In this article, we discuss the top 10 stocks to buy in 2022 according to Motley Fool’s 1623 Capital. If you want to see more top stocks in the hedge fund’s portfolio, check out Top 5 Stocks to Buy in 2022 According to Motley Fool’s 1623 Capital.
1623 Capital was established in 2018 by Jeff Fischer and Brian Richards, the chief investment officer and chief operating officer of the hedge fund. 1623 Capital is a subsidiary of The Motley Fool. A fundamental long/short equity strategy is employed at 1623 Capital’s Pro Fund. The hedge fund is based in Alexandria, Virginia, with discretionary assets under management of $310.5 million and a Q1 portfolio worth $199.5 million. The hedge fund invests in the transports, utilities and telecommunications, information technology, healthcare, finance, consumer staples, and communications sectors.
Securities filings for Q1 2022 reveal that Motley Fool’s 1623 Capital added 11 new stocks to its portfolio, made additional purchases in 13, sold out of 18 companies, and reduced holdings in 12 securities. 1623 Capital strengthened its hold on Dollar General Corporation (NYSE:DG), Visa Inc. (NYSE:V), and FedEx Corporation (NYSE:FDX). Whereas, the hedge fund sold out of Airbnb, Inc. (NASDAQ:ABNB), Meta Platforms, Inc. (NASDAQ:META), and Pinterest, Inc. (NYSE:PINS) in the March quarter.
Some of the most notable stocks held by Motley Fool’s 1623 Capital include Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Block, Inc. (NYSE:SQ).
Our Methodology
We used the Q1 portfolio of Motley Fool’s 1623 Capital for this analysis, selecting the hedge fund’s top 10 holdings. The stocks are ranked according to 1623 Capital’s stake value in each company.
Photo by Austin Distel on Unsplash
Top Stocks to Buy in 2022 According to Motley Fool’s 1623 Capital
10. Broadridge Financial Solutions, Inc. (NYSE:BR)
1623 Capital’s Stake Value: $7,318,000
Percentage of 1623 Capital’s 13F portfolio: 3.66%
Number of Hedge Fund Holders: 17
Broadridge Financial Solutions, Inc. (NYSE:BR) is a New York-based financial technology company that offers proxy statements, annual reports, and other financial data to public companies. Motley Fool’s 1623 Capital owns 47,000 shares of Broadridge Financial Solutions, Inc. (NYSE:BR) as of Q1 2022, worth $7.3 million, representing 3.66% of the total 13F holdings.
On May 12, Broadridge Financial Solutions, Inc. (NYSE:BR) declared a $0.64 per share quarterly dividend, in line with previous. The dividend was paid to shareholders on July 6. The company delivers a dividend yield of 1.75% as of July 5. On June 14, Wells Fargo disclosed its recession stock portfolio, and Broadridge Financial Solutions, Inc. (NYSE:BR) was part of its Info Tech ETF.
According to Insider Monkey’s database, 17 hedge funds were bullish on Broadridge Financial Solutions, Inc. (NYSE:BR) at the end of Q1 2022, with collective stakes worth $123.16 million. Dmitry Balyasny’s Balyasny Asset Management is the leading position holder in the company, with 170,227 shares worth $26.50 million.
Like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Block, Inc. (NYSE:SQ), Broadridge Financial Solutions, Inc. (NYSE:BR) is on the radar of elite investors.
9. ServiceNow, Inc. (NYSE:NOW)
1623 Capital’s Stake Value: $8,409,000
Percentage of 1623 Capital’s 13F portfolio: 4.21%
Number of Hedge Fund Holders: 90
ServiceNow, Inc. (NYSE:NOW) is a California-based software company that specializes in cloud computing and IT service management. Credit Suisse analysts Sami Badri and George Engroff observed that back-office applications and front-office software would potentially see an increase in spending in 2026, compared to 2021 and 2022, which bodes well for ServiceNow, Inc. (NYSE:NOW).
Stifel analyst Brad Reback on May 25 reiterated a Buy rating on ServiceNow, Inc. (NYSE:NOW) but lowered the price target on the shares to $550 from $650. The management updated its long-term model, raising the FY24 and FY26 subscription revenue goals by $1 billion each to $11 billion and $16 billion, respectively. The analyst added that ServiceNow, Inc. (NYSE:NOW) expects to achieve these growth targets organically. He sees these targets as “very achievable” and forecasts that ServiceNow, Inc. (NYSE:NOW)’s growing platform, advanced pipeline, and large deal momentum should allow the company to retain over 20% revenue growth and significant margin expansion. However, the analyst cited “ongoing market turmoil and multiple compression” for a reduced price target.
According to Insider Monkey’s data, 90 hedge funds were bullish on ServiceNow, Inc. (NYSE:NOW) at the end of Q1 2022, with collective stakes worth about $7.5 billion. Chase Coleman’s Tiger Global Management is the leading stakeholder of the company, with 2.4 million shares worth $1.36 billion.
In its Q3 2021 investor letter, Palm Capital, an asset management firm, highlighted a few stocks and ServiceNow, Inc. (NYSE:NOW) was one of them. Here is what the fund said:
“ServiceNow, Inc. (NYSE:NOW) shares were our final top contributor for 3Q on a strong beat and raise quarter. The company reported 31% subscription revenue growth, 30% subscription billings growth, and a 19% non-GAAP FCF margin for the quarter, while raising full year subscription revenue and billings guidance to 29% and 31%, respectively, as well as raising non-GAAP FCF margin by 100 basis points to 31%.
ServiceNow, Inc. (NYSE:NOW) is a best-of-breed provider of both IT Service Management (ITSM) and IT Operations Management (ITOM) solutions to enterprise customers. The company’s products serve mainly its clients’ internal employee base with a current focus on automating the process of IT deployment, configuration and service and management of IT assets across an organization. Both its ITSM and ITOM solutions are delivered as a software-as-a-service (SaaS), and are each leading solutions in growing markets, driven by the secular trend of enterprises transitioning all aspects of their business and operations to the cloud. As the company maintains and adds customers, upsells them, and expands into adjacent markets, we believe ServiceNow, Inc. (NYSE:NOW) should sustain a strong long-term revenue and FCF growth trajectory.”
8. The Charles Schwab Corporation (NYSE:SCHW)
1623 Capital’s Stake Value: $8,853,000
Percentage of 1623 Capital’s 13F portfolio: 4.43%
Number of Hedge Fund Holders: 78
The Charles Schwab Corporation (NYSE:SCHW) is a California-based financial services company that specializes in commercial banking, personal banking, stock brokerage, electronic trading platforms, wealth management, investment management, and financial planning. The company announced in mid-June that it is expecting revenue growth of up to 8.5% in the second quarter. Motley Fool’s 1623 Capital held 15,100 shares of The Charles Schwab Corporation (NYSE:SCHW) in Q1 2022, worth $8.85 million, representing 4.43% of the total 13F portfolio.
Deutsche Bank analyst Brian Bedell on June 28 reiterated a Buy rating on The Charles Schwab Corporation (NYSE:SCHW) but lowered the price target on the shares to $80 from $84. The analyst slashed earnings estimates and price targets across the “rate sensitive” trust banks and online brokers to account for greater deposit from increased near-term interest rate assumptions and marginally higher deposit betas. The analyst reiterated an “increasingly more conservative” stance on trust banks.
According to Insider Monkey’s data, 78 hedge funds were bullish on The Charles Schwab Corporation (NYSE:SCHW) at the end of the first quarter of 2022, up from 72 funds in the preceding quarter. Harris Associates is the largest shareholder of the company, with more than 12 million shares worth $1 billion.
Here is what Giverny Capital Asset Management has to say about The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2022 investor letter:
“My wife likes to kid me for my tendency to praise essays and other commentary by saying, “It was good because I agreed with it.” I cite Jamie Dimon at the top of this letter because I agree with his comments and, in fact, have been writing to you for some time about the problem of unsustainably low interest rates coupled with high levels of inflation. As you know, we own a significant number of companies that should benefit from higher interest rates, including brokerage Charles Schwab. Turning to trading, during the first quarter we lightly trimmed our holding Charles Schwab. We trimmed Schwab after a big run-up. It remains one of our top five holdings.”
7. Equinix, Inc. (NASDAQ:EQIX)
1623 Capital’s Stake Value: $9,270,000
Percentage of 1623 Capital’s 13F portfolio: 4.64%
Number of Hedge Fund Holders: 40
Equinix, Inc. (NASDAQ:EQIX) is an American multinational company that specializes in internet connections and data centers. In the beginning of May, Equinix, Inc. (NASDAQ:EQIX) acquired four data centers in Chile, which adds to its Latin America market share. Securities filings for Q1 2022 reveal that Motley Fool’s 1623 Capital held 12,500 shares of Equinix, Inc. (NASDAQ:EQIX), worth $9.27 million, representing 4.64% of the total 13F portfolio.
On June 30, Jefferies analyst Jonathan Petersen upgraded Equinix, Inc. (NASDAQ:EQIX) to Buy from Hold, raising the price target to $790 from $750, citing pricing power and robustness in a recession. He thinks REITs underperforming in a recession is “not a given”, observing that real estate delivered “robust returns” during previous stagflation periods. The analyst recommends properties with rent inflation potential to negate occupancy headwinds, such as Industrial, Storage, Residential, Data Centers, Towers, and Senior Housing.
Among the hedge funds tracked by Insider Monkey, 40 funds were long Equinix, Inc. (NASDAQ:EQIX) at the conclusion of the first quarter of 2022, compared to 45 funds in the last quarter. Ian Simm’s Impax Asset Management is the biggest shareholder of the company, with 661,963 shares worth roughly $491 million.
Here is what Baron Funds has to say about Equinix, Inc. (NASDAQ:EQIX) in its Q2 2021 investor letter:
“The shares of Equinix, Inc. gained 18% in the most recent quarter. Equinix is the premier global data center company in the world. We believe the company is exceptionally well positioned to continue to benefit from powerful secular demand trends including strong growth in information technology outsourcing, increased cloud computing adoption, multi-year increases in mobile data traffic, global internet traffic, and the number of connected devices.”
6. American Tower Corporation (NYSE:AMT)
1623 Capital’s Stake Value: $10,049,000
Percentage of 1623 Capital’s 13F portfolio: 5.02%
Number of Hedge Fund Holders: 50
American Tower Corporation (NYSE:AMT) is a real estate investment trust that owns and operates wireless and broadcast communications infrastructure worldwide. On July 1, KeyBanc analyst Brandon Nispel maintained an Overweight rating on American Tower Corporation (NYSE:AMT) but lowered the price target on the stock to $283 from $286. He forecasts a “relatively strong outlook” for the U.S. Tower new leasing in the coming few years, though added that 2023 “appears to represent the peak growth, which is likely to keep Tower stocks range bound” in the short-term.
Securities filings for the first quarter of 2022 reveal that Motley Fool’s 1623 Capital owned 40,000 shares of American Tower Corporation (NYSE:AMT), worth $10 million, representing 5.02% of the total 13F holdings.
Among the hedge funds tracked by Insider Monkey, 50 funds were bullish on American Tower Corporation (NYSE:AMT) at the end of Q1 2022, compared to 53 funds in the earlier quarter. Charles Akre’s Akre Capital Management is the leading stakeholder of the company, with approximately 7 million shares worth $1.75 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Block, Inc. (NYSE:SQ), American Tower Corporation (NYSE:AMT) is one of the top stock picks of Motley Fool’s 1623 Capital.
Here is what Qualivian Investment Partners has to say about American Tower Corporation (NYSE:AMT) in its Q3 2021 investor letter:
“What Attracts Us
Superior Business:
- High barriers to entry resulting from low bargaining power of suppliers (land owners) and customers (wireless companies). Neither can find reasonable substitutes for existing cell towers. Combined with low possibility of disruption, this results in a business oligopoly and pricing power.
- Stable business with consistent high returns on equity, low maintenance capital required, and strong cash generation.
− Ten-year, non-cancelable contracts with built in pricing escalators and high renewal rates
− 1%-2% churn
Superior Reinvestment Opportunities:
- Strong growth for the foreseeable future due to increasing demand for wireless data usage, resulting in wireless carriers Capex equipment spend on existing and new towers.
- Low maintenance capital expenditure requirements; most of capital expenditure is for growth
Superior Management / Capital Allocation:
- Capital reinvested back in business has had returns well above cost of capital
• Company has purchased stock opportunistically…” (Click here to see the full text)
Click to continue reading and see Top 5 Stocks to Buy in 2022 According to Motley Fool’s 1623 Capital.
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Disclosure: None. Top 10 Stocks to Buy in 2022 According to Motley Fool’s 1623 Capital is originally published on Insider Monkey.
