In this article, we will be discussing the 10 stocks to invest in according to Claes Fornell.
Creator of the American Customer Satisfaction Index, Claes Fornell is an expert on customer satisfaction analytics and capital asset management. Serving as manager and chairman, he is a founding partner of the Michigan-based investment management firm, CSat Investment Advisory. Having earned his doctorate from Lund University in 1976, Claes Fornell worked as professor at Duke University, Northwestern University, and the Stockholm School of Economics. His research focuses on the development and application of advanced quantitative methods for understanding and obtaining high financial returns, in tandem with lower risks.
His hedge fund makes use of a classic long/short and market neutral strategy, alongside investing in the stocks of large-cap consumer goods and services companies that are traded on US stock exchanges and measured using ACSI.
According to the Q2 13F filings, CSat Investment Advisory, as an investment firm, manages more than $119 million in its portfolio. CSat Investment Advisory’s portfolio is diversified across 13 key sectors, with the Consumer Discretionary sector being the largest one. The fund focuses most of its investments in the United States, with a majority of the companies in the fund’s portfolio being large-cap companies with stocks scaling up to more than $10 billion in market capitalization, making up 65% of the fund’s total value.
Some of the top stocks present in the investment portfolio of CSat Investment Advisory at the end of the second quarter of 2021 include Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and The Charles Schwab Corporation (NYSE:SCHW), among others discussed in detail below.
Photo by Behnam Norouzi on Unsplash
Our Methodology
With this background in mind, let us now look towards the 10 stocks to invest in according to Claes Fornell. We made use of CSat Investment Advisory’s 13F portfolio for the second quarter for this analysis.
Why should we pay attention to Claes Fornell’s stock picks? 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 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.
10 Stocks To Invest In According To Claes Fornell
10. PepsiCo, Inc. (NASDAQ:PEP)
CSat Investment Advisory’s Stake Value: $2.7 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.26%
Number of Hedge Fund Holders: 66
PepsiCo, Inc. (NASDAQ:PEP), a food and beverage company, ranks tenth on our list of the 10 stocks to invest in according to Claes Fornell. Some of the company’s notable brands include Lay’s, Pepsi and Gatorade.
On October 7, Barclays analyst Lauren Lieberman raised the price target on PepsiCo, Inc. to $168 from $165, and kept an Overweight rating on the shares of the company.
According to Insider Monkey’s data, 66 hedge funds out of the 873 tracked held stakes in PepsiCo, Inc. worth roughly $5.2 billion, as of the end of the second quarter of 2021. This is an increase from the 61 hedge funds that held stakes in the company in the previous quarter, with a total stake value of approximately $4.9 billion. CSat Investment Advisory currently holds 19,086 shares in PepsiCo, Inc.. These shares are valued at $2.7 million and represent 2.26% of the fund’s portfolio value.
9. CVS Health Corporation (NYSE:CVS)
CSat Investment Advisory’s Stake Value: $2.89 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.43%
Number of Hedge Fund Holders: 67
CVS Health Corporation (NYSE:CVS) is a healthcare and pharmaceutical company based in Rhode Island. It is ranked ninth on our list of the 10 stocks to invest in according to Claes Fornell.
Securities filings show that CSat Investment Advisory owned 38,484 shares in the company at the end of the second quarter of 2021 worth $2.89 million, representing 2.43% of the portfolio.
On August 31, Morgan Stanley analyst Ricky Goldwasser raised her price target on CVS Health Corporation to $114 from $99, and kept an Overweight rating on the company’s shares.
Of the 873 elite funds tracked by Insider Monkey, 67 were long in CVS Health Corporation at the end of June, up from 62 in the first quarter of 2021.
ClearBridge Mentioned CVS Health Corp in its Q2 2021 investor letter. Here is what the firm has to say:
“Our differentiated positions in the health care sector also made strong contributions as the market began to reward the heavily discounted sector.CVS Health saw strength in its pharmacy benefits manager business as well as its managed care business, Aetna, helping to confirm our positive view of CVS’s repositioning of its business model from a dispensary model to a service model. With CVS store-based health care services offering patients better convenience, encouraging better health care compliance and ultimately lower costs, we believe the company is at the forefront of a changing mindset in the health care services sector.”
8. The Hershey Company (NYSE:HSY)
CSat Investment Advisory’s Stake Value: $2.89 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.43%
Number of Hedge Fund Holders: 38
The Hershey Company (NYSE:HSY) is an American manufacturer of food products that specializes in chocolate and sugar-based confections. Ranked eighth on our list of the 10 stocks to invest in according to Claes Fornell, The Hershey Company has a market capitalization of $37.13 billion.
As of Q2 2021, 38 hedge funds tracked by Insider Monkey have positions in The Hershey Company, worth over $1.2 billion. By the end of June, Claes Fornell holds 18,310 shares in the company, amounting to more than $2.89 million and account for 2.43% of the fund’s total portfolio value.
On October 18, Deutsche Bank analyst Steve Powers raised the price target on The Hershey Company to $184 from $174, and kept a Hold rating on the shares.
7. Hilton Worldwide Holdings Inc. (NYSE:HLT)
CSat Investment Advisory’s Stake Value: $3 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.57%
Number of Hedge Fund Holders: 45
Hilton Worldwide Holdings Inc. (NYSE:HLT) is a renowned multinational hospitality company, ranking seventh on our list of the 10 stocks to invest in according to Claes Fornell. Best known for its Hilton hotels, the company offers franchises or directly owns its properties.
By the end of the second quarter of this year, Claes Fornell’s CSat Investment Advisory held 25,353 shares of Hilton Worldwide Holdings Inc. with the stake equaling $3 million and representing 2.57% of the fund’s investment portfolio. For the same quarter, 45 of the 873 funds tracked by Insider Monkey held a stake in the company.
On October 5, Loop Capital analyst Alton Stump initiated coverage of Hilton Worldwide Holdings Inc. with a Hold rating and $135 price target.
Just like Apple Inc., Alphabet Inc., Amazon.com, Inc. and The Charles Schwab Corporation, Hilton Worldwide Holdings Inc. is a stock investors should pay attention to.
In the Q2 2021 investor letter of Pershing Square Holdings, the fund mentioned Hilton Worldwide Holdings Inc.. Here is what the fund said:
“While the hotel industry has been extremely negatively impacted by the COVID-19 pandemic, Hilton has done an excellent job navigating industry volatility, a testament to the company’s high-quality, asset light, high-margin business model and superb management team. From the moment the pandemic began, Hilton’s management team took decisive actions to ensure the company not only managed through what it knew would be a challenging period, but also positioned the company to generate improved margins, cash fl ows and investment returns once the business recovers to pre-COVID-19 demand levels.
Industry RevPAR (the industry metric for same-store sales at a given hotel) bottomed in April 2020 and has shown sequential improvement every quarter as travel and mobility have recovered along with COVID-19 vaccine rollouts and a resumption in travel. In recent months, there is increasing evidence that a robust recovery scenario is underway, led by domestic leisure travel occasions which is currently trending above 2019 demand levels. For the fi rst three weeks of July, the most recent data the company provided, RevPAR has already recovered to 85% of 2019 levels – a signifi cant improvement over prior months driven by increased hotel occupancy and a rapid recovery in rate.
While management anticipates a moderation in leisure demand as we exit the summer, it expects the moderation in leisure travel to be off set by a more pronounced recovery in business transient travel occasions as offi ces reopen this fall. Although there remains near-term uncertainty in domestic travel given the increase in COVID-19 case numbers following the arrival of the Delta variant in the U.S., we believe that the medium-term outlook continues to point to a robust recovery scenario. Throughout the pandemic, Hilton took actions to reduce corporate expenses by about 20% compared to 2019 levels.
Simultaneously, the company provided resources and support to the Hilton owner community which further solidifi ed Hilton as the preferred franchise partner, thereby expanding Hilton’s pipeline of units around the world.In the most recent quarter Hilton affi rmed its near-to-medium term outlook of mid-single-digit net unit growth, and a resumption of its historical 6-7% net unit growth beginning in 2023-2024, higher growth than competitors, and further evidence of Hilton’s unique business model.
We believe that Hilton will continue to grow its market share over time given independent hotels’ increased interest in seeking an affi liation with global brands, particularly in the wake of the pandemic. While the recovery may continue to be uneven, Hilton has made tremendous progress which will help it become an even more profi table and stronger business going forward.”
6. Amazon.com, Inc. (NASDAQ:AMZN)
CSat Investment Advisory’s Stake Value: $3.07 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.58%
Number of Hedge Fund Holders: 271
Amazon.com, Inc. is a multinational company that specializes in e-commerce, cloud computing, digital streaming and artificial intelligence. It comes in at sixth on our list of the 10 stocks to invest in according to Claes Fornell.
There were 271 hedge funds in the database of Insider Monkey that held stakes in Amazon.com, Inc. worth $60.49 billion in the second quarter of 2021, compared to 243 funds in the first quarter with total stakes amounting to approximately $50.4 billion. Claes Fornell of CSat Investment Advisory held 994 shares in the company by the end of the quarter. These shares are valued at $3.07 million and account for 2.58% of his fund’s total investment portfolio.
On October 21, Baird analyst Colin Sebastian maintained an Outperform rating, alongside a $4,000 price target on Amazon.com, Inc. shares.
Madison Funds, in its Q3 2021 investor letter, mentioned Amazon.com, Inc. (NASDAQ:AMZN). Here is what the fund had to say:
“We did add a modest new position weight to the portfolio in the quarter in Amazon.com, Inc. stock (AMZN). We acknowledge that many aspects of Amazon’s merit as an investment are well appreciated. However, our work leads us to conclude that shares are attractive. Leadership positions in both e-commerce and cloud computing provide the company with significant durable competitive advantages in industries that we think can produce above average growth over the next decade. Over the past year, AMZN shares have trailed the market as investors debate near-term growth prospects following the pandemic-induced e-commerce demand. Additionally, margins have been depressed due to Amazon’s unprecedented increases in spending to build out fulfillment and in-house logistics capabilities – Amazon will build out more square footage this year and last than it did cumulatively over the previous 10 years, more than doubling its in-house delivery capacity. We like the investments Amazon is making and believe they will further advantage the company relative to other retailers, making it nearly impossible for competitors to match the same level of delivery speed and convenience. With its large and frequently engaged customer base, Amazon has multiple mechanisms to make money, including selling advertising and enhanced subscription services. Within the cloud business, we forecast Amazon Web Services (AWS) leveraging its strengths in Infrastructure-as-a-service (IaaS) to move into higher value segments of cloud computing (such as platform-as-a-service: PaaS), allowing the company to continue outgrowing the overall IT sector with strong profitability. While Amazon shares have performed extremely well over the long-term, we think near-term concerns about whether Amazon will earn a return on its accelerated investments provide an opportunity now for investors willing to look through the investment period. Our view is that the investments likely earn strong returns and extend Amazon’s competitive advantages and aboveaverage growth.”
5. The Charles Schwab Corporation (NYSE:SCHW)
CSat Investment Advisory’s Stake Value: $3.11 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.61%
Number of Hedge Fund Holders: 72
The Charles Schwab Corporation is a multinational financial services company that offers commercial banking, asset management and wealth management services. Ranked fifth on our list of the 10 stocks to invest in according to Claes Fornell, The Charles Schwab Corporation has a market capitalization of $157.74 billion.
By the end of the second quarter of 2021, 72 hedge funds out of the 873 tracked by Insider Monkey held stakes in The Charles Schwab Corporation worth roughly $4.85 billion. This is compared to 76 hedge funds in the previous quarter with a total stake value of approximately $4.9 billion. Claes Fornell currently owns 47,839 shares in the company. The value of these shares amount to more than $3.11 million and account for 2.61% of his hedge fund’s portfolio.
On October 22, Citi analyst William Katz raised his price target on The Charles Schwab Corporation to $100 from $98, and kept a Buy rating on the shares of the company.
Lakehouse Capital, an investment management firm, releases its Q2 2021 investor letter and mentioned The Charles Schwab Corporation in it. Here is what the firm has to say:
“Charles Schwab is not a household name in Australia but it is in the US where it is the largest discount broker with more than 32 million brokerage accounts, 2 million corporate retirement plans, and total client assets of US$7.4 trillion. Schwab’s shares performed extremely well during the year thanks to a confluence of factors including a strong stock market with the S&P 500 up 39% year-on-year, the company’s recent merger with industry heavyweight TD Ameritrade, and expectations that interest rate income would grow as the US economy gained steam.
Two other important contributors to Schwab’s year, which were a mix of cyclical and structural, were an increase in net new accounts and increased trading activity. We view these as cyclical in the sense that markets are performing very well and that retail investors have been bored and emboldened during the American lockdowns, however, also structural because Schwab’s shift to $0 commissions on equity trades has permanently reduced a barrier to trading for investors with smaller accounts. We also note that, while brokerage activity is cyclical, the average brokerage account itself is very sticky — we estimate normalised annual retention rates for accounts of better than 93% — and that the average client assets per account grow over time thanks to asset growth and clients collectively being net savers.
Schwab makes for an excellent natural hedge for the Fund as Schwab tends to perform well when interest rates increase, which is generally negative for the rest of the portfolio. And the position did its job for us by increasing during a rising interest rate environment, enabling us to harvest much of our gains from Schwab and redeploy them to shares of other growth companies that had gotten cheaper in response to higher rates. We’re mindful of the run in the shares and the cyclical nature of the business but comfortable keeping a small position for now given Schwab’s natural hedging dynamics, extremely loyal customers, and an industry-leading position in a growing market.”
4. FedEx Corporation (NYSE:FDX)
CSat Investment Advisory’s Stake Value: $3.34 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 2.8%
Number of Hedge Fund Holders: 61
FedEx Corporation (NYSE:FDX) is an American multinational conglomerate holding company which focuses on transportation, e-commerce and business services. Based in Memphis, Tennessee, the company is ranked fourth on the list of the 10 stocks to invest in according to Claes Fornell.
On October 8, Citi analyst Christian Wetherbee maintained a Buy rating on FedEx Corporation alongside a $300 price target.
As of Q2 2021, CSat Investment Advisory holds 11,774 shares of FedEx Corporation, worth $3.34 million and representing 2.8% of the fund’s total investment portfolio. At the end of the second quarter of 2021, 61 hedge funds in the database of Insider Monkey held stakes worth $2.17 billion in FedEx Corporation, down from 63 in the previous quarter worth $2.26 billion.
Artisan Partners, in its Q1 2021 investor letter, mentioned FedEx Corporation. Here is what the fund had to say:
“Whatever products did make it off the line met a constrained logistics infrastructure, with commercial air capacity cut and ship cargo space at a premium. Then, in the event your dishwasher part actually made it to US waters, our ports were congested due to manpower shortages and COVID-19 protocols. When the goods were finally unloaded, it turns out trucking shortages caused a spike in ground rates! All this might be bad for your dinner parties, home décor or exercise goals, but it can be great for the middlemen. Middlemen like logistics expert FedEx.
FedEx provides global logistics services. It gets your dishwasher part on a truck, or that semiconductor chip on a plane. Surging demand for at-home deliveries during the pandemic boosted volumes and allowed management to push through price increases, keeping competitive with industry peers. The industry’s renewed pricing discipline was a welcome change, reflecting a broader commitment to earn better returns on invested capital. Despite a significant re-rating of the business over the last 12 months, FedEx remains attractive based on our margin of safety criteria.”
3. Alphabet Inc. (NASDAQ:GOOG)
CSat Investment Advisory’s Stake Value: $3.62 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 3.04%
Number of Hedge Fund Holders: 155
Alphabet Inc. is a multinational tech-based conglomerate. The California-based ranks third on our list of the 10 stocks to invest in according to Claes Fornell.
As of the end of the June quarter, 155 hedge funds out of the 873 tracked by Insider Monkey held stakes in Alphabet Inc.. According to the recent 13F Filings, Claes Fornell’s CSat Investment Advisory holds 1,752 shares in the company. These shares are worth more than $3.62 million and represent 3.04% of the fund’s total portfolio value.
On October 12, JPMorgan analyst Doug Anmuth maintained an Overweight rating on Alphabet Inc. with a $3,250 price target, noting that the company was the most liked mega-cap internet stock.
In its Q2 2021 investor letter, Mawer Investment Management named Alphabet Inc. among the companies that reported strong results. Here is what the fund said:
“Many higher growth companies reported strong results amid the pick-up in broad economic activity including Alphabet. These higher growth companies tend to have increased sensitivity to a change in discount rates and were supported as long-term interest rates stabilized over the period.”
2. Southwest Airlines Co. (NYSE:LUV)
CSat Investment Advisory’s Stake Value: $3.75 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 3.15%
Number of Hedge Fund Holders: 49
Southwest Airlines Co. (NYSE:LUV) is a major American airline company, and is the world’s largest low-cost air carrier. The company provides passenger airline services through its fleet of over 718 aircraft that travel to 121 destinations in the world. It ranks second on our list of the 10 stocks to invest in according to Claes Fornell.
On October 4, Barclays analyst Brandon Oglenski upgraded Southwest Airlines Co. to Overweight from Equal Weight, with a price target of $75, up from $64.
By the end of the second quarter of 2021, 49 hedge funds out of the 873 tracked by Insider Monkey held stakes in Southwest Airlines Co. worth roughly $926 million. This is compared to 52 hedge funds in the previous quarter with a total stake value of approximately $747 million. By the end of June, Claes Fornell’s CSat Investment Advisory reported owning 61,529 shares in the company, worth more than $3.75 million.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Southwest Airlines Co. was one of them. Here is what the fund said:
“One of our goals as we constantly monitor the portfolio is to see if we can better deploy capital by lowering the probability of being wrong. This motivation drove our swap of Delta Airlines into Southwest Airlines during the quarter. We expect a huge rebound in airline traffic as COVID-19 concerns abate, but we are much more comfortable that it will be led by leisure travel. Conversely, we are more uncertain of the ultimate level and timing of business travel demand. Southwest, with its simple fare strategy and high leisure travel exposure, is better positioned to capture the ongoing traffic rebound without having to answer the business travel demand question on which Delta is more dependent. As a result, we expect Southwest to play serious offense as it gains share in the rebounding travel market and can fully leverage the massive pent-up demand for travel that we expect. In addition, the U.S. lead in vaccination over Europe favors Southwest over Delta, given the domestic focus of Southwest. COVID-19 has changed many things, but humans by their very nature like to move, and many of them will do it on Southwest.”
1. Apple Inc. (NASDAQ:AAPL)
CSat Investment Advisory’s Stake Value: $5.85 million
Percentage of CSat Investment Advisory’s 13F Portfolio: 4.92%
Number of Hedge Fund Holders: 138
Apple Inc. is placed first on our list of the 10 stocks to invest in according to Claes Fornell. The California-based company operates as a technology firm with a large stake in the consumer electronics business.
On October 8, Morgan Stanley analyst Katy Huberty maintained an Overweight rating and $168 price target on Apple Inc. shares.
By the end of the second quarter of 2021, Claes Fornell held over 47,965 shares in Apple Inc., worth more than $5.85 million. These shares represented 4.92% of his hedge fund’s portfolio value. According to our database, 138 hedge funds were long Apple Inc. in the second quarter of 2021, compared to 127 funds in the preceding quarter.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
You can also read about 10 Best Robinhood Stocks Under $20 and Hedge Funds are Selling These 10 Chinese Stocks Amid Crackdowns.
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This article is originally published at Insider Monkey.
