In this article, we discuss the 6 best stocks to buy according to Adam Wyden’s ADW Capital.
Adam Wyden is the son of renowned US senator Ron Wyden. He received his bachelor’s in Economics from The Wharton School in 2006. Wyden later completed his MBA in Finance from Columbia Business School. Wyden started his career in 2005 as an intern research analyst at DE Shaw’s $700 million long-short tech group, where he worked for four months. After his internship, Wyden became a merchant banking analyst at SMH Capital till July 2008.
Philosophy
Wyden’s greatest inspiration is his grandmother, who was a great believer in blue-chip stocks. According to him, he learned compounded interest from her checkbook when he was young. He also mentioned that he tries to find ideas that he can explain to his 93-year-old Jewish grandmother. He was also inspired by his great-uncle, a well-known investor who taught him to invest with people “who have more to lose than you do”. He lives by the words “chance favors the prepared mind”.
Furthermore, Adam Wyden’s most significant investment philosophy was utilizing technology to find stocks that “nobody knows existed”. When it comes to investing in recessive market conditions, Wyden recalls his story of investing in penny stocks that were coming out right after the great financial crisis of 2008. He bought those stocks early for nearly a dollar and sold them all when they reached $6-$7.
Regarding position sizing, Adam Wyden believes in adding a higher concentration to his top stocks and giving single-digit concentration to the stock that he feels is mispriced and could later become remarkable.
ADW Capital
ADW Capital is based in Miami, Florida, and was founded in 2010 by Adam Wyden from the second floor of his mother’s basement with $400,000 in seed capital. According to Business Insider, the fund’s philosophy and structure are modeled on the investment partnership that Warren Buffett had before starting Berkshire Hathaway. According to the management, the fund aims to produce high risk-adjusted returns through “conservative equity investing” in lesser-known stocks in the U.S., Canada, and Western Europe. The fund became successful soon after its inception and returned 91.31% in its first year. From 2011 to 2021, the fund’s annualized rate of return was around 24%. 2020 was the most profitable year for ADW Capital, where it returned 119.2%. Conversely, the most significant loss for the fund occurred in 2018, which was 33%.
Investments ADW Capital Avoids
In an interview, Adam Wyden said that he mostly avoids commodity-based stocks and healthcare. He said:
“We avoid financials, energy or anything commodity-based, and healthcare and biotech. With financials, I learned the hard way in 2008 the dangers of their balance sheet opacity and natural levels of leverage. With businesses tied to commodities, I’ve concluded I don’t want to invest in situations where I can get the micro story dead on but not get paid at all because a commodity price goes against me.
With healthcare, maybe it’s tied to my personal background and the fact I grew up in Washington, D.C., but I’m not comfortable with businesses where the government is actively trying to see that they make less money. I’ve also found that for smaller companies in this field outcomes are too often binary. I run a very concentrated portfolio, and I can’t make a big bet when the potential downside is a catastrophe.”
As of the second quarter of 2022, ADW Capital had discretionary assets under management of $389.16 million. The fund had six stocks in its 13F portfolio, valued at around $211.91 million, down from $257.6 million in the prior quarter. Moreover, in Q2 2022, ADW Capital added over $36 million worth of call options divided between 2 stocks and reduced holdings in 2 businesses.
PAR Technology Corporation (NYSE:PAR), APi Group Corporation (NYSE:APG), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK) are some of the most notable names in ADW capital’s 13F portfolio.
Our Methodology
We analyzed ADW Capital’s Q2 13F portfolio and added all six of its current holdings, while Call and Put options were not added to the list. For a better understanding of the readers, analyst ratings, growth catalysts, and dividend history of the stocks was also added along with their recent financial results.
The hedge fund sentiment around each stock was taken from Insider Monkey’s Q2 2022 database of 895 elite hedge funds.
Best Stocks to Buy According to Adam Wyden’s ADW Capital
6. PLBY Group, Inc. (NASDAQ:PLBY)
Number of Hedge Fund Holders: 17
PLBY Group, Inc. (NASDAQ:PLBY), formerly known as Playboy Enterprises, Inc., started as a media company. Later, the company further diversified its portfolio into gaming, lifestyle, and apparel segments. It was a publicly traded company for 40 years before the founder, Hugh Hefner, succeeded in a bid to take the company private in 2011. PLBY Group, Inc. (NASDAQ:PLBY) began trading publicly again in February 2021. PLBY Group, Inc. (NASDAQ:PLBY) suffered a significant blow since the beginning of the pandemic as total net revenues that were attributable to Chinese markets were around 48% at the time. However, the company has started to make acquisitions outside of China to become less dependent on the segment. Resultantly, the company’s TTM revenue has reached $288.847 million as of June 30, from $246.58 million realized in December 2021.
On August 10, Canaccord analyst Jason Tilchen maintained a Buy rating on PLBY Group, Inc. (NASDAQ:PLBY) and lowered the price target to $14 from $18. Tilchen mentioned that it would take a few quarters for investors to realize that the company is making progress on its strategic initiative. He further added that he views the current valuation as attractive.
As of the June quarter, 17 hedge funds held stakes in PLBY Group, Inc. (NASDAQ:PLBY), compared to 19 in the previous quarter. ADW Capital held 410,000 shares in the company in the second quarter, valued at $2.6 million, representing 1.23% of the firm’s portfolio.
PAR Technology Corporation (NYSE:PAR), APi Group Corporation (NYSE:APG), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK) are some of the major businesses that make up ADW Capital’s 13F portfolio, along with PLBY Group, Inc. (NASDAQ:PLBY).
5. FAT Brands Inc. (NASDAQ:FAT)
Number of Hedge Fund Holders: 1
FAT Brands Inc. (NASDAQ:FAT) is a California-based multi-brand restaurant franchising company. As of August 2022, the company owned 17 brands in 2300 locations. Out of the 895 hedge funds tracked by Insider Monkey, only ADW Capital held a stake in the company in the second quarter of 2022. The firm owned 587,400 shares worth $4.376 million, representing 2.06% of its portfolio.
FAT Brands Inc. (NASDAQ:FAT) has been focusing highly on acquisitions in the past couple of years. Starting from the burger chain Johnny Rockets for $25 million in 2020, it later made several acquisitions in 2021 at a combined value of $900 million. In May 2022, the company acquired Nestle Toll House Café for an undisclosed amount. In addition, FAT Brands Inc. (NASDAQ:FAT) started its operations in Mexico in mid-August after opening a Fatburger and Buffalo’s Express chain and plans to open another Fatburger chain by the end of 2022.
FAT Brands Inc. (NASDAQ:FAT) posted exceptional results in the second quarter of 2022. The company reported a net loss of $0.19 per share, outperforming the estimates by $0.69. The company’s revenue surged by a whopping 1138.4% to $102.79 million, exceeding the estimates by $0.79 million.
On July 12, FAT Brands Inc. (NASDAQ:FAT) declared a 7.7% increase in its quarterly dividend to $0.14, paid out on September 1 to the shareholders of record on August 16. As of September 8, the company has a dividend yield of 6.74%.
4. GFL Environmental Inc. (NYSE:GFL)
Number of Hedge Fund Holders: 25
GFL Environmental Inc. (NYSE:GFL) is a Canadian waste management company. The company also provides infrastructure and soil remediation services. In Q2 2022, Samlyn Capital held the most significant stake in the company, with shares worth $131.139 million. The firm increased its holdings in the company by 22% in the quarter. Similarly, the second biggest stakeholder, Highbridge Capital Management increased its position by 179%, and Citadel Investment Group increased its stake by 19%. ADW Capital held 659,000 shares of GFL Environmental Inc. (NYSE:GFL) valued at $17 million in the second quarter.
GFL Environmental Inc. (NYSE:GFL) expanded its solid waste footprint in the United States in May after acquiring Sprint Waste Services for an undisclosed sum. Furthermore, the company made 21 acquisitions in 2022, representing approximately $300 million in incremental annualized revenue.
According to GFL Environmental Inc. (NYSE:GFL)’s Q2 reports, the company recorded an EPS of $0.24 against the $0.06 consensus. Additionally, the revenue of $1.71 billion was 30.5% higher than the previous year and outperformed the analyst estimates by $500 million. GFL Environmental Inc. (NYSE:GFL) also raised its revenue outlook for FY2022 to the range of $6.43 billion-$6.48 billion, from the previous guidance of $6.0 billion-$6.1 billion.
On August 2, TD Securities analyst Tim James reiterated a Buy rating on GFL Environmental Inc. (NYSE:GFL) shares and raised his price target to C$55 from C$53.
GFL Environmental Inc. (NYSE:GFL) is one of the significant stocks in ADW Capital’s portfolio, along with PAR Technology Corporation (NYSE:PAR), APi Group Corporation (NYSE:APG), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK)
Here is what Ave Maria said about GFL Environmental Inc. (NYSE:GFL) in its Q2 2022 investor letter:
“GFL Environmental Inc. (NYSE:GFL) is a growing solid waste management company. In the first quarter of 2022, revenue increased 11.3% on an organic basis and 27.4% including acquisitions. At the company’s investor day in May, the management provided increased free-cash-flow guidance for 2022, 2023 and 2024., which looks very positive.”
3. RCI Hospitality Holdings, Inc. (NASDAQ:RICK)
Number of Hedge Fund Holders: 15
RCI Hospitality Holdings, Inc. (NASDAQ:RICK) is a hospitality company that operates strip clubs, nightclubs, bombshells, sports bars, and restaurants. Furthermore, it operates a few dance clubs and also has the license to sell Robust energy drinks in the US.
On July 28, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) acquired Cheetah Gentlemen’s Club in Florida. The company will own all the real estate associated with the club. The deal was closed for $10 million in cash and $15 million in two 10-year, 6% seller financing notes. The club is RCI Hospitality Holdings, Inc. (NASDAQ:RICK)’s 15th club acquisition in the fiscal year. According to the management, the club is expected to generate $4 million in adjusted EBITDA.
On September 1, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) declared a quarterly dividend of $0.05, payable on September 27 to the shareholders of record on September 13. Moreover, the company has been actively participating in shareholder returns. In the previous two quarters, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) repurchased 255,962 shares worth $14.31 million, at an average price of $55.91 per share.
As of the second quarter of 2022, out of 895 hedge funds, 15 funds held bullish positions in RCI Hospitality Holdings, Inc. (NASDAQ:RICK), collectively valued at $60.7 million. ADW Capital owned the most prominent position, with 899,000 shares worth $43.476 million, representing 20.51% of the fund’s portfolio.
Here is what Greystone Capital Management had to say about RCI Hospitality Holdings, Inc. (NASDAQ:RICK) in its Q2 2022 investor letter:
“As I’ve said before, a frustrating element of today’s market environment is having to watch one of our businesses perform brilliantly quarter after quarter while the stock price either declines or barely reacts to positive operating results. RICK continues to perform well in both their nightclub and Bombshells segments, with their recent 11-club acquisition set to contribute nicely to both the top and bottom line during FY22, while Bombshells growth will continue as the company expands both corporate and franchise locations. In January, RICK stock reached an all-time high of $92/share, only to decline nearly 50% to today’s price as macro concerns dominate the mood and capital flows away from retail, consumer discretionary and restaurant stocks. While RICK’s industry/sector is a tough one for many investors to wrap their heads around owning right now, I believe the company is being unfairly lumped into the broader restaurant and consumer discretionary categories while being compared with weaker and less attractive peers. So why would we want to own RICK? In terms of navigating the current or potential economic environment, RICK’s variable cost structure, balance sheet and access to capital provide significant advantages. The business has pricing power on both the service and alcohol sides, has assets to monetize, and is on a mission to acquire another $20mm of EBITDA by 2023 via accretive M&A where they serve as the buyer of choice for mom-and-pop nightclub operators. Should they achieve this goal, shares would be trading at around 5x next year’s EBITDA making RICK one of the cheapest stocks in the entire restaurant universe. This isn’t lost on management, who are repurchasing shares hand over fist at a high free cash flow yield while the stock trades at unreasonable levels…” (Click here to see the full text)
2. APi Group Corporation (NYSE:APG)
Number of Hedge Fund Holders: 29
APi Group Corporation (NYSE:APG) is an American construction and engineering company that provides safety, specialty, and industrial services across four continents. As of Q2 2022, 29 hedge funds had a stake in the company, with Viking Global taking the most prominent position, consisting of shares worth $503.51 million. In the second quarter, ADW Capital owned 3.1 million APi Group Corporation (NYSE:APG) shares worth $46.407 million, representing 21.89% of the firm’s portfolio.
On July 11, BofA analyst Andrew Obin upgraded APi Group Corporation (NYSE:APG) to Buy from Neutral and maintained his $23 price target. The analyst mentioned that almost half of the company’s revenues are generated from fire inspection and other recurring revenues, and the company’s backlog bears visibility on the remaining project-based revenue.
In the second quarter of 2022, APi Group Corporation (NYSE:APG) reported an adjusted EPS of $0.37, compared to $0.35 estimates. Moreover, the revenues were up by 63.6% on a YoY basis to $1.6 billion, versus q $1.65 billion consensus.
1. PAR Technology Corporation (NYSE:PAR)
Number of Hedge Fund Holders: 19
PAR Technology Corporation (NYSE:PAR) is an American software application company that provides technology solutions to restaurants, retail industries, and governments. At the end of Q2 2022, ADW Capital held 1.65 million company shares, valued at $61.863 million, representing 29.19% of the fund’s portfolio.
On August 10, Craig-Hallum analyst George Sutton reaffirmed a Buy rating on PAR Technology Corporation (NYSE:PAR)’s shares and raised the price target to $50 from $40. The analyst believes that the company has done a “terrific job” in employing M&A to expand its business to take a significant share of the enterprise restaurant market.
PAR Technology Corporation (NYSE:PAR) announced two significant acquisitions since the beginning of 2022. In May, the company announced the acquisition of guest engagement platform, Punchh, for $500 million. In early August, the company announced that it acquired one of Switzerland’s fastest-growing, modern, omni-channel ordering solutions for restaurant brands, MENU.
Here is what Farrer Wealth Advisors had to say about PAR Technology Corporation (NYSE:PAR) in its Q1 2022 investor letter:
“Par Technologies is a leader in the enterprise POS space, servicing restaurant chains such as Arby’s, Dairy Queen, and Five Guys. The company was in the hardware space for most of its existence, but when a new CEO, Savneet Singh, was installed a few years ago, he refocused the company on a newly purchased software called Brink. Singh had done a decent job of shifting the company’s focus to software sales, removing the technical debt inherent in Brink, and making smart acquisitions such as Punchh (loyalty platform). However, our conversations with management led us to believe that the strategy Par was employing was difficult, as re-writing the DNA of a company takes time. Thus, it started to become one of those investments where we kept saying to ourselves “let’s give them one more quarter” which in hindsight, should have been an internal red flag. Our patience ran out these past few months and given the drawdowns and other opportunities in the market, we sold our position. That said, we never built Par into anything but a small position, and it was our smallest position at the time of sale. Considering most of our clients owned the stock from anywhere from $10-25 the end outcome was reasonable despite our thumb sucking. We do think Par will eventually be quite successful in their space, however we think its best to put our money elsewhere for now. We wish the company and management the best and will root for their success from the side-lines.”
You can also take a peek at Best Self-Driving Stocks To Invest In and Best Artificial Intelligence Stocks To Buy Now.
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Disclosure. None. 6 Best Stocks to Buy According to Adam Wyden’s ADW Capital is originally published on Insider Monkey.
