In this article, we discuss the top 5 stocks to buy according to Ken Heebner’s Capital Growth Management. If you want our detailed analysis of Ken Heebner’s history, investment philosophy, and hedge fund performance, go directly to the Top 10 Stocks To Buy According to Ken Heebner’s Capital Growth Management.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Lithium prices have more than doubled over the past year, so we are checking out this emerging lithium stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now, let’s take a look at Capital Growth Management’s top 5 stock picks:
5. Select Medical Holdings Corporation (NYSE:SEM)
Capital Growth Management’s Stake Value: $36,132,000
Percentage of Capital Growth Management’s 13F Portfolio: 3.25%
Number of Hedge Fund Holders: 24
Select Medical Holdings Corporation (NYSE:SEM), a top stock to buy according to Capital Growth Management’s Ken Heebner, is a medical and healthcare company, which operates long-term acute care and inpatient rehabilitation hospitals, managing them via its subsidiary, Select Medical. Capital Growth Management owns 855,000 shares in Select Medical Holdings Corporation (NYSE:SEM), worth $36.1 million, representing 3.25% of the firm’s Q2 portfolio.
On November 4, the Q3 EPS for Select Medical Holdings Corporation (NYSE:SEM) came in at $0.57, beating the estimated EPS by $0.05. The corporation’s revenue for the quarter was 1.53 billion, exceeding estimates by $91.03 million.
As of the second quarter of 2021, 24 hedge funds tracked by Insider Monkey were long Select Medical Holdings Corporation (NYSE:SEM), up from 22 in the preceding quarter.
4. Signet Jewelers Limited (NYSE:SIG)
Capital Growth Management’s Stake Value: $36,356,000
Percentage of Capital Growth Management’s 13F Portfolio: 3.27%
Number of Hedge Fund Holders: 33
Signet Jewelers Limited (NYSE:SIG) is a top stock pick of Ken Heebner, and the largest retailer of diamond jewellery in the world. Catering mainly to the middle market jewellery segment, Signet Jewelers Limited (NYSE:SIG) has stores across the United States, the UK, Canada, the Republic of Ireland, and Channel Islands. Signet Jewelers Limited (NYSE:SIG) owns and operates multiple brands under its banner including Zales, Jared, and JamesAllen.com, among others. Capital Growth Management owns 450,000 shares in Signet Jewelers Limited (NYSE:SIG), worth $36.35 million, representing 3.27% of the firm’s portfolio at the end of June.
UBS analyst Mauricio Serna initiated coverage of Signet Jewelers Limited (NYSE:SIG) with a Buy rating and a $140 price target. The analyst believes that Signet Jewelers Limited (NYSE:SIG) is positioned to experience increased sales over the next four years due to its attractive pricing, strong store footprint, and a healthy balance sheet.
As of the second quarter, 33 hedge funds were bullish on Signet Jewelers Limited (NYSE:SIG), up from 26 in the preceding quarter.
3. Philip Morris International Inc. (NYSE:PM)
Capital Growth Management’s Stake Value: $37,662,000
Percentage of Capital Growth Management’s 13F Portfolio: 3.39%
Number of Hedge Fund Holders: 46
Philip Morris International Inc. (NYSE:PM) is a multinational tobacco corporation which caters to over 180 countries with its nicotine products. Philip Morris International Inc. (NYSE:PM) is one of the Big Tobacco companies, and its most popular cigarette brand is Marlboro. Capital Growth Management owns 380,000 shares in Philip Morris International Inc. (NYSE:PM), worth $37.66 million, representing 3.39% of the firm’s Q2 portfolio for the second quarter.
Out of the 873 hedge funds tracked by Insider Monkey, 46 funds were bullish on Philip Morris International Inc. (NYSE:PM) at the end of June, compared to 48 in the first quarter.
Philip Morris International Inc. (NYSE:PM) announced Q3 earnings on October 19, with the EPS coming in at $1.58, beating estimates by $0.02. Revenue for the quarter was $8.12 billion, exceeding estimated revenue by $175.15 million.
Here is what Broyhill Asset Management has to say about Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
2. OneMain Holdings, Inc. (NYSE:OMF)
Capital Growth Management’s Stake Value: $39,541,000
Percentage of Capital Growth Management’s 13F Portfolio: 3.56%
Number of Hedge Fund Holders: 41
OneMain Holdings, Inc. (NYSE:OMF), a top stock to buy according to Capital Growth Management, is a financial services company that offers personal loans and insurance to customers across the US. What sets OneMain Holdings, Inc. (NYSE:OMF) apart from most financial services companies is its business model that offers lending services to customers who have otherwise limited access to traditional lending corporations.
As of June this year, Capital Growth Management owns 660,000 shares in OneMain Holdings, Inc. (NYSE:OMF), worth $39.5 million, representing 3.56% of the firm’s Q2 portfolio.
OneMain Holdings, Inc. (NYSE:OMF), on October 20, reported earnings for the third quarter. The Q3 EPS came in at $2.37, beating estimates by $0.09. OneMain Holdings, Inc. (NYSE:OMF)’s revenue for the quarter was $1.03 billion, which exceeded analysts’ estimates by $0.26 million.
As of the second quarter, 41 hedge funds were bullish on OneMain Holdings, Inc. (NYSE:OMF), down from 43 in the preceding quarter.
James Fotheringham, an analyst from BMO Capital, kept a Market Perform rating on OneMain Holdings, Inc. (NYSE:OMF) on October 22, lowering the price target from $65 to $60. He stated that the Q3 earnings didn’t beat estimates by a significant margin, and even though demand for loans is increasing, the loan yields are shrinking and operational expenses are rising.
Here is what Miller Value Partners has to say about OneMain Holdings, Inc. (NYSE:OMF) in their Q4 2020 investor letter:
“OneMain Holdings (OMF) was the top contributor over the quarter, advancing 56.0% after reporting Q3 Earnings Per Share (EPS) of $2.19, well above consensus of $1.26 and the quarterly dividend, which was increased 36% to $0.45/share (3.5% annualized yield and 11.5% Trailing Twelve Month (TTM) yield). Net interest income of $836M beat estimates of $778M, implying a 24.3% asset yield and 18.7% net interest margin. Origination volumes increased 41% sequentially to $2.9Bn on continued strength in digital while end-of-period net receivables were flat at $17.8Bn. Credit quality remains excellent with net charge-offs of 5.2%, the lowest level since 3Q 2015. Management guided to year-end receivables of $18.1Bn, net charge-offs of 5.6% (from 5.8%-6.0%), and net leverage of 4.3x-4.5x.”
1. The Buckle, Inc. (NYSE:BKE)
Capital Growth Management’s Stake Value: $47,263,000
Percentage of Capital Growth Management’s 13F Portfolio: 4.26%
Number of Hedge Fund Holders: 25
The Buckle, Inc. (NYSE:BKE) is the top stock according to Ken Heebner’s portfolio as of June this year, with Capital Growth Management owning 950,000 shares in The Buckle, Inc. (NYSE:BKE), worth $47.26 million. This stock accounts for 4.26% of Heebner’s investment portfolio. The Buckle, Inc. (NYSE:BKE) is a fashion retailer operating across the United States, offering apparel, footwear, and accessories since its inception in 1973.
As of the second quarter of 2021, 25 hedge funds in Insider Monkey’s database of elite funds reported owning stakes in The Buckle, Inc. (NYSE:BKE), worth over $196.9 million. This is compared to 22 hedge funds in the preceding quarter, with an approximate stake value of $77.7 million.
You can also take a look at 10 Most Shorted Stocks Hedge Funds Are Buying and Yale University Stock Portfolio: Top 10 Picks.
