In this article, we discuss 10 stocks to buy according to Peter Simmie’s Bristol Gate Capital.
Peter Simmie earned his BA in English and Economics from the University of Manitoba and an MBA from the Kellogg School of Management. He worked as vice president and portfolio manager at Nigel Stephens Counsel Inc. from 1995 to 2005. Richard Hamm and Peter Simmie created Bristol Gate Capital in 2006.
Bristol Gate Capital is a hedge fund established in Toronto, Canada. For advisers, family offices, and institutions, the hedge fund leverages data science with fundamental analysis to run concentrated high dividend growth portfolios. Bristol Gate Capital believes that by focusing its investments over the next 12 months on a small number of firms with strong dividend growth prospects, it will be able to develop a portfolio that will beat the market while reducing potential losses.
Based on its patented dividend growth estimation technique, Bristol Gate Capital runs a US Equity Strategy and a Canadian Equity Strategy. Since its inception in 2009, Bristol Gate’s US Equity Strategy has shown outstanding results, with a compound annual return of 17.86% from 2009 to January 2020. In 2019, the strategy had one of its finest years ever, with returns of 35.53%. The strategy had another excellent year in 2017, with a return of slightly over 20%. Its holdings have an average annual dividend growth rate of 20.4% and a 1.6% yield. At the end of the third quarter, the US Equity Strategy’s trailing 12-month median dividend growth was 12.0%, as opposed to the S&P 500 component median of 6.2% and actual cash dividend growth of 2.7%. The hedge fund predicted a 15% median dividend increase for its portfolio businesses over the next 12 months. Bristol Gate Capital’s portfolio had 33 long positions and a value of $2.22 billion at the end of the fourth quarter of 2021, with a 50.57% concentration of the top 10 holdings.
The most notable stocks held by Peter Simmie’s Bristol Gate Capital in Q4 2021 include Canadian National Railway Company (NYSE:CNI), Mastercard Incorporated (NYSE:MA), and Starbucks Corporation (NASDAQ:SBUX).
Canadian National Railway Company (NYSE:CNI) represents 0.05% of Bristol Gate Capital’s Q4 portfolio, with the fund holding 9,405 shares worth roughly $1.15 million. Argus analyst John Eade upgraded Canadian National Railway Company (NYSE:CNI) to Buy from Hold on February 17, with a $145 price objective. The analyst said in a research report that the stock had a strong balance sheet and an attractive valuation.
Source:Pixabay
In Mastercard Incorporated (NYSE:MA), Peter Simmie’s Bristol Gate Capital owns 218.70 million shares. The considerable investment covers an impressive 3.53% of the fund’s Q4 portfolio. On March 4, Tigress Financial analyst Ivan Feinseth raised his price target on Mastercard Incorporated (NYSE:MA) to $472 from $460 and reiterated a Strong Buy rating on the shares.
Another notable stock in Peter Simmie’s portfolio is Starbucks Corporation (NASDAQ:SBUX). The investor owns an $86.08 million stake in the company. On February 1, Starbucks Corporation (NASDAQ:SBUX) declared a quarterly dividend of $0.49 per share, in line with the previous.
Our Methodology
Here is the list of 10 stocks to buy according to Peter Simmie’s Bristol Gate Capital. We used the Q4 portfolio of Bristol Gate Capital for this analysis. The hedge fund sentiment for each stock was assessed using data from 924 top hedge funds tracked by Insider Monkey in the fourth quarter of 2021.
Stocks to Buy According to Peter Simmie’s Bristol Gate Capital
10. Moody’s Corporation (NYSE:MCO)
Bristol Gate Capital Stake Value: $104,731,000
Percentage Bristol Gate Capital’s 13F Portfolio: 4.7%
Number of Hedge Fund Holders: 58
Moody’s Corporation (NYSE:MCO) is a commercial and financial services firm based in the United States. After Moody’s Corporation (NYSE:MCO)’s Q4 earnings failed to meet estimates owing to lower than expected profits and overall market volatility, BMO Capital analyst Jeffrey Silber lowered his price target on Moody’s Corporation (NYSE:MCO) to $402 from $430 on February 14. On the other hand, the analyst kept an Outperform rating on the stock.
Bristol Gate Capital acquired a stake in Moody’s Corporation (NYSE:MCO) in Q2 2020, purchasing 196,423 shares of the company, worth $53.96 million. In Q4 2021, the hedge fund increased its stake in Moody’s Corporation (NYSE:MCO) by 1%, and its position in the company is now worth about $104.73 million.
58 out of the 924 hedge funds tracked by Insider Monkey held stakes in Moody’s Corporation (NYSE:MCO) in the fourth quarter of 2021, worth $16.85 billion, compared to the same number of funds in the preceding quarter, holding stakes in Moody’s Corporation (NYSE:MCO) worth $15.70 billion. Among the hedge funds being tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway is a leading shareholder in Moody’s Corporation (NYSE:MCO), with 24.67 million shares worth more than $9.64 billion.
In addition to Canadian National Railway Company (NYSE:CNI), Mastercard Incorporated (NYSE:MA), and Starbucks Corporation (NASDAQ:SBUX), Peter Simmie’s Bristol Gate Capital is quite bullish on Moody’s Corporation (NYSE:MCO).
In its Q4 2020 investor letter, Baron Funds highlighted a few stocks, and Moody’s Corporation (NYSE:MCO) was one of them. Here is what the fund said:
“Moody’s Corporation provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021.The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”
9. Cintas Corporation (NASDAQ:CTAS)
Bristol Gate Capital Stake Value: $107,022,000
Percentage Bristol Gate Capital’s 13F Portfolio: 4.81%
Number of Hedge Fund Holders: 42
Cintas Corporation (NASDAQ:CTAS) provides corporate identification uniforms to businesses through rental and sales programs. Cintas Corporation (NASDAQ:CTAS) declared a quarterly dividend of $0.95 per share on January 11. As of March 6, the stock’s dividend yield was 1.00%.
On December 29, Argus analyst John Eade maintained a Buy rating on Cintas Corporation (NASDAQ:CTAS) and boosted his price objective to $490 from $410. With collective stakes worth $1.21 billion, 42 hedge funds tracked by Insider Monkey held positions in Cintas Corporation (NASDAQ:CTAS) in Q4, up from 36 in the previous quarter.
John Allison’s Unio Capital is Cintas Corporation (NASDAQ:CTAS)’s largest stakeholder in Q4, owning shares worth over $926.26 million. Bristol Gate Capital started building its position in Cintas Corporation (NASDAQ:CTAS) during the second quarter of 2016. In Q4 2021, the hedge fund held 241,491 shares in Cintas Corporation (NASDAQ:CTAS), valued at $107.02 million. The company constituted 4.81% of Peter Simmie’s portfolio.
Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks in its Q4 2020 investor letter, and Cintas Corporation (NASDAQ:CTAS) was one of them. Here is what the fund said:
“We concluded our campaigns in Cintas during Q4. We have held Cintas since the portfolio’s inception on the thesis that the acquisition of G&K created significant opportunities for revenue and cost synergies. We had high confidence in Cintas’ management team to achieve those synergies, and we have been rewarded accordingly for that conviction. We think the stock’s valuation now more appropriately reflects the strength of the franchise and profit cycle, and therefore we ended our successful campaign.”
8. Intuit Inc. (NASDAQ:INTU)
Bristol Gate Capital Stake Value: $108,693,000
Percentage Bristol Gate Capital’s 13F Portfolio: 4.88%
Number of Hedge Fund Holders: 82
Intuit Inc. (NASDAQ:INTU) is a financial software company based in the United States. In Q4 2021, Bristol Gate Capital reduced its position in Intuit Inc. (NASDAQ:INTU) by 16% and held shares worth roughly $108.69 million. The company made up 4.88% of Peter Simmie’s portfolio.
On February 25, Deutsche Bank analyst Brad Zelnick reduced his price target on Intuit Inc. (NASDAQ:INTU) to $650 from $700 but kept a Buy rating on the shares. According to Zelnick in a research note, Intuit Inc. (NASDAQ:INTU)’s fiscal Q2 results were better than expected, signaling a slower start to this year’s tax season overall.
In Q4 2021, Intuit Inc. (NASDAQ:INTU) experienced positive hedge fund sentiment, as 82 elite funds reported owning stakes worth $7.99 billion in the company, up from 64 in the preceding quarter valued at $6.15 billion.
In its fourth quarter 2021 investor letter, L1 Capital, an investment management firm, mentioned Intuit Inc. (NASDAQ:INTU). Here is what the fund said:
“We trimmed our investment in Intuit following a period of strong share price performance. Our decision to reduce the size of Intuit’s position in the portfolio was solely due to our views on Intuit’s valuation relative to alternative investment opportunities, and reflects our valuation discipline, even for Quality 1 rated businesses. We would welcome the opportunity to increase our investment in Intuit should the share price fall further from current levels.”
7. The Home Depot, Inc. (NYSE:HD)
Bristol Gate Capital Stake Value: $109,717,000
Percentage Bristol Gate Capital’s 13F Portfolio: 4.93%
Number of Hedge Fund Holders: 68
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer based in the United States that offers tools, construction materials, appliances, and related services. On February 25, Edward Jones analyst Brian Yarbrough upgraded The Home Depot, Inc. (NYSE:HD) to Buy from Hold.
On February 22, The Home Depot, Inc. (NYSE:HD) declared a quarterly dividend of $1.90 per share, up 15.2% from the previous payout of $1.65. Bristol Gate Capital started investing in The Home Depot, Inc. (NYSE:HD) during the fourth quarter of 2015, with shares worth $23.32 million. In Q4 2021, The Home Depot, Inc. (NYSE:HD) accounted for 4.93% of the hedge fund’s portfolio.
In Q4 2021, Ken Fisher’s Fisher Asset Management was a prominent stakeholder of The Home Depot, Inc. (NYSE:HD), with 7.83 million shares worth $3.25 billion. Overall, 68 hedge funds were bullish on The Home Depot, Inc. (NYSE:HD) in the fourth quarter of 2021, up from 58 in the previous quarter.
In its Q4 2021 investor letter, Ensemble Capital Management mentioned The Home Depot, Inc. (NYSE:HD). Here is what Ensemble Capital Management has to say about the company:
“On the more positive side, we saw notable performance contribution from Home Depot. In the midst of a housing shortage and rising home prices, Americans turned to home improvement projects with Home Depot’s startlingly fast growth in 2020 continuing throughout 2021. With each quarter that passed showing a continuation of strong growth rather than the slowdown that many investors expected, the stock led the S&P 500 for most of the year and turned in a heady 27% rally in the fourth quarter to close out the year. Notably, while Do It Yourself homeowners did indeed shop at Home Depot less than they did during record setting 2020, almost half of the company’s revenue comes from Pro contractors where strong growth continues.”
6. Microsoft Corporation (NASDAQ:MSFT)
Bristol Gate Capital Stake Value: $110,808,000
Percentage Bristol Gate Capital’s 13F Portfolio: 4.98%
Number of Hedge Fund Holders: 262
Microsoft Corporation (NASDAQ:MSFT) is a global technology conglomerate holding corporation headquartered in Redmond, Washington, with a market capitalization of $2.17 trillion. On March 4, Microsoft Corporation (NASDAQ:MSFT) announced the completion of its acquisition of Nuance Communications, Inc. (NASDAQ:NUAN).
Morgan Stanley analyst Keith Weiss initiated coverage of Microsoft Corporation (NASDAQ:MSFT) on February 8, rating it as Overweight and setting a price objective of $372. In the fourth quarter, Peter Simmie increased his stake in Microsoft Corporation (NASDAQ:MSFT) by 1%, and his shares in the company are now worth about $110.81 million.
Among the hedge funds tracked by Insider Monkey in Q4 2021, Fisher Asset Management held the most significant stake in Microsoft Corporation (NASDAQ:MSFT), owning 26.84 million shares worth roughly $9.03 billion. Overall, 262 hedge funds were bullish on the stock in the fourth quarter.
Bristol Gate Capital’s fourth-quarter holdings included Canadian National Railway Company (NYSE:CNI), Mastercard Incorporated (NYSE:MA), and Starbucks Corporation (NASDAQ:SBUX), in addition to Microsoft Corporation (NASDAQ:MSFT).
Polen Capital, in its fourth quarter 2021 investor letter, mentioned Microsoft Corporation (NASDAQ:MSFT). Here is what the fund said:
“Microsoft remains a beneficiary of accelerated digital tailwinds in a post-pandemic era. The company reported a nearly 22% yearover-year increase in third-quarter revenues. It maintains its momentum as a leading provider of cloud-based productivity solutions across different parts of the technology stack and various applications.”
5. UnitedHealth Group Incorporated (NYSE:UNH)
Bristol Gate Capital Stake Value: $112,284,000
Percentage Bristol Gate Capital’s 13F Portfolio: 5.04%
Number of Hedge Fund Holders: 96
UnitedHealth Group Incorporated (NYSE:UNH) is a health insurance company that provides health benefit plans and services to private and public sector enterprises as well as individuals. The company also deals in Medicare programmes and prescription drug coverage. Rajiv Jain’s GQG Partners is the leading shareholder of UnitedHealth Group Incorporated (NYSE:UNH), with 3.85 million shares worth $1.93 billion.
Whit Mayo, an analyst at SVB Leerink, boosted his price objective on UnitedHealth Group Incorporated (NYSE:UNH) to $550 from $480 on January 26 and maintained an Outperform rating on the stock. The analyst stated that the fourth-quarter results were substantially in line with expectations.
Peter Simmie started building his position in UnitedHealth Group Incorporated (NYSE:UNH) back in Q4 2015. The investment fund also bolstered its position in UnitedHealth Group Incorporated (NYSE:UNH) in the fourth quarter of 2021, by buying 1,286 additional shares. This makes their stake in UnitedHealth Group Incorporated (NYSE:UNH) total 223,611 shares worth $112.28 million.
Third Point Management, in its Q3 2021 investor letter, mentioned UnitedHealth Group Incorporated (NYSE:UNH). Here is what the fund has to say:
“UnitedHealth is one of the largest healthcare companies in the world and a market leader in both its insurance and healthcare services (Optum) businesses. We initiated our position during the 2020 Presidential election at a time of heightened political and regulatory uncertainty.
We believe under its new CEO, Andrew Witty, UnitedHealth can not only preserve its market dominance and sustain industry-leading growth rates across most of its key segments but also enter new healthcare services markets. Witty is known as a mission-driven CEO who clearly articulates his view that providing high-quality, affordable health care services is a social good. He receives consistently high marks from former colleagues, and we believe that his leadership approach will ballast and even strengthen UNH’s already impressive management and employee ranks. The insurance and services businesses are synergistic and complementary, which entrenches United’s critical role in care financing, access, and management. This dynamic gives us confidence in the durability of United’s market leadership…” (Click here to see the full text)
4. Broadcom Inc. (NASDAQ:AVGO)
Bristol Gate Capital Stake Value: $115,688,000
Percentage Bristol Gate Capital’s 13F Portfolio: 5.2%
Number of Hedge Fund Holders: 62
Broadcom Inc. (NASDAQ:AVGO) is a multinational technology firm that develops, manufactures, and sells semiconductors and infrastructure software. In Q4 2021, Bristol Gate Capital held 173,860 Broadcom Inc. (NASDAQ:AVGO) shares, worth $115.69 million, which accounted for 5.2% of the hedge fund’s portfolio.
As a consequence of Broadcom Inc. (NASDAQ:AVGO)’s strong Q4 results, KeyBanc analyst John Vinh boosted his price target to $720 from $710 on March 4 and maintained an Overweight rating on the stock. In addition, on March 3, Broadcom Inc. (NASDAQ:AVGO) declared a quarterly dividend of $4.10 per share, presenting a 14% increase from its prior dividend of $3.60.
At the end of the fourth quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $4.79 billion in Broadcom Inc. (NASDAQ:AVGO), up from 50 the preceding quarter worth $2.71 billion.
Miller Howard Investments, in its third-quarter 2021 investor letter, mentioned Broadcom Inc. (NASDAQ:AVGO). Here is what the fund said:
“Technology remains important in our portfolios, although the sector weights have come down over the past year. We now hold Broadcom (AVGO) of which have strong growth prospects, yet attractive valuations in our view. Unlike many younger tech companies, we believe our holdings should significantly benefit from an upturn in the economy.”
3. The Sherwin-Williams Company (NYSE:SHW)
Bristol Gate Capital Stake Value: $116,279,000
Percentage Bristol Gate Capital’s 13F Portfolio: 5.22%
Number of Hedge Fund Holders: 53
The Sherwin-Williams Company (NYSE:SHW) is a paint and coatings manufacturer and retailer. On February 16, The Sherwin-Williams Company (NYSE:SHW) declared a quarterly dividend of $0.60 per share, an increase of 9% over the $0.55 paid in the same quarter in 2021.
On January 28, Mizuho analyst Christopher Parkinson trimmed his price objective on The Sherwin-Williams Company (NYSE:SHW) to $350 from $353 and reiterated a Buy rating on the shares. The analyst projected that The Sherwin-Williams Company (NYSE:SHW) would have a challenging first quarter but that supply constraints would improve in Q2.
During Q4 2021, Peter Simmie’s Bristol Gate Capital held 330,189 The Sherwin-Williams Company (NYSE:SHW) shares, which were worth $116.28 million and represented 5.22% of its portfolio. Of the 53 hedge funds that were bullish on The Sherwin-Williams Company (NYSE:SHW) according to the fourth quarter database of Insider Monkey, Chilton Investment Company is the leading stakeholder of the company, holding 1.17 million shares worth $412.05 million.
In its Q4 2021 investor letter, Giverny Capital Asset Management mentioned The Sherwin-Williams Company (NYSE:SHW). Here is what the fund said:
“Our fourth-largest holding at year-end was Charles Schwab. Schwab shares rose 60%, buoyed by twin tailwinds of asset growth and the prospect of rising interest rates. Schwab is an exceptional business – it has grown new brokerage accounts at a steady 5%-6% clip for many years, and even faster recently. It has won the trust of retail investors – it’s hard to overstate how important trust is in financial services – but also offers financial advisers a low-cost custodial solution that has helped it win large chunks of business from legacy players like Merrill Lynch or Morgan Stanley. Schwab earns the bulk of its profit on interest rate spreads, or the difference between what it earns on cash deposits held in customers’ brokerage and bank accounts and what it pays to the owners of those accounts. As interest rates rise, so Schwab’s earnings. We’re happy about that, but we see Schwab continuing to grow brokerage accounts for years to come.”
2. Thermo Fisher Scientific Inc. (NYSE:TMO)
Bristol Gate Capital Stake Value: $118,003,000
Percentage Bristol Gate Capital’s 13F Portfolio: 5.3%
Number of Hedge Fund Holders: 95
Thermo Fisher Scientific Inc. (NYSE:TMO) is a company that makes analytical instruments, equipment, software, and diagnostics for research, reagents and consumables, analysis, and discovery. Among the hedge funds tracked by Insider Monkey in Q4 2021, 95 funds were bullish on Thermo Fisher Scientific Inc. (NYSE:TMO), up from 94 funds in the preceding quarter.
On February 3, Wells Fargo analyst Dan Leonard reduced his price target on Thermo Fisher Scientific Inc. (NYSE:TMO) to $605 from $700 and kept an Equal Weight rating on the shares after quarterly results. Post-pandemic expectations, according to the expert, were unrealistically high.
Ken Fisher’s Fisher Asset Management held the biggest stake in Thermo Fisher Scientific Inc. (NYSE:TMO) in the fourth quarter of 2021, with 2.15 million shares worth $1.44 billion. Thermo Fisher Scientific Inc. (NYSE:TMO) accounts for about 5.3% of Bristol Gate Capital’s portfolio, as the hedge fund owns a $118 million stake in the company.
In its third quarter 2021 investor letter, Baron Funds mentioned Thermo Fisher Scientific Inc. (NYSE:TMO). Here is what the fund said:
“We added to our position in Thermo Fisher Scientific Inc., a leading provider of life sciences tools & services. Thermo Fisher is a well-managed business with secular tailwinds in attractive life sciences end markets. At the company’s annual investor day, management provided long-term financial targets consisting of 7% to 9% core organic revenue growth and mid-teens annual earnings and free cash flow growth. We continue to like Thermo Fisher as a long-term earnings compounder.”
1. Zoetis Inc. (NYSE:ZTS)
Bristol Gate Capital Stake Value: $121,368,000
Percentage Bristol Gate Capital’s 13F Portfolio: 5.45%
Number of Hedge Fund Holders: 61
Zoetis Inc. (NYSE:ZTS) develops, manufactures, and sells pharmaceuticals, vaccinations, biodevices, diagnostic items, genetic testing, and precision livestock farming technologies. On December 20, Citi analyst Navann Ty raised his price target on Zoetis Inc. (NYSE:ZTS) to $232 from $184 and maintained a Neutral rating on the shares.
Bristol Gate Capital owns approximately 497,349 Zoetis Inc. (NYSE:ZTS) shares as of Q4 2021, worth $121.37 million, representing 5.45% of the total 13F securities. The hedge fund has slashed its stake in the firm by 7%, although it still remains the fund’s largest holding.
Overall, hedge funds are loading up on Zoetis Inc. (NYSE:ZTS), as 61 out of the 924 funds tracked by Insider Monkey held stakes in the company at the end of December 2021, up from 58 funds a quarter earlier.
In its third quarter 2021 investor letter Polen Capital, an investment management firm, mentioned Zoetis Inc. (NYSE:ZTS). Here is what the fund said:
“Finally, exiting our position in Zoetis was purely a function of valuation. With the business trading for up to 45x forward earnings, we felt we had more attractive alternatives. We maintain high conviction in the company and their competitive advantages and hope to be owners again, at a more attractive valuation. In short, we sold what we believe to be very a high-quality business at relatively high valuations to fund the purchase of equally high-quality businesses trading at lower valuations and even better long-term earnings growth prospects. While we are certainly not tactical in approach, we do aim to make prudent adjustments over time.”
You can also take a peek at 10 Stocks to Buy Now According to Jeffrey Gates’ Gates Capital and 10 Stocks to Invest in Now According to Anthony Bozza’s Lakewood Capital.
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Disclosure: None. 10 Stocks to Buy According to Peter Simmie’s Bristol Gate Capital is originally published on Insider Monkey.
