In this article, we discuss the top 5 stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors. If you want to read our detailed analysis of these stocks, go directly to the Top Stocks to Invest in According to John Smith Clark’s Southpoint Capital Advisors.
5. Lithia Motors, Inc. (NYSE: LAD)
Southpoint Capital Advisors’ Stake Value: $249 million
Percentage of Southpoint Capital Advisors’ 13F Portfolio: 4.31%
Number of Hedge Fund Holders: 63
Initiated in 1946, Lithia Motors, Inc. (NYSE: LAD) cements itself in 5th place on Insider Monkey’s list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors.
On August 31, Lithia Motors, Inc. (NYSE: LAD) announced a partnership with Pfaff Automotive Partners to increase its reach in Canada.
In Q2 2021, 63 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $2.9 billion compared to the 40 hedge funds staking $2.3 billion in the first quarter.
In the Q3 2020 Investor Letter, Cartenna Capital highlighted a few stocks and Lithia Motors Inc (NYSE:LAD) is one of them. Here is what Cartenna Capital said:
“Another key winner during Q3 for the Fund was our long position in Lithia Motors Inc. (“LAD” or “Lithia”). LAD represented a compelling opportunity to own a best-in-class auto dealer at a significant discount and whose fundamental drivers including vehicle miles driven, new/used unit volumes and used pricing, were rapidly accelerating off April’s trough levels. Our thesis centered on three idiosyncratic advantages of Lithia over other auto dealers. First, Lithia’s geographic breakdown offered meaningful exposure to highly dense urban areas like the Tri-State Region (NYC) and coastal California cities, where we believed public transportation and ride sharing would lose share to private automobile transportation. Second, LAD’s rapidly growing used-car business (13.7% same-store sales in 2019) was positioned to disproportionately benefit the Company as 75% of Lithia’s used car inventory is 4+ years old. Used cars of this age are typically less commoditized, more recession resistant and generate higher margins. The third, and most compelling, idiosyncratic opportunity emerged as Lithia’s management revealed a new digital retail strategy. With this new Driveway.com platform, we immediately deemed Lithia to be the best positioned to address the entire vehicle ownership lifecycle in a digital world, take market share, and expand its multiple as new investors appreciated the omnichannel story. Further, Lithia’s new “50 and 50 Plan” outlines a path to achieve $50b1n of revenue and $50 of earnings per share by 2025 (2019: $12.9b1n revenue, $11.76 EPS). Even after a run to $227 per share in late September, LAD continues to offer a tremendous risk-reward profile.”
4. Centene Corporation (NYSE: CNC)
Southpoint Capital Advisors’ Stake Value: $255 million
Percentage of Southpoint Capital Advisors’ 13F Portfolio: 4.42%
Number of Hedge Fund Holders: 49
Formed in 1984 and spearheaded in St. Louis, Missouri, Centene Corporation (NYSE: CNC) sits at the 4th position on our list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors.
By the second quarter, 49 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $3.2 billion compared to the 53 hedge funds staking $2.7 billion in the previous quarter.
In the Q3 2020 Investor Letter, FPA Capital Fund highlighted a few stocks and Centene Corp (NYSE:CNC) is one of them. Centene Corp (NYSE:CNC) is an insurance company. Here is what FPA Capital Fund said:
“CNC was the Fund’s 2 nd worst performer for the quarter. The company is a managed care organization (discussed in more detail in prior commentaries). The stock declined on election uncertainty and on the increased likelihood that the Supreme Court might strike down the Affordable Care Act due to the death of Supreme Court Justice Ginsburg. CNC does have the headline risk, but the stock is trading at 10x 2021 price to earnings multiple versus its long term historical average of 16x. 6 Its COVID-19 costs appear to be in line with expectations and the worst long term effect from a repeal of the Affordable Care Act is estimated to be a 10% hit to earnings. 7 We believe that any likely political scenarios would not cause a major longterm disruption to the company while its valuation appears to price in a much more dire scenario.”
3. AppLovin Corporation (NASDAQ: APP)
Southpoint Capital Advisors’ Stake Value: $263 million
Percentage of Southpoint Capital Advisors’ 13F Portfolio: 4.55%
Number of Hedge Fund Holders: 16
Boasting a market capitalization of $27 billion, AppLovin Corporation (NASDAQ: APP) provides a marketing enhancement platform.
During the second quarter, 16 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in AppLovin Corporation (NASDAQ: APP) worth $987 million.
2. Uber Technologies, Inc. (NYSE: UBER)
Southpoint Capital Advisors’ Stake Value: $270.6 million
Percentage of Southpoint Capital Advisors’ 13F Portfolio: 4.68%
Number of Hedge Fund Holders: 135
Inaugurated in 2009 and rooted in San Francisco, California, Uber Technologies, Inc. (NYSE: UBER) places second on our list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors.
As of the second quarter, 135 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $10.4 billion in contrast to the 130 hedge funds with $10.5 billion worth of stakes in the previous quarter. With a stake of $1.2 billion, Brad Gerstner’s Altimeter Capital Management is the company’s biggest stakeholder.
Here is what RiverPark Funds has to say about Uber Technologies, Inc. in its Q2 2021 investor letter:
“UBER was our top detractor for the quarter. Delivery growth remains strong, and ride sharing has started to recover, though still down year over year (vs. pre-COVID results). Gross bookings grew 24% year over year, driven by 166% Delivery growth.
Despite the COVID disruption, UBER remains the undisputed global leader in ride sharing, with greater than 50% share in every major region in which it operates. The company is also a leader in food delivery (64% of 1Q21 revenue), where it is number one or two in the more than 25 countries in which it operates. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its more than 100 million users (by comparison, Amazon Prime has 130+ million members) and penetrate new markets of ondemand services, such as grocery delivery, truck brokerage and worker staffing for shift work. Its New Verticals (non-food delivery such as grocery, convenience, and alcohol) business hit a $3 billion annualized run rate in March, up 77% quarter over quarter.
UBER, at its current $91 billion market capitalization, trades at 4x next year’s revenue from its two core businesses. Additionally, the company has substantial, unrecognized, value in its several nascent development businesses and another $13 billion in equity stakes in synergistic businesses around the world.”
1. Expedia Group, Inc. (NASDAQ: EXPE)
Southpoint Capital Advisors’ Stake Value: $286 million
Percentage of Southpoint Capital Advisors’ 13F Portfolio: 4.96%
Number of Hedge Fund Holders: 87
Ranking 1st on our list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors, Expedia Group, Inc. (NASDAQ: EXPE) engages primarily in the travel industry, notably through their trivago app.
As of the second quarter, 87 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in Expedia Group, Inc. (NASDAQ: EXPE) worth $5.92 billion.
Here is what ClearBridge Investments has to say about Expedia Inc. in its Q1 2021 investor letter:
“Several of our better performers in the first quarter were purchased while their business models were under stress from COVID restrictions or the macro environment the pandemic created. What gave us confidence in purchasing Expedia were the actions the company took to extend out their balance sheets until travel resumed. It should benefit as a broader vaccination rollout prompts cruise lines to resume operations and consumers to start traveling again and are positioned to deliver better margins and gain pricing power as the economy normalizes due to the cost controls implemented during the downturn.”
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