In this article, we presented the 10 best stocks to buy according to billionaire Mason Hawkins.
Mason Hawkins is an American Billionaire who founded Southeastern Asset Management Inc in 1975. The Tennessee-based hedge fund manages over $12.71 billion discretionary assets under management and over $4.47 billion in managed 13F securities. At the end of the fourth quarter, stocks in the communications market accounted for 26.23% of the value investor’s 13F portfolio. The number of holdings was 25, with the fund dropping positions in Univar Solutions Inc (NYSE: UNVR) and adding bets in Douglas Emmett, Inc. (NYSE: DEI). The biggest three positions are Lumen Technologies Inc (NYSE: LUMN), CNX Resources Corp (NYSE: CNX), and General Electric Company (NYSE: GE).
Southeastern Asset Management also serves as the investment advisor for Longleaf Partners Fund, a set of mutual funds and Undertakings for Collective Investment in Transferable Securities (UCITS), established in 1987. In 2020, the fund returned 10.53% versus 18.40% for S&P 500 index. The fund is also generating more than 9% annualized returns since its inception through 1987.
Mason Hawkins’ Background
Mason Hawkins graduated from the University of Florida with a bachelor’s degree in finance in 1970. The billionaire then continued his education and obtained a master degree in finance from the University of Georgia in 1971. Hawkins started his career at Atlantic National Bank as Director of Research, where he worked until 1973. He later served at First Tennessee Investment Management as the Director of Research until 1975. After obtaining experience, Mason and three other partners formed Southeastern Asset Management in 1975. The 73-year old billionaire also served as co-portfolio manager of Longleaf Partners Small-Cap Fund since 1989, named after Mason’s parents’ longleaf pine tree, which they developed for the family’s lumber business.
Mason Hawkins’ Investment Strategy
Billionaire Mason Hawkins is known for focusing his investments on a small number of undervalued businesses with solid balance sheets and capable management teams to achieve long-term capital growth. The investor believes in investing in stocks priced at 60% or less of their intrinsic value and selling them when the stock price rises above that level. Mason Hawkins thinks that having a portfolio that is focused solely on the best investment ideas is important. In most cases, each of his managed portfolios contains less than 25 stocks.
In 2020, Southeastern Asset Management hit gold with its huge stake in Eastman Kodak Company (NYSE: KODK). Southeastern’s stock soared in value from around $96 million to approximately $1.1 billion, mainly due to the announcement that camera firm Kodak will engage in drug production primarily of active pharmaceutical ingredients after it secured a $765 million loan from the US government.
As the travel industry starts to recover and hold steady gains, Southeastern Asset Management increased its interest in MGM Resorts International (NYSE: MGM) by 42.11% or 2.09 million shares. The stock gained 187.19% in the last twelve months. MGM had a three-year sales growth rate of 13.9% and a three-year EBITDA growth rate of 24.7% before the Covid-19 pandemic started in 2020.
Last year Hawkins talked about several important factors to keep in mind before investing during the pandemic in an interview with Value Investor Insight. Here’s what he said about their assessment of intrinsic value.
“Again, it’s pricing for us, not timing. What we can be certain about today is that this is a very adversarial business environment. But we do believe we will return to some degree of normalcy. If a company is priced in the market at 30 cents on the dollar against our assessment of intrinsic value, for the most part all we need to assume is that normalcy will generally return in order to find that an attractive opportunity. We’ll be the first to admit that we don’t know exactly when revenues and free cash flow are going to be generated in a normal way again, but when discounts are that steep we can be patient and expect to benefit not only from intrinsic values growing again, but also from Mr. Market weighing those values much more fairly when things eventually improve. As risk-averse capital allocators – and this comes from the largest investor in the Longleaf Partners’ funds – what we are most concerned about is not losing permanent capital. If we are very confident in our rough appraisal of value and that it will normalize in the near future, we’re willing to step up aggressively.”
Mason Hawkins of Southeastern Asset Management
While the COVID-19 pandemic may have led to an economic recession, Mason Hawkins is confident that the market will normalize to pre-pandemic levels. At the same time, this is a good opportunity for an attractive opportunity to investors. Hawkins is an exception in a struggling industry. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start our list of 10 best stocks to buy according to billionaire Mason Hawkins.
10 Baidu, Inc. (NASDAQ:BIDU)
Value: $197,506,000
Percent of Mason Hawkins’ 13F Portfolio: 4.4%
Number of Hedge Fund Holders: 51
The Chinese tech giant Baidu, Inc. ranks 10th in the list of 10 best stocks to buy, according to billionaire Mason Hawkins. Baidu, Inc. is a multinational technology company with over 700 million users. The company specializes in internet-related services and products, including their AI-powered camera that can spot early detection of eye infirmities leading to blindness, and MediaGo, a platform for Chinese advertisers seeking to attract users worldwide. The company recently came up with China’s first commercial self-driving bus, Baidu Apollo. The self-driving vehicle is in full operations on the road in a municipality in China with a total length of 8.8 kilometers.
In March, Loop Capital analyst upgraded BIDU from Hold to Buy, with a price target of $290.00 up from $210.00. Mason Hawkins’ investment strategy was effective in the case of Baidu because shares jumped 103% over the last twelve months. The company has a market cap of $71.8 billion and recorded a revenue of $16.4 billion for the full year of 2020. The number of bullish hedge fund bets went up by eight recently. Baidu, Inc. was in 51 hedge funds’ portfolios at the end of December. Mason Hawkins’ Southeastern Asset Management currently owns 913 thousand shares of BIDU, worth $197 million. BIDU occupies 4.4% of Southeastern Asset Management’s overall equity.
Harding Loevner mentioned that Baidu dominated the ACWI Communications Services Index in its Q4 2020 investor letter:
“We parted ways with several companies that failed to attain our predetermined mileposts for success: Chinese search engine Baidu. Baidu, sold in despair in late April over its declining growth prospects and competitor incursions, has since trounced the ACWI Communications Services Index.”
9. Lazard Ltd (NYSE:LAZ)
Value: $208,310,000
Percent of Mason Hawkins’ 13F Portfolio: 4.7%
Number of Hedge Fund Holders: 20
Lazard Ltd is ranked 9th in our list of best stocks to buy according to billionaire Mason Hawkins. Lazard Ltd is a worldwide financial advisory and asset management firm based in Hamilton, Bermuda. The company specializes in investment banking and financial services with institutional clients. Lazard-backed SPAC Lazard Healthcare Acquisition I recently filed with the Securities and Exchange Commission (SEC) for its initial public offering (IPO) of 25 million units at $10 under the ticker LHCAU.
On April 7, Lazard gained 1.9% after Morgan Stanley raised the stock to Overweight from Equal-weight. The upgrade was because of the positive outlook for global Mergers and Acquisitions (M&A) and improving prospects for Europe. Shares of LAZ soared 62% over the last twelve months. The company has a market cap of $4.84 billion and a full year 2020 revenue of $1.40 billion, up 3% from 2019. The stock was in 20 hedge funds’ portfolios at the end of the fourth quarter, up from 19 in the third quarter. Southeastern Asset Management currently holds 4,924,564 shares of LAZ, worth $208 million. LAZ positions account for 4.7% of Mason Hawkins’ overall portfolio.
Third Avenue Management mentioned that in the competitive financial consulting market, Lazard is a strong rival in its Q4 2020 investor letter:
“Lazard Ltd. (“Lazard”) – During the quarter, the Fund initiated a position in Lazard, which houses two distinct businesses – financial advisory and asset management. Lazard is one of the formidable competitors in the global financial advisory industry, though Lazard is not involved in investment banking lines of business which are balance sheet-intensive or those which take on credit risk. Lazard’s advisory business is the world’s fifth largest by revenues, putting the company’s advisory business on par with those of far larger companies, such as Bank of America and Citi. Meanwhile, Lazard’s advisory revenues are meaningfully larger than the likes of Credit Suisse and UBS. While advisory revenues represent a low single-digit percentage of revenues for those peers, the figure is slightly more than 50% for Lazard. One further point of attraction for Lazard’s advisory business is its sterling reputation in restructuring advisory, which often shines in challenging environments in which insolvencies and near-insolvencies rise. The remaining portion of Lazard’s revenue is derived from the company’s asset management business, which operates completely independent of the advisory business and at last report had approximately $248 billion of assets under management. Lazard’s assets under management are focused on several niches in active management commanding management fees at the higher end of the industry, and the performance of its strategies has been sufficiently strong to have generated inflows of late, an unusual accomplishment for an active manager. The company in total is very well-capitalized and has a long history of controlling the relationship between compensation, its primary expense, and revenue. We believe that our purchase price implies a modest multiple of current operating earnings and that the operating environment can certainly improve, most likely as M&A activity continues to accelerate, but from other sources as well. External to the company however, it is clear that there are a number of companies that would almost certainly be very eager to purchase one or both of Lazard’s businesses. Consolidation is rampant in the asset management industry and several purchases of asset management companies of similar size to Lazard, though arguably of lower quality, have been announced recently. Separately, several European investment banks, including ones named earlier in this paragraph, have publicly declared a desire to grow their advisory businesses, especially in cross-border M&A capabilities, which is a core competency within Lazard. Using conservative estimates of prices we believe could be realized in the sale of Lazard’s businesses, the current share price appears to meaningfully undervalue the company.”
8. MGM Resorts International (NYSE:MGM)
Value: $222,242,000
Percent of Mason Hawkins’ 13F Portfolio: 5.0%
Number of Hedge Fund Holders: 44
Ranking 8th on the list of 10 best stocks to buy according to billionaire Mason Hawkins is MGM Resorts International. The Las Vegas, Nevada-based global hospitality and entertainment firm operates 29 unique hotel and destination gaming resorts in the United States and China. The company has a vast portfolio of luxury hotels and casinos, including Bellagio, MGM Grand, ARIA, and The Mirage Hotel and Casino. On April 5, Morgan Stanley analysts have given MGM Resorts International an Overweight ranking, with a price target of $45.
MGM Resorts International has a market cap of $19.92 billion. The company’s revenue in 2020 came in at $5.2 billion. The stock has gained 198% over the last twelve months. Southeastern Asset Management owns 7.05 million shares of MGM, worth $222 million. MGM accounts for 5.0% of Mason Hawkins’ total portfolio.
Longleaf Partners Fund mentioned that despite the global financial crisis, MGM remains one of the most profitable casinos and entertainment firms in its Q4 2020 investor letter:
“MGM Resorts (54%, 2.10%; 46%, 2.32%), the casino and online gaming company, quickly became a top contributor for the year after we initiated the position in the third quarter. 3Q EBITDA came in moderately above breakeven, a strong improvement from the COVID lockdown-impacted second quarter. MGM’s regional casinos performed very well, while flight restrictions caused its Las Vegas properties to lag. More importantly, CEO William Hornbuckle finished implementing $450 million of necessary recurring annual cost savings, which should result in a 15% increase in pretax earnings once post-vaccine leisure travel resumes and MGM revenues normalize. The stock remains cheap against this post-reopening earnings power. BetMGM, the company’s new online gaming and sports-betting app, is on track for over $150 million revenues this year and growing very quickly in a market with enormous potential. Comparable pure-play digital gaming businesses trade for extremely high multiples today, and BetMGM has a sustainably superior economic model due to its lower customer acquisition costs.”
7. FedEx Corporation (NYSE:FDX)
Value: $229,922,000
Percent of Mason Hawkins’ 13F Portfolio: 5.1%
Number of Hedge Fund Holders: 63
Ranking 7th on the 10 best stocks to buy according to billionaire Mason Hawkins is FedEx Corporation. Headquartered in Memphis, Tennessee, FedEx Corporation is among the biggest delivery services, maintaining customers worldwide, including the US Postal Service in a $1.5 billion-a-year contract. FedEx has been on the frontlines of the COVID-19 pandemic, fulfilling orders of essential and e-commerce parcels worldwide. This month, the company distributed around 100 million vaccine doses to administration sites throughout the United States.
On April 13, Keybanc upgraded FDX from Sector Weight to Overweight FDX because analysts believe in developing Express and Ground outlook through 2021. The company has a market cap of $76.3 billion and full-year revenue of $17.4 billion in 2020. Shares of FDX jumped 130.35% over the past twelve months. As of the end of the fourth quarter of 2020, Southeastern Asset Management owns 885 thousand shares of FDX worth $229 million. FDX accounts for 5.1% of Southeastern’s total portfolio.
Longleaf Partners Fund mentioned that FDX was one of its top contributors after a notable year for the company that wasn’t solely because of COVID in its Q4 2020 investor letter:
“FedEx (76%, 3.69%; 3%, 0.29%), the global logistics company, was the top contributor in 2020 after an outstanding year for the business that wasn’t simply the result of COVID, even if the company has been a strong beneficiary of the rapid societal changes driven by it. The share price returned over 85% in the last six months. Over the last quarter, Ground revenues increased 38%, while operating income grew 61%, despite another round of heavy investments weighing down margins temporarily into the single-digits. The company is indispensable for the United States’ e-commerce deliveries and is reaping the rewards of its investments in previous years to gear up for 7-day delivery. The Express segment is still benefitting from fewer passenger flights diminishing competing underbelly capacity. Despite the sharp appreciation, the stock trades at a reasonable mid-teens P/E multiple on forward earnings, and we expect the value to grow double-digits annually from here. FedEx has done its part to give back this year in the face of COVID. Since the onset of the pandemic, FedEx has delivered more than 55 kilotons of personal protective equipment, including more than two billion face masks, and more than 9,600 humanitarian aid shipments around the globe. More recently, FedEx was tapped to deliver the first wave of Pfizer-BioNTech vaccines across the US, and its infrastructure will be critical to successfully disseminating the vaccines.”
6. Comcast Corporation (NASDAQ:CMCSA)
Value: $254,276,000
Percent of Mason Hawkins’ 13F Portfolio: 5.7%
Number of Hedge Fund Holders: 84
Philadelphia-based telecommunications company Comcast Corporation ranks 6th on the list of the 10 best stocks to buy according to billionaire Mason Hawkins. The company offers various products such as film, internet services, cable television, and broadcasting. In 2020, CMCSA had over 2 million business customers and 30 million pay-TV subscribers. Early this week, Raymond James boosts Comcast from Market Perform to Outperform with a $61 price target.
The company has a market cap of $252.4 billion. Comcast Corporation’s total revenues came in at $103.6 billion, up 4.9% from 2019. The stock has gained 44% in the last twelve months. As of the end of the fourth quarter of 2020, Southeastern Asset Management owns 4.85 million shares of CMSCA worth $254 million. CMSCA accounts for 5.7% of Mason Hawkins’ total portfolio.
Cooper Investors mentioned Comcast’s high-quality cable assets is a one-of-a-kind connectivity system that continues to deliver when meeting the demand for high-speed broadband in its Q4 2020 investor letter:
“During the quarter the portfolio exited its position in Comcast, a long term holding having been in the portfolio since 2013. We were attracted to Comcast’s high quality cable assets which we view as unique communication infrastructure that continues to perform well as it serves the persistent demand for high speed broadband. However the outlook for their media and content assets in NBCU and Sky has become increasingly uncertain while remaining a key area of management focus and capital allocation. This clouded view on industry trends led us to seek more attractive investment propositions elsewhere.”
5. Mattel, Inc. (NASDAQ: MAT)
Value: $303,931,000
Percent of Mason Hawkins’ 13F Portfolio: 6.8%
Number of Hedge Fund Holders: 25
Ranking 5th on the list of 10 best stocks to buy according to billionaire Mason Hawkins is Mattel, Inc. The California-based toy manufacturer owns renowned brands such as Barbie, Hot Wheels, and Thomas & Friends. In 2020, Barbie’s brand gross sales amounted to $1.35 billion, increasing by $1.16 billion from 2019. During the COVID-19 pandemic, 30% of MAT’s retail stores shut down, affecting their overall revenue performance. However, the company was quick to recover with e-commerce as a platform to reach their audience. Evidently, in the third quarter of 2020, online sales rose 50% compared to the same period of 2019.
The company has a market cap of $7.15 billion and a revenue of $4.58 billion in 2020. Shares of MAT surged 123% over the past twelve months. Southeastern Asset Management currently owns 17.4 million shares of MAT, worth $30 million. Mattel, Inc. occupies 6.8% of Southeastern Asset Management’s overall equity. Hedge fund interest in Mattel, Inc. fell at the end of last quarter. The number of long hedge fund bets declined by one lately. Mattel, Inc. was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to 26 positions in the previous quarter.
Longleaf Partners Fund mentioned that in March, MAT responded to store closures by successfully pivoting to e-commerce sales in its Q4 2020 investor letter:
“Mattel (29%, 2.04%; 49%, 3.15%), the global toy and media company, was also a top performer for the year as well as for the quarter. The company’s third quarter was excellent across the board. Barbie’s resurgence continued with 30% growth, leading consolidated Mattel revenues up 10%. Gross margins expanded by 400 basis points, and the quarter’s EBITDA came in remarkably high at $470 million (for an $8.6 billion EV company), partially due to shifting advertising spending back towards the end of the year. Mattel typically earns all its annual profit during the fourth quarter holiday rush, and we expect another excellent sequential performance to result in over $100 million FCF for the year. CEO Ynon Kreiz has delivered extraordinary improvements to revenues, expenses and culture since he took over in 2018. This year the company reacted to store closures in March with a successful quick pivot towards e-commerce sales. Mattel has also continued to build out its intellectual property assets with 10 feature films under development, as well as over 25 TV projects and video games. These high-margin projects have not yet begun to boost the company’s financial results and should prove transformative over the next several years. In the COVID environment, Mattel worked to manufacture PPE for donation to medical professionals and launched a “Thank You Heroes” collection with all net proceeds being donated to First Responders First. The company gave grants to Feed the Children and Save the Children and donated art supplies, games and toys to students in need.”
4. Hyatt Hotels Corporation (NYSE: H)
Value: $305,407,000
Percent of Mason Hawkins’ 13F Portfolio: 6.8%
Number of Hedge Fund Holders: 27
Hyatt Hotels Corporation ranks 4th on the list of 10 best stocks to buy according to billionaire Mason Hawkins. The worldwide luxury hotel and resort operator has over 1,000 properties globally. By 2023, the company plans to grow its hotel presence in India by adding more than 50 Hyatt-brand hotels across the country, including Park Hyatt, Hyatt Place brands, and Alila. The hotel will add more than 3,600 keys to its existing 32 Hyatt-owned hotels in the country. In February, Evercore ISI Group kept its Hold rating on Hyatt Hotels and raised its price target to $90.
The company has a market cap of $8.5 billion and total revenue of $2.06 billion in 2020. Shares of Hyatt increased 55.89% over the past twelve months. Mason Hawkins’ Southeastern Asset Management currently holds 4.13 million shares of Hyatt, worth $305 million. Hyatt occupies 6.8% of Southeastern Asset Management’s total portfolio.
Baron Partners Fund mentioned that Hyatt continues to be a major player in the hospitality business in its Q4 2020 investor letter:
“Global hotelier Hyatt Hotels Corp. contributed to results on investor expectations that travel will increase as several newly developed COVID-19 vaccines work to help bring an end to the pandemic. While it may take time for Hyatt’s business and group customers to return, a strong leisure business is aiding recovery in revenue per available room. Hyatt has also successfully lowered its breakeven occupancy levels by reducing fixed costs and has cut its capital budget to preserve cash. Hyatt’s strong balance sheet is allowing it to weather the pandemic-generated disruption.”
Pixabay/Public Domain
3. General Electric Company (NYSE: GE)
Value: $349,656,000
Percent of Mason Hawkins’ 13F Portfolio: 7.8%
Number of Hedge Fund Holders: 69
World energy leader provider General Electric Company ranks 3rd on the list of 10 best stocks to buy according to billionaire Mason Hawkins. Headquartered in Boston, Massachusetts, General Electric Company produces vast products and services ranging from aircraft engines, power generation, and oil and gas production. The company recently made a deal with Invenergy, a US-based energy production company, to provide onshore wind turbines to three wind farms in Oklahoma. Once completed, American Electric Power Company Inc (NASDAQ:AEP) will own the farms, with a total capacity of 1485MW.
In March, Deutsche Bank raised its price target for General Electric from $13 to $14 and reiterated its Hold rating. The company has a market cap of $117.6 billion and a full-year 2020 revenue of $75.62 billion. Shares of GE surged 95% over the last twelve months. As of the end of the fourth quarter of 2020, Southeastern Asset Management owns 32.3 million shares of GE worth $349 million. General Electric accounts for 7.8% of Mason Hawkins’ total portfolio.
The number of bullish hedge fund positions increased by 24 in the fourth quarter. Southeastern Asset Management was in 69 hedge funds’ portfolios at the end of December.
Longleaf Partners Fund mentioned that thanks to strict cost control, GE Aviation made a phenomenal $356 million profit in the third quarter in its Q4 2020 investor letter:
“General Electric (GE) (-2%, 0.17%; 74%, 3.56%), the Aviation, Healthcare and Power conglomerate, was the top contributor in the fourth quarter, taking its YTD performance into slightly positive territory after a very difficult first half. The company’s crown jewel Aviation business sells and maintains commercial and military jet engines. With air travel frozen, this year’s second quarter was its worst in over a century of operating history with a $680 million operating loss. 3Q revenues improved sequentially as some flights resumed but still declined 39% year-over-year. Yet GE Aviation earned a remarkable $356 million in the third quarter due to extreme cost discipline. With fewer expenses, the same world-class competitive position and favorable long-term air-travel growth prospects, Aviation should keep improving incrementally with the potential to emerge stronger than ever within several years. GE Healthcare revenues, excluding non-recurring ventilator sales for COVID treatment, also improved 3% year-over-year in an encouraging performance. GE also took steps to give back in 2020 by working to help develop thousands of ventilators to aid coronavirus patients. The stock has roughly doubled from its March low as business results improved, in large part due to CEO Larry Culp’s excellent management. Please stay tuned for the next episode of the Price-to-Value Podcast in which Vice-Chairman Staley Cates interviews Larry Culp on Lean manufacturing, GE’s culture, navigating COVID and his outlook for the business.”
Jonathan Weiss / Shutterstock.com
2. CNX Resources Corporation (NYSE: CNX)
Value: $383,486,000
Percent of Mason Hawkins’ 13F Portfolio: 8.6%
Number of Hedge Fund Holders: 25
Securing the second spot on the list of 10 best stocks to buy according to billionaire Mason Hawkins is CNX Resources Corporation. Headquartered in Canonsburg, Pennsylvania, CNX Resources Corporation is one of the leading natural gas companies and the first company to use an electric fracking fleet located in the Appalachian Basin. Truist Securities recently downgraded CNX Resources from Buy to Hold, with a $16 price target.
The company has a market cap of $3.01 billion. The company’s revenue in full-year 2020 came in at $1.24 billion. The stock has gained 29% in the last twelve months. Southeastern Asset Management currently owns 35.5 million shares of CNX, worth $383 million. CNX occupies 8.6% of Mason Hawkins’ Southeastern Asset Management’s overall equity. Overall, hedge fund sentiment decreased significantly. The stock was in 25 hedge funds’ portfolios at the end of December compared to 33 in the previous quarter.
Longleaf Partners Global Fund mentioned that compared to the S&P 500, where Energy was by far the lowest performing sector in the year, CNX had been a good relative contributor in its Q4 2020 investor letter:
“CNX (22%, 1.57%; 14%, 0.58%), the natural gas company, was also a strong contributor, after having been noted in our 2019 year-end letter as a “problem child.” The company reported strong free-cash flow and earnings before interest rate, tax, depreciation and amortization (EBITDA) growth in the first half. In addition to its positive absolute performance, CNX has been a strong relative contributor versus the S&P 500 for which Energy was by far the worst performing sector in the year. In October, Bloomberg reported that Appalachian neighbor EQT approached CNX with a merger offer. CEO Nick DeIuliis and Chairman Will Thorndike are focused on their company’s value per share and will do the right thing for shareholders. CNX has the potential to both pay down debt with its hedged FCF and resume repurchases to grow FCF/share during an extreme energy bear market.”
Copyright: vyacheslavsvetlichnyy / 123RF Stock Photo
1. Lumen Technologies, Inc. (NYSE: LUMN)
Value: $634,768,000
Percent of Mason Hawkins’ 13F Portfolio: 14.2%
Number of Hedge Fund Holders: 29
Topping the list of the 10 best stocks to buy according to billionaire Mason Hawkins is Lumen Technologies, Inc. Based in Monroe, Louisiana, the enterprise technology platform operates various products such as network services, security, cloud solutions, and managed services. In 2019, ransomware attacks on companies nearly doubled to $20 billion. To fight against ransomware, Lumen Technologies, Inc. released its new Ransomware Assessment Program as part of its comprehensive portfolio of Professional Security Services, available to different companies globally. In January, after LUMN shares rallied 58% year to date, Morgan Stanley analyst downgraded Lumen Technologies, Inc. from Equal-weight to Underweight with a price target of $12.10. The change was largely motivated by technical factors such as short covering.
The company has a market cap of $12.94 billion and full-year operating revenue of $20.71 billion in 2020. The stock has gained 24% over the past twelve months. Mason Hawkins’ Southeastern Asset Management currently holds 65.1 million shares of Lumen Technologies, Inc., worth $634 million. LUMN occupies 14.2% of Southeastern Asset Management’s total portfolio. Lumen Technologies, Inc has experienced a decrease in hedge fund sentiment in recent months. LUMN was in 29 hedge funds’ portfolios at the end of December, down two hedge funds from the third quarter.
Longleaf Partners Fund mentioned that Lumen would expand if it continues to invest in fiber in its Q4 2020 investor letter:
“Lumen (-19%, -2.71%; -1%, -0.12%), the fiber telecom company formerly named CenturyLink, was a top detractor for the year and the only (slight) detractor in the fourth quarter. During the last quarter, Enterprise fiber revenues grew 0.8% year-overyear, International and Global declined 2.6% and Small and Medium Business (SMB) shrunk 5.8% due to COVID repercussions. Yet margins slightly increased due to the strong cost controls of CEO Jeff Storey and CFO Neel Dev. Despite significant deleveraging over the last two years and multiple debt issuances this year at low to mid-single digit interest rates, the stock trades at an incredibly low multiple of <5x FCF. We believe Lumen can grow by continuing to invest into fiber, which should outweigh its declining legacy copper landline business. Numerous recent large transactions for fiber peers at double-digit EBITDA multiples and landline peers at mid-single digit EBITDA multiples also suggest that Lumen could monetize several of its segments at good prices well beyond its total market capitalization today. We have stepped up our engagement with the company and signed a non-disclosure agreement (NDA) last month, so unfortunately we cannot say more other than “stay tuned.””
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Disclosure: None. 10 Best Stocks to Buy According to Billionaire Mason Hawkins is originally published on Insider Monkey.
