In this piece, we will take a look at the 10 retail stocks to buy according to Greg Poole’s Echo Street Capital.
Echo Street Capital is a hedge fund based out of New York, United States. It is run by the hedge fund manager Gregory Poole, who is also the firm’s founder. Mr. Poole created the hedge fund in 2002, and since then it has grown its assets to become one of the few multi-billion dollar investment firms out there.
Mr. Poole has decades of experience in the financial industry, the bulk of which has been spent managing the affairs of his current hedge fund. He is a graduate of the University of Western Ontario in Canada, from which he received his bachelor’s degree in economics in 1996. After graduating, Mr. Poole jumped head-on into the investment industry by landing a role at the prestigious Goldman Sachs as an analyst for the bank’s real estate division. After joining, the new hedge fund executive would go on to become a portfolio manager at the bank in 2000, before setting up his own firm two years later. Since starting Echo Street Capital, Mr. Poole has seen the hedge fund grow its portfolio to sit at $14 billion as of the end of the third quarter of last year for a whopping 133% annual growth when compared to its value of $5.8 billion in Q3 2020.
While Echo Street Capital is known for its focus on the retail sector, it has also dabbled in other industries such as technology and healthcare. The firm also employs a data-intensive approach through which it determines the net value of its investments and then stores this information in an internal database to track performance for a long time period. The firm has invested in hundreds of companies, some of the most well known of which are Microsoft Corporation (NASDAQ:MSFT), PayPal Holdings, Inc. (NASDAQ:PYPL), and Mastercard Incorporated (NYSE:MA).
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Our Methodology
In order to determine which retail stocks are Mr. Poole and Echo Street’s favorites, we took a look at the fund’s 13-F filings with the SEC for the third quarter of last year. This allowed us to sift out the favorite firms, after which we analyzed them through their quarterly earnings, investor letters, analyst coverage, other large investors, and overall hedge fund sentiment gathered through Insider Monkey’s Q3 2021 survey of 867 hedge funds.
10 Retail Stocks to Buy According to Greg Poole’s Echo Street Capital
10. The Kroger Co. (NYSE:KR)
Echo Street Capital’s Stake Value: $1.2 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.001%
Number of Hedge Fund Holders: 39
The Kroger Co. (NYSE:KR) is an American retailer that operates several kinds of stores. These stores cover food, medicines, department stores, and marketplaces.
Mr. Poole’s Echo Street Capital owned 30,291 The Kroger Co. (NYSE:KR) shares during the third quarter of last year. These were worth $1.2 million. Insider Monkey’s Q3 2021 research covering 867 hedge funds revealed that 39 owned a stake in the company.
The Kroger Co. (NYSE:KR) posted $31.9 billion in revenue and $0.78 in non-GAAP EPS for its fiscal Q3, beating analyst estimates for both. MKM Partners raised its price target on the stock from $44 to $48 in December 2021 and based its decision on strong Q3 earnings but cautioned that the retailer’s expenses can increase in the future if throughput slows down.
The Kroger Co. (NYSE:KR)’s largest investor is Warren Buffett’s Berkshire Hathaway who owns a whopping 61 million shares worth $2 billion.
The Kroger Co. (NYSE:KR) joins PayPal Holdings, Inc. (NASDAQ:PYPL), Microsoft Corporation (NASDAQ:MSFT), and Mastercard Incorporated (NYSE:MA) in the list of Mr. Poole’s favorite stocks.
9. Chewy, Inc. (NYSE:CHWY)
Echo Street Capital’s Stake Value: $1.2 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.001%
Number of Hedge Fund Holders: 32
Chewy, Inc. (NYSE:CHWY) is an electronic commerce retailer based in the United States. The company’s retail website and mobile application allow companies to sell their pet food, supplies, and health products to consumers.
Mr. Poole’s Echo Street Capital held 18,882 Chewy, Inc. (NYSE:CHWY) shares during the third quarter of last year, for a $1.2 million stake that was a new addition to its portfolio. Insider Monkey’s Q3 2021 survey of 867 hedge funds revealed that 32 owned the company’s shares.
For its fiscal Q3, Chewy, Inc. (NYSE:CHWY) posted $2 billion in revenue and -$0.08 in GAAP EPS, meeting analyst estimates for revenue and missing them for the EPS. Citi lowered its price target to $61 from $66 in December 2021, as it adjusted for the earnings report.
Chewy, Inc. (NYSE:CHWY)’s largest investor is Nancy Zevenbergen’s Zevenbergen Capital Investments who owns 1 million shares worth $77 million.
ClearBridge Investments mentioned the company in its Q2 2021 investor letter outlining that:
“Some of our best performing holdings over the last several quarters took a pause during the strong up market in the second quarter. Chewy, Inc. (NYSE:CHWY), which gave back some gains over fears that a return of pet owners to brick-and-mortar retailers will threaten the company’s e-commerce business. We maintain confidence Chewy, Inc. (NYSE:CHWY) will be able to maintain the customer relationships it established during pandemic lockdowns as well as expand into international markets.”
8. Yum! Brands, Inc. (NYSE:YUM)
Echo Street Capital’s Stake Value: $1.3 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.001%
Number of Hedge Fund Holders: 38
Yum! Brands, Inc. (NYSE:YUM) is an American fast-food retailer that is known for several renowned brands. These include the popular Kentucky Fried Chicken (KFC) fast food chain alongside Pizza Hut and Taco Bell.
Yum! Brands, Inc. (NYSE:YUM) brought in $1.6 billion in revenue and $1.22 in non-GAAP EPS for its fiscal Q3 and managed to beat analyst estimates for both. Barclays raised its price target on the stock to $140 from $133 in December 2021, basing the decision on optimism for recovery from the ongoing pandemic.
Mr. Poole’s hedge fund owned 10,757 Yum! Brands, Inc. (NYSE:YUM) shares during Q3 2021, for a $1.3 million stake which was significantly larger than the fund’s stake in the fast food retailer in the previous quarter. A third-quarter 2021 Insider Monkey survey of 867 hedge funds revealed that 38 owned the company’s shares.
Yum! Brands, Inc. (NYSE:YUM)’s largest investor is Panayotis Takis Sparaggis’ Alkeon Capital Management who owns 2.3 million shares worth $282 million.
7. Deckers Outdoor Corporation (NYSE:DECK)
Echo Street Capital’s Stake Value: $1.5 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.01%
Number of Hedge Fund Holders: 48
Deckers Outdoor Corporation (NYSE:DECK) is a footwear retailer based in the United States that sells several kinds of shoes such as those for casual wear and athletic activities.
Deckers Outdoor Corporation (NYSE:DECK) earned $721 million in revenue and $3.66 in GAAP EPS for its second fiscal quarter, beating analyst estimates only for revenue. The company price target was increased by Jefferies to $525 from $475 in November 2021, owing to the strength of its brands.
During Q3 2021, Echo Street Capital owned 4,086 Deckers Outdoor Corporation (NYSE:DECK) shares for a $1.47 million stake that represented 0.01% of its portfolio. For the third quarter of last year, 48 of 867 funds polled by Insider Monkey had owned the company’s shares.
Deckers Outdoor Corporation (NYSE:DECK)’s largest investor is Robert Pitts’ Steadfast Capital Management who owns 825,423 shares worth $297 million.
6. Vistra Corp. (NYSE:VST)
Echo Street Capital’s Stake Value: $1.7 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.01%
Number of Hedge Fund Holders: 41
Vistra Corp. (NYSE:VST) is an integrated retail electricity company that serves consumers in the United States. Its retail arm provides natural gas and electricity to 20 American states with millions of connections. In its third fiscal quarter, Vistra Corp. (NYSE:VST) brought in $2.99 billion in revenue and operational net income of $16 million, heavily missing analyst revenue estimates by $1.88 billion. Prior to the earnings release, BMO Capital had raised the electricity retailer’s price target to $27 from $25 in October 2021, stating that share buyback programs signaled board confidence.
Echo Street Capital owned 105,007 Vistra Corp. (NYSE:VST) shares during the third quarter of last year in a $1.7 million stake. Insider Monkey’s Q3 2021 survey of 867 hedge funds revealed that 41 owned the company’s shares. Howard Marks’ Oaktree Capital Management is Vistra Corp. (NYSE:VST)’s largest investor through a $511 million stake via 29.9 million shares.
Alongside Mastercard Incorporated (NYSE:MA), PayPal Holdings, Inc. (NASDAQ:PYPL), and Microsoft Corporation (NASDAQ:MSFT), Vistra Corp. (NYSE:VST) is a Gregory Poole favorite.
5. Central Garden & Pet Company (NASDAQ:CENT)
Echo Street Capital’s Stake Value: $7.7 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.05%
Number of Hedge Fund Holders: 18
Central Garden & Pet Company (NASDAQ:CENT) is a lawn, garden, and pet supplies retailer headquartered in Walnut Creek, California, United States. The company has several product brands such as Aqueon, Zilla, Bell Nursery, and Four Paws.
Central Garden & Pet Company (NASDAQ:CENT) raked in $739 million revenue and -$0.06 GAAP EPS in its fiscal Q4, beating analyst estimates for both. Argus downgraded the stock to Hold from Buy in November 2021, stating that supply chain disruption and delay in automation will negate the effects of the growth in pet ownership in the wake of the ongoing pandemic.
Mr. Poole’s hedge fund owned 181,182 Central Garden & Pet Company (NASDAQ:CENT) shares during Q3 2021, allowing it to have a $7.7 million stake in the company that represented 0.05% of its portfolio. During the same time period, 18 of the 867 hedge funds polled by Insider Monkey owned the company’s shares.
Central Garden & Pet Company (NASDAQ:CENT)’s largest investor is Steven Boyd’s Armistice Capital who owns 956,000 shares worth $41 million.
4. Amazon.com, Inc. (NASDAQ:AMZN)
Echo Street Capital’s Stake Value: $91 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.64%
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest and most renowned electronic commerce retailer that connects global suppliers and merchants to customers in a host of countries. It also provides services in cloud computing and designs data center processors.
Echo Street Capital held 27,928 Amazon.com, Inc. (NASDAQ:AMZN) shares during Q3 2021 which were worth $91 million and represented 0.64% of its portfolio. During the same time period, 243 of 867 hedge funds polled by Insider Monkey had held a stake in the company.
Ken Fisher’s Fisher Asset Management is Amazon.com, Inc. (NASDAQ:AMZN)’s largest investor according to Insider Monkey’s research through a $6.3 billion stake via 1.9 million shares.
Polen Capital mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2021 investor letter. It stated that:
“Amazon has also lagged as its revenue growth is slowing on the very difficult comparisons from last year when this behemoth was growing revenue by over 40%. We still expect exceptional long-term growth and significant margin expansion as the fastest growing (and now large) segments of Amazon are also generating the highest margins.”
3. Copart, Inc. (NASDAQ:CPRT)
Echo Street Capital’s Stake Value: $112.7 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.79%
Number of Hedge Fund Holders: 42
Copart, Inc. (NASDAQ:CPRT) is an online vehicle auction services platform that is headquartered in the United States and serves customers in the country and all over the globe. Its online platform allows banks, insurance companies, sellers, dealers, and individuals to connect with each other.
For its fiscal Q3, Copart, Inc. (NASDAQ:CPRT) brought in $810 million in revenue and $1.07 in non-GAAP EPS, beating analyst estimates for both. Truist raised the company’s price target to $175 from $160 in November 2021, believing that a strong market position combined with low costs and low leverage implies strong future growth.
As Q3 2021 ended, Echo Street owned 812,881 Copart, Inc. (NASDAQ:CPRT) shares in a $112 million stake which represented 0.79% of its portfolio. An Insider Monkey Q3 2021 study of 867 hedge funds outlined that 42 owned the company’s shares.
Copart, Inc. (NASDAQ:CPRT)’s largest investor is Kevin Oram and Peter Uddo’s Praesidium Investment Management Company. It owns 978,046 shares worth $135 million.
Merion Road Capital Management mentioned Copart, Inc. (NASDAQ:CPRT) in its Q2 2021 investor letter, outlining that:
“Many of our companies reported very strong earnings back in April. The market shrugged these off as it pondered how much growth would be sustainable, are inflationary trends transitory, and when interest rates will rise. While a slow-down in the broader economic recovery would hurt our portfolio, I remain positive on our position’s market positioning and longer term trends.
For instance, Copart reported 33% YoY revenue growth with EBIT margins expanding to 45%, an all-time high. While the company benefitted from inflation (an interesting hedge the market largely ignored earlier in the year), sustainable increases in ASPs and service offerings bode well for revenue per vehicle growth. Management noted that traffic is still down 20% or more as non-US markets are several months behind the United States on reopening and vaccinations. This volume boost should provide good tailwinds in the coming months.”
2. MercadoLibre, Inc. (NASDAQ:MELI)
Echo Street Capital’s Stake Value: $115 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.8%
Number of Hedge Fund Holders: 68
MercadoLibre, Inc. (NASDAQ:MELI) is a Latin American electronic commerce platform provider. The company allows merchants and sellers to list and sell their products online.
Mr. Poole’s hedge fund owned 68,563 MercadoLibre, Inc. (NASDAQ:MELI) shares during the third quarter of last year. These were worth $115 million and represented 0.8% of the fund’s portfolio. During the same time period, 68 of the 867 hedge funds polled by Insider Monkey also owned the company’s shares.
MercadoLibre, Inc. (NASDAQ:MELI) brought in $1.86 billion through revenue and $1.92 through GAAP EPS in its fiscal Q3, beating analyst estimates for revenue only. Its price target was raised to $2,200 from $2,100 by Barclays in November 2021, who shared that the company has an attractive value proposition and services.
MercadoLibre, Inc. (NASDAQ:MELI)’s largest investor is Panayotis Takis Sparaggis’ Alkeon Capital Management who owns 445,136 shares worth $747 million.
LRT Capital Management mentioned the company in its Q3 2021 investor letter. It commented that:
“Mercadolibre, Inc. (MELI) – the LatAm eCommerce, shipping, and payments company, is now trading at a very attractive valuation – its lowest P/S ratio ever. The concerns here have to do with the recession in Brazil and slowing economic growth throughout the region.”
1. CoStar Group, Inc. (NASDAQ:CSGP)
Echo Street Capital’s Stake Value: $121.7 million
Percentage of Echo Street Capital’s 13F Portfolio: 0.85%
Number of Hedge Fund Holders: 29
CoStar Group, Inc. (NASDAQ:CSGP) is an online marketplace for real estate, hospitality, and other similar sectors. This platform allows its users access to an inventory of properties, alongside other services.
As its fiscal third quarter came to an end, CoStar Group, Inc. (NASDAQ:CSGP) reported that it had earned $499 million in revenue and $0.25 in non-GAAP EPS. This pleased Wall Street by beating estimates for both. Truist raised its price target to $110 from $98 in October 2021, believing that the company is only facing temporary headwinds.
Echo Street Capital owned 1.4 million CoStar Group, Inc. (NASDAQ:CSGP) shares during Q3 2021 which were worth $121.7 million and represented 0.85% of its portfolio. During the same time period, 29 of the 867 hedge funds part of Insider Monkey’s survey owned the company’s shares.
Charles Akre’s Akre Capital Management is CoStar Group, Inc. (NASDAQ:CSGP)’s largest investor through an $840 million stake via 9.7 million shares.
Harding Loevner mentioned the company in its Q3 2021 investor letter which stated that:
“A new holding is US-based CoStar, the dominant player in information services for the commercial real estate industry and online classified ads for commercial property. Its data and analytics business, which has over 90% market share in the US, mines a proprietary database of commercial real estate that spans office, industrial, retail, multi-family, and land. Its online marketplace business, with over 50% market share, owns valuable websites including Apartments.com for apartment listings and LoopNet for business property listings. Over 80% of its revenue is recurring, as its offerings are typically integrated with the workflow of its customers: brokers, owners, developers, and property managers.”
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Disclosure: None. 10 Retail Stocks to Buy According to Greg Poole’s Echo Street Capital is originally published on Insider Monkey.
