In this article, we discuss the top 10 stock picks of William Von Mueffling’s Cantillon Capital Management. If you want to skip our detailed analysis of Mueffling’s investment philosophy and performance, go directly to Top 5 Stock Picks of William Von Mueffling’s Cantillon Capital Management.
William Von Mueffling worked at Lazard Asset Management before launching Cantillon Capital Management in 2003. He rose to fame while at Lazard Asset Management by posting 30% annualized returns during 1998-2003. That level of return during the extended market turmoil was made possible through timely short positions on several Internet high-fliers. Currently, he is the CEO and CIO of Cantillon Capital Management, an investment firm with more than $14 billion in assets under management.
Mueffling used a traditional long/short strategy when he started Cantillon Capital Management. However, the hedge fund saw net withdrawals in 2008 as its funds experienced a loss. To everyone’s surprise, he gave up shorting as an investment strategy the following year, highlighting how difficult it was to short when the government was creating money. Mueffling beat several other hedge funds, although his gains were still relatively small when assessed in terms of absolute returns. His hedge fund dropped 7%-8% up until May 2009.
According to a Wall Street Journal story from 2010, Cantillon Capital Management’s strategy is to look for businesses that deliver above-average returns on shareholder equity but are properly valued in relation to their income streams. Additionally, Mueffling stated in an interview with Graham & Doddsville, the Columbia Business School newsletter:
“One can broadly divide value investing into two camps. The first camp is the Graham & Dodd style which is buying assets at a discount or cash at a discount. The second camp is the Buffett style, which I characterize as buying financial productivity at a discount. We fall into the second camp. We believe that there are many different types of moats to be found, and that a moat around a business should allow it to produce outsized margins and wonderful returns on capital. The trick is being able to buy this stream of cash flows at a discount. Unlike Graham & Dodd investing where you might look at low price-to-book value companies or net-net companies, we are trying to buy high financial productivity at a discount to its intrinsic value.”
William Von Mueffling of Cantillon Capital Management
Cantillon Capital Management announced 39 portfolio changes in the second quarter of 2022. The hedge fund made additional purchases in 10 stocks, acquired 2 new stocks, and reduced holdings in 27 equities. As a result, the number of total holdings increased from 37 to 39. The hedge fund’s portfolio value decreased from $14.01 billion in Q1 to $11.98 billion in Q2 2022. The top 10 positions make up 40.93% of the total 13F holdings, indicating a highly concentrated portfolio. In the second quarter of 2022, the fund dedicated the largest percentage of its portfolio, nearly 25.15%, to the information technology industry. Some of the fund’s notable investments included Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG).
Our Methodology
We used the Q2 2022 portfolio of William Von Mueffling’s Cantillon Capital Management for this analysis, selecting the top 10 stocks in Mueffling’s portfolio. The popularity of each company among hedge funds in the second quarter of 2022 was determined using Insider Monkey’s extensive database of 895 hedge funds.
Top Stock Picks of William Von Mueffling’s Cantillon Capital Management
10. Equifax Inc. (NYSE:EFX)
Cantillon Capital Management’s Stake Value: $371,292,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.09%
Number of Hedge Fund Holders: 43
Equifax Inc. (NYSE:EFX) provides corporations, governments, and consumers with information solutions and human resources business process automation outsourcing services. In addition, Equifax Inc. (NYSE:EFX) announced the launch of Cloud-Control on October 4. This dashboard enhances security and transparency in digital supply chains for businesses utilizing Equifax products and solutions.
In addition to Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), William Von Mueffling is bullish on Equifax Inc. (NYSE:EFX). He has consistently held a position in Equifax Inc. (NYSE:EFX) since Q4 2016, and in the second quarter of 2022, he owned more than 2.03 million shares of Equifax Inc. (NYSE:EFX) worth $371.29 million, representing 3.09% of the total 13F holdings.
On October 4, Barclays analyst Manav Patnaik maintained an ‘Overweight’ recommendation on Equifax Inc. (NYSE:EFX) and decreased his price objective from $230 to $225. According to the analyst, his “Street low” fiscal 2023 predictions for the credit bureaus continued to reflect a little economic downturn.
According to Insider Monkey’s data, 34 hedge funds were bullish on Equifax Inc. (NYSE:EFX) at the end of June 2022, compared to 43 funds in the earlier quarter. In addition, David Blood and Al Gore’s Generation Investment Management is a significant position holder in Equifax Inc. (NYSE:EFX), with roughly 4.65 million shares worth $850.64 million.
9. Fidelity National Information Services, Inc. (NYSE:FIS)
Cantillon Capital Management’s Stake Value: $388,046,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.23%
Number of Hedge Fund Holders: 67
Fidelity National Information Services, Inc. (NYSE:FIS) provides solutions, technology, and services to merchants, banks, and capital markets firms. Following a sell-side event on September 23, analyst Trevor Williams of Jefferies reiterated a ‘Buy’ rating and a $110 price target on Fidelity National Information Services (NYSE:FIS). William Von Mueffling added Fidelity National Information Services, Inc. (NYSE:FIS) to his portfolio in Q1 2013 and has consistently held his stake over the years. As of Q2 2022, he owns 4.23 million shares of the company worth about $388.05 million.
Among the hedge funds tracked by Insider Monkey, 67 funds were bullish on Fidelity National Information Services, Inc. (NYSE:FIS) at the end of the second quarter of 2022, compared to 68 funds in the earlier quarter. Robert Joseph Caruso’s Select Equity Group is a prominent shareholder of the company, with 9.53 million shares worth $873.97 million.
In its Q1 2022 investor letter, Weitz Investment Management, an asset management firm, mentioned Fidelity National Information Services, Inc. (NYSE:FIS) was one of them. Here is what the fund said:
“Other fiscal-year detractors included Fidelity National Information Services (NYSE:FIS). FIS has been our most disappointing investment in the Covid era. Unlike Meta, the stock trades well below our average cost. The business itself has been relatively durable, but the stock certainly has not. While the core elements of our bullish thesis remain firmly intact, hindsight tells us that we could have waited for a better entry point. From today’s stock price, which is what matters now, we think the risk/reward balance is favorable.”
8. Agilent Technologies, Inc. (NYSE:A)
Cantillon Capital Management’s Stake Value: $410,797,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.42%
Number of Hedge Fund Holders: 41
Agilent Technologies, Inc. (NYSE:A) provides application-specific solutions for the life sciences, diagnostics, and applied chemical sectors. Agilent Technologies has paid dividends for at least 10 years. Agilent Technologies (NYSE:A) issued a quarterly dividend of $0.21 per share on September 21, in line with the previous, with a 0.66% forward yield.
On August 24, Credit Suisse analyst Dan Leonard initiated coverage of Agilent Technologies, Inc. (NYSE:A). He assigned the firm an ‘Outperform’ rating and a $165 price objective. The analyst believed that the firm’s ability to grow towards the top of the market in varied macro circumstances had been under-appreciated by the Street.
Agilent Technologies, Inc. (NYSE:A) has featured on Cantillon Capital Management’s portfolio since the fourth quarter of 2015. In Q2 2022, the hedge fund held about 3.46 million shares of Agilent Technologies, Inc. (NYSE:A), worth $410.80 million, representing 3.42% of the total portfolio.
According to Insider Monkey’s data, 41 hedge funds were long Agilent Technologies, Inc. (NYSE:A) at the end of Q2 2022, down from 43 funds a quarter earlier. Impax Asset Management, with a position worth $495.10 million, stood as the most significant shareholder of Agilent Technologies, Inc. (NYSE:A).
7. Visa Inc. (NYSE:V)
Cantillon Capital Management’s Stake Value: $453,111,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.78%
Number of Hedge Fund Holders: 166
Visa Inc. (NYSE:V) is a company that provides digital payment services. Visa Inc. (NYSE:V) Canada and TD Securities launched innovative cooperation on October 6 as the first financial institution in Canada to join Visa B2B Connect, a cross-border business-to-business (B2B) payments network that enables account-to-account international transfers rapidly, securely, and reliably.
On August 16, Daiwa analyst Kazuya Nishimura downgraded Visa Inc. (NYSE:V) from ‘Outperform’ to ‘Neutral’ and trimmed his price objective on the shares from $230 to $225. Border restrictions have almost all vanished in recent years, except for some parts of Asia. Therefore, Nishimura perceived fewer opportunities for profitability to beat market expectations even if Visa continues to forecast positive growth.
William Von Mueffling, in Q2 2022, reduced his hold on Visa Inc. (NYSE:V) by 1% and revealed holding 2.30 million shares worth $453.11 million, representing 3.78% of the total 13F securities.
According to Insider Monkey’s data, 166 hedge funds were long Visa Inc. (NYSE:V) at the end of Q2 2022, compared to 159 funds in the earlier quarter. TCI Fund Management is a notable shareholder of the company, with 19.92 million shares worth $3.92 billion.
In its Q2 2022 investor letter, Lakehouse Capital mentioned Visa Inc. (NYSE:V) and discussed its stance on the firm. Here is what the fund said:
“It was business as usual for Visa Inc. (NYSE:V) as it delivered another solid quarter driven by strong US growth, the ongoing gradual displacement of cash with digital transactions, and accelerated growth in cross-border volume as travel spending plays catch up post-Covid. Visa processed 49.3 billion transactions on its network, up 16% year-on-year and 39% above pre-pandemic levels, driving $2.7 trillion in total payments volume, both of which have more than recovered from the impacts of the pandemic. The total number of cards in Visa’s network also grew by 8% year-on-year to 3.9 billion.
Cross-border transactions were a key issue for Visa during the pandemic, but this headwind has now turned into a tailwind. Constant currency cross-border volumes rose 40% (48% excluding intra-Europe) in the most recent quarter and we expect this trend will continue to play out in the year ahead. While a potential economic slowdown and geopolitical concerns are always a risk, we take comfort in the fact that Visa has a sixty-plus year track record of successfully overcoming numerous macroeconomic challenges that in the moment appeared insurmountable. We believe this current episode will prove no different and that the combination of a very attractive industry structure and the ongoing secular shift towards digital payments provides a foundation that will enable Visa to continue winning for many years to come.”
6. Thermo Fisher Scientific Inc. (NYSE:TMO)
Cantillon Capital Management’s Stake Value: $466,246,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.89%
Number of Hedge Fund Holders: 93
Thermo Fisher Scientific Inc. (NYSE:TMO) designs, produces, and markets a variety of goods. It operates through Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services segments. On October 4, Evercore ISI analyst Vijay Kumar added Thermo Fisher Scientific Inc. (NYSE:TMO) to the firm’s “TAP Outperform” list and several other Medtech and Life Science Tools firms. Kumar assigned an ‘Outperform’ rating and a $580 price target on Thermo Fisher Scientific Inc. (NYSE:TMO) shares.
Securities filings reveal that Cantillon Capital Management reduced its stake in Thermo Fisher Scientific Inc. (NYSE:TMO) by 4,695 shares during the second quarter of 2022. The fund now owns 858,206 shares of Thermo Fisher Scientific Inc. (NYSE:TMO), worth over $466.25 million and representing 3.89% of its total 13F portfolio.
As of the end of the second quarter of 2022, 93 hedge funds had ownership positions in Thermo Fisher Scientific Inc. (NYSE:TMO), down from 101 hedge funds a quarter earlier. Fisher Asset Management, with a nearly $1.27 billion stake, is a significant shareholder of Thermo Fisher Scientific Inc. (NYSE:TMO).
Just like Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Thermo Fisher Scientific Inc. (NYSE:TMO) is one of the notable stocks in the second quarter portfolio of William Von Mueffling’s Cantillon Capital Management.
Stewart Asset Management mentioned Thermo Fisher Scientific Inc. (NYSE:TMO) in its Q2 2022 investor letter and explained its insights for the company. Here is what the fund said:
“Recently we initiated two new investments. One in Thermo Fischer Scientific (NYSE:TMO), a supplier to the life sciences industry. We have followed the company for many years and the recent downturn in share price gave us a good entry price at which to invest. Thermo has had strong earnings growth for many years and is led by a superb team. The company’s recent acquisitions make it a full-service supplier to the biopharma and biotech industries.”
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Disclosure: None. Top 10 Stock Picks of William Von Mueffling’s Cantillon Capital Management is originally published on Insider Monkey.