The Sohn Investors/Capitalize for Kids Conference recently took place in Toronto, Canada, during which a number of top investment managers pitched their best ideas to a gathering of their peers. In this article we’ll take a look at four long stock ideas presented at the conference from three different investment firms, as well as one short idea.
After you’ve finished reading about GameStop, one of the featured stocks in this article, consider some related reading by checking out a list of The 10 Best Selling Video Game Franchises of All Time.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
Aaron Cowen of Suvretta Capital is bullish on Restaurant Brands International Inc (NYSE:QSR), which falls under the quick service restaurant category. The company operates approximately 19,000 restaurants in over 100 countries and is the owner of the popular Burger King and Tim Hortons brands. Cowen likes the business model of the company as a franchisor of brands. He thinks that the company has strong management and that Burger King’s merger integration with Tim Hortons is going well. The company has decreased its operating expenses significantly post-merger and could deliver $3 in FCF per share. He also thinks that the company may be looking out for another acquisition which could further add value to the stock. His target price for the stock is $75, which is 70% higher than its current price. As per our database, 31 funds held Restaurant Brands International Inc (NYSE:QSR) shares worth $3.01 billion on June 30, amounting to 31% of the company’s total outstanding stock.
Besides Restaurant Brands International Inc (NYSE:QSR), Aaron Cowen is also bullish on Adobe Systems Incorporated (NASDAQ:ADBE), which is one of the world’s largest software companies. Adobe operates through two main business segments. The first is the Creative Cloud, which is used by 13 million users to create webpages and is growing by 15%-20% per year. Cowen believes that Adobe Systems Incorporated (NASDAQ:ADBE) essentially has a monopoly with this offering. Secondly, Adobe does digital marketing, helping companies place ads on websites and measure the ROI on their marketing effects. Cowen likes the company because it underwent a significant transformation in 2013, through which it transformed itself into an SaaS (Software as a Service) business model. While its margins fell in the short-term due to upfront costs, Cowen thinks that they will increase into the mid-40s by 2018. He also thinks that the company could do $7 in earnings per share by 2018, and believes that gives the stock a target price of $170-$180 in a base case scenario. The number of funds in our system with a long position in Adobe Systems Incorporated (NASDAQ:ADBE) declined to 58 as of June 30 from 63 a quarter earlier. The value of their holding also declined to $2.37 billion from $3.01 billion quarter-over-quarter.
We’ll check out three more stocks pitched in Toronto on the next page, including one which took a tumble shortly after this conference.