859 million represented a decline of 8%. In addition, earnings per share came in at $0.15, below estimates by $0.09.
Howard Marks’ Oaktree Capital Management is the largest shareholder of Garrett Motion Inc. (NASDAQ:GTX), with 68.83 million shares worth $569.26 million. According to Insider Monkey’s data, 20 hedge funds were long Garrett Motion Inc. (NASDAQ:GTX) at the conclusion of the first quarter of 2022, with aggregate stakes valued at about $1.98 billion.
Securities filings reveal that Centerbridge Partners owned over 3.39 million shares of Garrett Motion Inc. (NASDAQ:GTX) at the end of March 2022, worth $24.37 million, and representing 1.55% of the fund’s portfolio value. In addition, Mark Gallogly’s Centerbridge Partners has kept a stake in Garrett Motion Inc. (NASDAQ:GTX) since the second quarter of 2021.
In its Q2 2022 investor letter, Alluvial Capital Management mentioned Garrett Motion Inc. (NASDAQ:GTX). Here is what the fund said:
“Garrett Motion is an exercise in patience. Just as it seemed the global automotive market was about to recover to pre-COVID production, along came Russia, inflation, and the threat of recession. Still, the company is making great strides in improving and simplifying its balance sheet. In June, the company redeemed the rest of the Series B preferred shares it issued to Honeywell when it exited bankruptcy in 2021. With the Series Bs out of the way, Garrett Motion is free to dedicate its cash flow to continued deleveraging or share buybacks. At some point in the next year or two, the conditions will be met for Garrett Motion to convert these preferreds and simplify their capital structure. If the market stubbornly refuses to value Garrett Motion shares at a reasonable price, I believe the company will pursue a sale or merger. Until then, our preferred shares will continue to accrue dividends at an attractive yield. The preferreds are worth at least $15 today, and possibly $20 or more if the company can reduce leverage and/or buy back shares and the automotive market recovers.”
6. GoHealth, Inc. (NASDAQ:GOCO)
Centerbridge Partners’ Stake Value: $48,006,000
Percentage of Centerbridge Partners’ 13F Portfolio: 3.06%
Number of Hedge Fund Holders: 13
GoHealth, Inc. (NASDAQ:GOCO) is based in Chicago and owns and runs a digital health insurance marketplace. GoHealth, Inc. (NASDAQ:GOCO)’s $914 million IPO, one of the most expensive in the history of health IPOs, was priced at $21 a share. However, the value of the shares has subsequently dropped precipitously, as they are currently selling for close to 97% less than what they did during the IPO.
GoHealth, Inc. (NASDAQ:GOCO) ranks 6th on our list of top 10 stock picks of Mark Gallogly’s Centerbridge Partners. Gallogly’s fund holds a $48.01 million position in GoHealth, Inc. (NASDAQ:GOCO), which accounts for 3.06% of his total Q1 13F investments. Centerbridge Partners is the most significant stakeholder of GoHealth, Inc. (NASDAQ:GOCO). In addition, the number of hedge funds tracked by Insider Monkey owning stakes in GoHealth, Inc. (NASDAQ:GOCO) fell to 13 in the first quarter from 15 in the preceding quarter. Those stakes held a consolidated value of $61.21 million, down from $177.61 million.
Just like First American Financial Corporation (NYSE:FAF), Genco Shipping & Trading Limited (NYSE:GNK), and Cedar Fair, L.P. (NYSE:FUN), GoHealth, Inc. (NASDAQ:GOCO) is one of the stocks to buy according to Mark Gallogly.
Click to continue reading and see Top 5 Stock Picks of Mark Gallogly’s Centerbridge Partners.
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Disclosure: None. Top 10 Stock Picks of Mark Gallogly’s Centerbridge Partners is originally published on Insider Monkey.
