In this article, we discuss 10 stocks to buy according to Don Morgan’s Brigade Capital.
Brigade Capital is a New York City-based hedge fund that was established in 2006. Don Morgan is now in the leadership of the hedge fund due to his extensive expertise in the financial sector. The hedge fund’s investing strategy focuses on companies with impaired balance sheets or considerable debt. Brigade Capital has offices in Tokyo, London, and Colorado.
The price of high-yield bonds and loans fell dramatically in 2015, negatively impacting Brigade Capital’s profits. Some funds that concentrated on the approach were forced to close, others suffered asset losses when investors withdrew, and liquidity froze. As a result, Brigade’s primary pool decreased more than 10% that year. Brigade Capital’s primary fund returned approximately 23% in 2016, as the corporate credit market stabilized after a difficult 2015. The Brigade Energy Fund, one of the firm’s five hedge fund vehicles, generated around 34% of the total return in 2016. To add another accomplishment to its resume, Brigade Capital also received the Firm of the Year honor from the Absolute Return Awards in 2017.
Source:Pixabay
Don Morgan’s Brigade Capital focuses on companies in various sectors, including consumer discretionary, banking, communications, energy, and information technology. As of Q2 2022, Brigade Capital holds a 13F portfolio valued at $891.62 million. Some of the hedge fund’s notable holdings in the second quarter included Chesapeake Energy Corporation (NASDAQ:CHK), SandRidge Energy, Inc. (NYSE:SD), and iHeartMedia, Inc. (NASDAQ:IHRT).
Our Methodology
Below is a list of 10 stocks to buy according to Don Morgan’s Brigade Capital. The equities were chosen from the hedge fund’s second-quarter regulatory filings. The hedge fund sentiment around each stock was determined using information from 895 top-tier hedge funds that Insider Monkey tracked in Q2 2022.
Stocks to Buy According to Don Morgan’s Brigade Capital
10. International Game Technology PLC (NYSE:IGT)
Brigade Capital’s Stake Value: $1,950,000
Percentage of Brigade Capital’s 13F Portfolio: 0.21%
Number of Hedge Fund Holders: 34
International Game Technology PLC (NYSE:IGT) is a gaming company that offers gaming experiences to players across all channels. John Overdeck and David Siegel’s Two Sigma Advisors held a notable stake in International Game Technology PLC at the end of the second quarter of 2022, worth $34.66 million.
On August 1, Stifel analyst Jeffrey Stantial maintained a ‘Buy’ recommendation on the shares of International Game Technology PLC while lowering his price objective from $36 to $26. He decreased predictions and target pricing for the gaming technology group in order to be more circumspect about the potential implications of sustained inflation on consumer finances.
In the second quarter of 2022, Brigade Capital held 105,000 shares of International Game Technology PLC, worth $1.95 million. That represented 0.21% of the hedge fund’s portfolio value. Out of the hedge funds tracked by Insider Monkey, 34 reported having ownership stakes in International Game Technology PLC as of the end of the second quarter of 2022. The aggregate value of hedge funds’ Q2 holdings stood at $263.50 million.
Just like Chesapeake Energy Corporation, SandRidge Energy, Inc., and iHeartMedia, Inc., International Game Technology PLC is one of the notable stocks in Don Morgan’s Brigade Capital portfolio.
Palm Harbour Capital mentioned International Game Technology PLC in its Q4 2021 investor letter. Here is what it said:
“The second largest contributor was International Game Technology, the Italian American lottery and slot machine company, which we introduced in our first quarter 2020 letter and which contributed 78 basis points to performance. Early in the quarter, IGT’s main competitor, the highly levered Scientific Games, entered into a definitive agreement to sell its lottery business to Brookfield Business Partners for total consideration of $6.1 billion in cash and contingent payout. At $471 million last twelve months EBITDA (admittedly COVID affected, excluding unallocated central costs), Scientific Games lottery business was sold at trailing 13.0x. Scientific Games exited lottery business to optimize the portfolio and aggressively de-lever its balance sheet. We believe IGT’s lottery business to be much higher quality and certainly larger. If we were to use a similar metric for IGT, including all corporate costs but excluding Gaming and Digital and Betting, we would have around 90% upside. We are willing to bet the Gaming and fast growing Digital and Betting segments are worth something as well. It seems the sell-side willfully ignores this transaction and sticks with their 7-8x EV/EBITDA valuation.
The company reported third quarter earnings with sales up by 21% year on year, EBIT up by 144% and leverage down to 3.8x from 6.4x at year-end 2020. Total Adjusted EBITDA improved by 42% with margin gaining 618 basis points. Following the recovery, management reinstated the dividend of $0.20 per share.”
9. iHeartMedia, Inc. (NASDAQ:IHRT)
Brigade Capital’s Stake Value: $2,170,000
Percentage of Brigade Capital’s 13F Portfolio: 0.24%
Number of Hedge Fund Holders: 20
iHeartMedia, Inc. provides media and entertainment services. Following disappointing Q2 earnings and the release of a less than favorable Q3 and full-year 2022 forecast, Goldman Sachs analyst Stephen Laszczyk downgraded iHeartMedia, Inc. to ‘Neutral’ from ‘Buy’ with a price target of $9, down from $15, on August 10.
Securities filings reveal that Brigade Capital decreased its stake in iHeartMedia, Inc. by 26% during the second quarter of 2022. The fund now owns 275,000 shares of iHeartMedia, Inc., worth over $2.17 million and representing 0.24% of its 13F portfolio.
20 hedge funds tracked by Insider Monkey reported having bullish bets on iHeartMedia, Inc. as of the end of the second quarter of 2022, with aggregate stakes worth $118.98 million. Silver Point Capital, with a position worth $37.67 million, stood as the most significant shareholder of iHeartMedia, Inc..
8. NMI Holdings, Inc. (NASDAQ:NMIH)
Brigade Capital’s Stake Value: $2,631,000
Percentage of Brigade Capital’s 13F Portfolio: 0.29%
Number of Hedge Fund Holders: 21
NMI Holdings, Inc. (NASDAQ:NMIH) provides private mortgage guaranty insurance services in the US. NMI Holdings, Inc., with its main office in Emeryville, California, was established in May 2011 and started operating in 2012. Howard Marks’ Oaktree Capital Management is a significant stakeholder of NMI Holdings, Inc., with 5.32 million shares worth over $88.58 million. Millennium Management trailed Oaktree Capital Management with a $14.25 million stake in the firm.
In the second quarter of 2022, 21 hedge funds were bullish on NMI Holdings, Inc., up from 19 in the preceding quarter. In the second quarter of 2022, Brigade Capital owned 158,000 shares of NMI Holdings, Inc., worth $2.63 million. This represented 0.29% of the investment portfolio of the hedge fund.
7. CommScope Holding Company, Inc. (NASDAQ:COMM)
Brigade Capital’s Stake Value: $5,068,000
Percentage of Brigade Capital’s 13F Portfolio: 0.56%
Number of Hedge Fund Holders: 28
CommScope Holding Company, Inc. (NASDAQ:COMM), with its main office in Hickory, North Carolina, is a supplier of infrastructure solutions for the core, access, and edge layers of communication networks, including wireless and fibre optic systems.
Deutsche Bank analyst Matthew Niknam increased his price target on CommScope Holding Company, Inc. from $9 to $12 on August 5 while retaining a ‘Buy’ rating as a consequence of the company’s Q2 results being substantially better than expected.
The hedge fund chaired by Don Morgan held close to 828,192 shares in CommScope Holding Company, Inc., worth over $5.07 million. It is the seventh-largest holding of Brigade Capital. However, the hedge fund’s stake in the company decreased by 42% in the second quarter of 2022.
According to Insider Monkey’s database, CommScope Holding Company, Inc. was part of 28 public hedge fund portfolios as of Q2 2022. The total value of these stakes was $254.07 million. In the second quarter of 2022, CommScope Holding Company, Inc.’s largest shareholder was Bob Peck and Andy Raab’s FPR Partners, which owned 20.32 million shares worth $124.38 million. Furthermore, the hedge fund increased its position in CommScope Holding Company, Inc. by 4%.
6. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
Brigade Capital’s Stake Value: $9,140,000
Percentage of Brigade Capital’s 13F Portfolio: 1.02%
Number of Hedge Fund Holders: 32
Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) owns, operates, and sells billboards domestically and internationally. On July 7, Citi analyst Jason Bazinet reaffirmed a ‘Neutral’ rating on Clear Channel Outdoor Holdings, Inc. while lowering his price target from $1.65 to $1.25. According to a Bazinet study report, most enterprises in the advertising and entertainment industries saw a drop due to recession threats.
32 out of the 895 hedge funds tracked by Insider Monkey were long Clear Channel Outdoor Holdings, Inc. in the second quarter of 2022, with stakes worth $110.29 million, compared to 37 funds in the previous quarter, holding stakes in the company totaling $353.74 million.
Clear Channel Outdoor Holdings, Inc. is the sixth-largest holding of Don Morgan’s Brigade Capital. Morgan began building his stake in Clear Channel Outdoor Holdings, Inc. in the second quarter of 2019. After selling 1.18 million shares of Clear Channel Outdoor Holdings, Inc. in the second quarter of 2022, his hedge fund had a $9.14 million stake in the company.
Clear Channel Outdoor Holdings, Inc. is one of the notable stocks in Brigade Capital’s portfolio along with Chesapeake Energy Corporation, SandRidge Energy, Inc., and iHeartMedia, Inc..
5. Chesapeake Energy Corporation (NASDAQ:CHK)
Brigade Capital’s Stake Value: $9,406,000
Percentage of Brigade Capital’s 13F Portfolio: 1.05%
Number of Hedge Fund Holders: 67
Chesapeake Energy Corporation, an independent exploration and production firm, acquires, explores, and develops assets in the United States to produce oil, natural gas, and natural gas liquids from subterranean reservoirs. Chesapeake Energy Corporation stands fifth on the list of Don Morgan’s Brigade Capital.
Benchmark analyst Subash Chandra initiated coverage of Chesapeake Energy Corporation on August 1, assigning the stock a ‘Buy’ rating and a $137 price target. Brigade Capital owns 115,975 shares in Chesapeake Energy Corporation worth over $9.41 million, representing close to 1.05% of its Q2 portfolio.
67 hedge funds from the second quarter database of Insider Monkey reported long bets on Chesapeake Energy Corporation, with combined stakes worth $3.53 billion. One of the firm’s notable shareholders is Oaktree Capital Management, which held a $851.64 million position.
In its Q1 2022 investor letter, ClearBridge Investments mentioned Chesapeake Energy Corporation. Here is what the fund said:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake …. (Click here to read full text).”
4. Bowlero Corp. (NYSE:BOWL)
Brigade Capital’s Stake Value: $9,531,000
Percentage of Brigade Capital’s 13F Portfolio: 1.06%
Number of Hedge Fund Holders: 18
Bowlero Corp. (NYSE:BOWL) is a media company and owner of bowling alleys that offer cuisine, entertainment, and bowling. In the second quarter of 2022, 18 hedge funds were long Bowlero Corp., with a total stake value of $203.96 million. Brigade Capital trimmed its stake in Bowlero Corp. by 7% in the second quarter, ending the period with shares worth $9.53 million.
Kevin Heenan, an analyst at JPMorgan, commenced coverage of Bowlero Corp. on August 30, assigning the stock an ‘Overweight’ rating and a $17 price target. In a research report, Heenan disclosed to investors that Bowlero Corp. held market dominance and leverage in the lucrative bowling sector.
3. Noble Corporation (NYSE:NE)
Brigade Capital’s Stake Value: $17,118,000
Percentage of Brigade Capital’s 13F Portfolio: 1.91%
Number of Hedge Fund Holders: 31
Noble Corporation (NYSE:NE) is an offshore drilling business with its main office in London, United Kingdom. It has a fleet of 20 offshore drilling units operating as of February 16, 2022, including 12 floaters and 8 jackups. On July 6, DNB Markets analyst Martin Huseby Karlsen reaffirmed a ‘Buy’ rating on Noble Corporation and increased his price objective from $43 to $49.
Noble Corporation, in which Brigade Capital increased its position by 222% in Q2 2022, is ranked third on Don Morgan’s list of ten stocks to purchase. The hedge fund holds 675,270 shares in Noble Corporation worth over $17.12 million, representing 1.91% of its portfolio.
31 hedge funds held stakes in Noble Corporation in the second quarter of 2022, collectively worth $457.57 million, compared to the same number of funds in the preceding quarter, holding stakes in Noble Corporation valued at $621.73 million.
2. Magnachip Semiconductor Corporation (NYSE:MX)
Brigade Capital’s Stake Value: $18,768,000
Percentage of Brigade Capital’s 13F Portfolio: 2.1%
Number of Hedge Fund Holders: 27
Magnachip Semiconductor Corporation (NYSE:MX) develops and manufactures analogue and mixed-signal semiconductor platform solutions for communications, IoT, consumer, computer, industrial, and automotive applications. Rajvindra Gill, a Needham analyst, expressed his optimism for Magnachip Semiconductor Corporation on August 10. He maintained a ‘Buy’ rating and a $22 price target on the stock.
On September 6, Magnachip Semiconductor Corporation unveiled its third-generation 200V MV Metal-Oxide-Semiconductor Field-Effect Transistors for industrial power supplies and motor controllers for Light Electric Vehicles.
Toronado Partners is a prominent stakeholder of Magnachip Semiconductor Corporation, with 2.57 million shares of the company, worth over $37.39 million. Even after selling 7,624 shares of Magnachip Semiconductor Corporation in the second quarter, Don Morgan’s Brigade Capital holds more than 1.29 million shares of the company, worth about $18.77 million.
Insider Monkey found 27 hedge funds bullish on Magnachip Semiconductor Corporation at the close of the second quarter of 2022. These funds held collective stakes in the company valued at $210.85 million, down from $252.98 million in the first quarter of 2022, when 28 hedge funds were long Magnachip Semiconductor Corporation.
Here is what Altron Capital Management had to say about Magnachip Semiconductor Corporation in its Q4 2021 investor letter:
“MagnaChip Semiconductor Corp.. While the previous buyout offer from Wise Road Capital did not go through as many expected, the company is still in talks with other potential buyers. Furthermore, the company announced a USD 75 million share buyback, which represents a significant percentage of the company’s shares. While we do not generally enter positions with the anticipation of a buyout, it is the case that a MagnaChip acquisition will be the most likely outcome.”
1. Valaris Limited (NYSE:VAL)
Brigade Capital’s Stake Value: $25,922,000
Percentage of Brigade Capital’s 13F Portfolio: 2.9%
Number of Hedge Fund Holders: 40
Valaris Limited (NYSE:VAL) is an offshore contract drilling firm that provides services to the global oil and gas industry. According to the 13F filings for the second quarter of 2022, Brigade Capital held over 613,690 shares of Valaris Limited, amounting to more than $25.92 million and representing 2.9% of the fund’s portfolio. Valaris Limited has featured on Morgan’s portfolio since the second quarter of 2021.
As of the end of the second quarter of 2022, 40 hedge funds had ownership positions in Valaris Limited, up from 39 hedge funds a quarter earlier. Magnetar Capital, with a nearly $953.61 million stake, is a significant shareholder of Valaris Limited.
You can also take a peek at 10 Stocks to Buy According to Kevin McCarthy’s Breakline Capital and 10 Stocks to Buy According to Mark McMeans’ Brasada Capital Management.
Follow Insider Monkey on Twitter
Suggested articles:
- 10 Stocks To Buy According to Francis Chou’s Chou Associates Management
- 10 Stocks To Buy According to William Von Mueffling’s Cantillon Capital Management
- Top 7 Best Stocks To Buy According to Stephen Feinberg’s Cerberus Capital Management
originally published on Insider Monkey.
