In this article, we presented the 10 best mid-cap stocks to buy according to billionaire Brian Higgins.
Billionaire Brian Higgins, 55, is the co-founder of investment management firm King Street Capital Management. The New York-based firm is managing $17 billion of assets across public equity and fixed income markets globally with the main concentration in distressed companies, bonds, equities, and foreign exchange. The 13F portfolio securities market value of Brian Higgins’ King Street stands $928 million and the top ten holdings account for 73% of the overall portfolio. Unlike other hedge funds that invest mostly in large and mega-cap stocks, King Street’s top 10 stocks can be categorized mostly as mid and small-cap stocks.
Brian Higgins King Street Capital Management has established several funds to diversify investments across a variety of asset classes. Its evergreen Flagship Funds focus on long/short multi-strategy credit and event-driven investments in various asset classes including fixed-income and equities. King Streets has also been running European Funds to capitalize on profit-making opportunities in European markets. Other funds include the Real Estate, Rockford Tower (CLOs), Global Drawdown Fund, and Tactical Credit Opportunity Fund.
Instead of chasing popular high growth tech and internet stocks, the billionaire Brian Higgins invests mainly in less known or underrated companies. The firm also likes to invest in troubled companies with strong future fundamentals. Its 13F securities portfolio is mainly focused on consumer discretionary, finance, healthcare, real estate, energy sectors. The fund has also expanded a small portion of its portfolio towards consumer staples, utilities, and communications sectors.
The firm seeks to adjust its portfolio on a quarterly basis to capitalize on profit-making opportunities. The billionaire Brian Higgins seeks to generate returns in the short-term instead of holding stocks for the long-time. The average time held for the top ten stocks stands around 1.55 quarters and the time held for the top 20 positions averages around 1.90 quarters.
The firm has initiated a position in 14 stocks and increased its position in 3 stocks in the September quarter. On the other hand, the New York-based hedge fund has also sold out 10 stocks and slashed its position in 9 stocks. The total market value of 13F declined from $1.13 billion to $928 million. Overall, the firm held positions in 28 securities at the end of the September quarter to beat the market trends.
While Brian Higgins’ reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 88 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. 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.
Let’s take a look at the 10 best mid-cap stocks to buy based on the billionaire Brian Higgins’ King Street Capital Management’s 13F portfolio to see whether these stocks helped his fund to beat the market trends in the fourth quarter. The performance of the top ten stocks has a significant impact on the overall performance because the top ten stocks account for 73% of the overall 13F portfolio.
10. DISH Network Corporation (NASDAQ: DISH)
The cable and satellite TV services provider DISH Network Corporation (NASDAQ: DISH) has beaten the broader market index in the past three months but shares of DISH Network underperformed in the last twelve months. Its stock price fell more than 7% in the past twelve months compared to the S&P 500 growth of over 16%.
Billionaire Brian Higgins’ hedge fund has slashed its DISH Network stake by 82% to only 3.97% of the portfolio during the September quarter. It is the tenth-largest stock holding of the King Street Capital 13F portfolio. King Street first initiated a position in Dish Network during the second quarter of 2019.
Dish Network has generated 42% revenue growth in the September quarter while earnings per share came in at $0.86. The company is seeking to expand its wireless offerings. As a result, it completed the acquisition of the Boost Mobile business and acquired almost 9 million retail wireless subscribers.
9. Surgery Partners, Inc. (NASDAQ: SGRY)
SGRY ranks 9th in our list of the best mid-cap stocks to buy now. Surgery Partners, Inc. (NASDAQ: SGRY) has been helping King Street Capital to generate big returns. Shares of Surgery Partners jumped 35% in the last three months, extending the twelve months gains to 105%.
Surgery Partners is the ninth-largest stock holding of billionaire Brian Higgins’ Street King’s 13F portfolio, accounting for 4.43% of the overall portfolio.
The company expects to generate full-year revenue in the range of $1.86 billion and adjusted EBITDA is likely to stand in the range of $250 to $260 million. Moreover, the company forecasts 2021 revenue to grow at a double-digit rate.
Tom Cowhey, Chief Financial Officer of Surgery Partners said, “Our investments over the past few years in our core infrastructure, along with our data-driven decision-making approach, have enabled our teams to effectively manage our business during these uncertain times. We also continue to aggressively reposition the Company to focus on our core-short stay surgical business. In the third quarter, we closed our toxicology laboratory and successfully divested non-core anesthesia assets. As of today, we have already redeployed proceeds to complete the buy-up of an existing surgical hospital in Idaho and purchased a new surgical hospital in California. Of equal importance, we continue to make key investments across our business into existing and new lines of service, including expansion of our total joint programs, to accelerate our growth as we prepare for the upcoming year.”
8. Radian Group Inc. (NYSE: RDN)
RDN ranks 8th in our list of the best mid-cap stocks to buy now. The New York-based hedge fund has initiated a big position in Radian Group Inc. (NYSE: RDN) during the September quarter and it appears that Street King has benefited from its position during the final quarter of 2020. Shares of Radian grew 18% in the last three months and the stock is up almost 50% in the past six months.
Radian Group is accounting for 4.84% of the overall portfolio. In addition to share price gains, Radian Group also offers a healthy dividend yield. It currently offers a quarterly dividend of $0.125 per share, corresponding to a 2.3% yield.
7. The Mosaic Company (NYSE: MOS)
MOS ranks 7th in our list of the best mid-cap stocks to buy now. The New York-based hedge funds move of adding the Mosaic Company (NYSE: MOS) to its portfolio looks like a good move. This is because the share price of Mosaic rallied 47% in the last three months alone. Street King has bought 2.8 million shares of Mosaic during the September quarter, accounting for 5.54% of the overall portfolio.
The share price rally is backed by a robust increase in commodity prices and fertilizers demand. The potash sales volume in November grew to 746K metric tons from 356K mt a year earlier. Moreover, phosphate sales volume also surged 39% year over year to 719K mt.
JPM analyst Jeff Zekauskas looks bullish over Mosaic’s fundamentals. “The attractive valuation relative to peers, an improved competitive positioning following the favorable Commerce Department ruling on phosphate imports from Morocco and Russia, and a strong 2021 outlook for U.S. farmers,” Jeff Zekauskas said. White Brook Capital was bullish about MOS in its 2019 Q2 investor letter:
“Mosaic reported a good quarter and has resolved its issues with its 2 Brazilian dams at or ahead of schedule. The floods in the Midwest that I flagged would be an issue over the short term as they pushed out or cancelled fertilizer orders continue to weigh on the stock.
The Company trades at a similar level to where it traded 3 years ago, when it was more highly leveraged, commodity prices were lower, cash flow generation was more sporadic with future capital intensity more significant. The Company did not have regional diversity of production, and the global supply demand environment was worse. I believe the stock continues to be cheap as investors over-compensate for weather concerns combined with general disdain for non-SaaS stocks and a desire to be in stocks that “are already working”. In time, I believe Mosaic will be a very good investment story where our patience is paid off.”
6. Las Vegas Sands Corp. (NYSE: LVS)
LVS ranks 6th in our list of the best mid-cap stocks to buy now. Brian Higgins’ stock-picking strategy also worked in the case of Las Vegas Sands Corp. (NYSE: LVS). The hedge fund has initiated a big position in LVS during the September quarter and it appears that King Street has benefited from its position. This is because shares of Las Vegas Sands grew 22% in the last three months.
Shares of Las Vegas Sands remained under pressure during the first half of 2020 amid pandemic related lockdowns. Its stock price is down 20% in the last twelve months. However, its fundamentals have started improving amid the virus vaccine discovery and easing travel and tourism restrictions.
“I am pleased to say the recovery process from the Covid-19 pandemic continues to progress in each of our markets,” said Sheldon G. Adelson, chairman and chief executive officer before passing away this week. “Our greatest priority as the recovery continues remains our deep commitment to supporting our team members and to helping those in need in each of our local communities of Macao, Singapore and Las Vegas”.
5. Cheniere Energy, Inc. (NYSE: LNG)
King Street Capital has reduced its stake by 10% in Cheniere Energy, Inc. (NYSEMKT: LNG) during the September quarter after initiating a position in the second quarter. It is the fifth-largest stock holding of King Street Capital, accounting for 7.48% of the overall portfolio.
Shares of Cheniere Energy also outperformed the S&P 500 index in the past three months. Its shares rallied more than 36% in the last three months and the stock price soared 73% in the past nine months.
Horizon Kinetics has highlighted few stocks including Cheniere Energy in an investor’s letter. Here is what Horizon Kinetics stated:
“Cheniere Energy was formerly an oil and gas exploration company. Around 1999, it abandoned its oil and gas drilling strategy in favor of building a liquefied natural gas terminal on the Gulf Coast – management at the time believed that the abundance of the natural gas reserves held within the United States could position it as a large net exporter of liquefied natural gas.
Over the course of the next two decades, Cheniere managed to navigate the quite cumbersome regulatory and permitting process. Eventually, permission was granted, and construction of the Sabine Pass facility commenced. Yet, given the immense capital requirements of the export facilities, Cheniere financed construction mostly through debt. Since a number of years were required to complete the construction, during which no operational revenues were produced, the incremental debt continued to accumulate, leaving it as a highly leveraged company.”
4. VICI Properties Inc. (NYSE: VICI)
The hedge fund has sold almost 52% of its stake in VICI Properties Inc. (NYSE: VICI) during the September quarter. VICI Properties underperformed in 2020 as its shares are down almost 1% in the last twelve months due to pandemic related disruptions. VICI Properties accounted for 7.53% of the overall portfolio at the end of the third quarter.
Despite lower than expected share price performance, VICI Properties has been rewarding investors through cash returns. It offers a dividend yield of more than 5%.
3. Melco Resorts & Entertainment Limited (NASDAQ: MLCO)
Brian Higgins’ saw the dip in Melco Resorts & Entertainment Limited stock price as a buying opportunity.
Consequently, the New York-based hedge fund initiated a position in the second quarter and increased its position by 107% in the September quarter. It is the third-largest stock holding of King Street, accounting for 8.43% of the portfolio. Shares of Melco Resorts soared 14% in the last six months but prospects look strong ahead amid easing social distancing restriction.
2. Sabre Corporation (NASDAQ: SABR)
The billionaire Brian Higgins’ also looks optimistic about the Sabre Corporation (NASDAQ: SABR) as the hedge fund has raised its stake by 650% during September after initiating a position in the second quarter. It is the second-largest stock holding of the King Street 13F portfolio, accounting for 10.52% of the overall portfolio.
Shares of Sabre rallied more than 50% in the last six months, thanks to the strengthening travel and tourism business.
RF Capital Management LLC, which posted a return of 18.8% for the second quarter (net of fees), commented on a few stocks including Sabre in an investor’s letter. Here is what RF Capital Management stated:
“Sabre Corporation (SABR) – This holding never became a large position in our portfolio. However, SABR was a profitable investment for us. We bought at an average price of $4.52/share and sold at $7.38/share. We sold our shares due to the quick gain and the company’s increasing leverage on the balance sheet. The airline and travel industries continue to be challenged, so we wanted to reduce our overall exposure as well.”
1. Aramark (NYSE: ARMK)
King Street has also capitalized on the buying opportunity in Aramark (NYSE: ARMK) during the second and third quarter of 2020.
The hedge fund’s strategy of buying distressed companies worked again in the case of Aramark. This is because shares of Aramark rallied 75% in the last six months. Aramark shares were hit harder by the pandemic related lockdowns early in 2020. It provides food, facilities, and uniform services to education, healthcare, business and industry, sports, leisure, and corrections clients in the United States and internationally.
Please also see Is George Soros Still Good At Picking Stocks At The Age of 90? and 12 Best Social Media Stocks To Buy Now
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