In this article, we discuss the 10 best stocks to buy according to Don Morgan’s Brigade Capital.
Don Ellis Morgan founded Brigade Capital in 2006 after leaving MacKay Shields. Mr. Morgan is also the chief investment officer and managing partner of Brigade Capital, which manages a portfolio worth $891.61 million as of June 2022.
Securities filings for Q2 2022 reveal that Don Morgan’s Brigade Capital added 3 new stocks to its portfolio, grew its holdings in 4 equities, sold 15 firms, and cut its holdings in 14 securities. Brigade Capital invests primarily in technology, consumer goods, financials, communications, and energy.
Targeting companies with troubled balance sheets or significant debt is a critical component of Brigade Capital’s investment strategy. Along with having a presence in the American state of Colorado, it maintains offices in significant worldwide locations, including Tokyo, Japan, and London, United Kingdom. Another achievement for the company was winning 2017’s Firm of the Year honor from the Absolute Return Awards.
Some of the most well-known stocks held by Don Morgan’s Brigade Capital include Valaris Limited (NYSE:VAL), MagnaChip Semiconductor Corporation (NYSE:MX), and Noble Corporation (NYSE:NE).
Image by Sergei Tokmakov Terms.Law from Pixabay
Methodology
We used the Q2 2022 Don Morgan’s Brigade Capital portfolio for this analysis, selecting the hedge fund’s top 10 holdings. The stocks are ranked according to Brigade Capital’s stake value in each company. We focused exclusively on stocks and did not include ETFs for this article.
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) operates and delivers gaming technology products and services throughout North America, Europe, the Middle East, Africa, Asia-Pacific, Latin America, and the Caribbean. Don Morgan’s Brigade Capital owned 105,000 shares of International Game Technology PLC (NYSE:IGT) at the end of Q2 2022, worth $1.9 million representing 0.21% of the total 13F holdings.
Stifel analyst Jeffrey Stantial on August 1 reduced his price objective for International Game Technology PLC (NYSE:IGT) from $36 to $26 and maintained a Buy recommendation on the stock. Though he expects game operations to show “impressive” recovery post-Omicron, with suppliers likely highlighting stable trends into Q3, the analyst is lowering estimates and target prices for the gaming technology group to take a more conservative stance on the potential impact of persistent inflation on consumer budgets, according to his group earnings preview note.
According to Insider Monkey’s Q2 2022 database, 34 hedge funds were bullish on International Game Technology PLC (NYSE:IGT), in line with the previous quarter. John Overdeck and David Siegel’s Two Sigma Advisors is one of the leading stakeholder of the company, with 1.86 million shares worth $34 million.
Similar to Valaris Limited (NYSE:VAL), MagnaChip Semiconductor Corporation (NYSE:MX), and Noble Corporation (NYSE:NE), smart money are also pouring into International Game Technology PLC (NYSE:IGT).
Here is what Palm Harbour Capital has to say about International Game Technology PLC (NYSE:IGT) in its Q4 2021 investor letter:
“The second largest contributor was International Game Technology, the ItalianAmerican 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.”
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. (NASDAQ:IHRT) is a global media and entertainment corporation. It is organized into three divisions: Multiplatform Group, Digital Audio Group, and Audio & Media Services Group. Securities filings for Q2 reveal that Don Morgan’s Brigade Capital owned 275,000 shares of iHeartMedia, Inc. (NASDAQ:IHRT) worth $2.17 million, representing 0.24% of the total securities.
On August 10, Goldman Sachs analyst Stephen Laszczyk lowered iHeartMedia, Inc. (NASDAQ:IHRT) to Neutral from Buy, with a $9 price target, down from $15, following mixed Q2 results.
According to Insider Monkey’s data, 20 hedge funds were long iHeartMedia, Inc. (NASDAQ:IHRT) at the conclusion of the second quarter of 2022, down from 25 funds in the preceding quarter. Edward A. Mule’s Durable Capital Partners is the largest shareholder of the company, with 4.7 million shares worth $37 million.
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) offers private mortgage guaranty insurance in the United States. The firm provides mortgage insurance and outsourced loan review services to mortgage loan originators. Don Morgan’s Brigade Capital owned 158,000 shares of NMI Holdings, Inc. (NASDAQ:NMIH) at the end of Q2 2022, worth $2.6 million representing 0.29% of its 13F portfolio’s value.
Citi analyst Arren Cyganovich on May 10 reduced his price objective on NMI Holdings to $28 from $32 and maintained his Buy rating on the stock following the first-quarter results.
According to Insider Monkey data, 21 hedge funds were long NMI Holdings, Inc. (NASDAQ:NMIH) at the end of the second quarter of 2022, up from 19 funds from the previous quarter. Howard Marks’ Oaktree Capital Management is the company’s largest stakeholder, with 5.3 million shares worth $88 million.
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) delivers communications and entertainment networks with infrastructure solutions. Broadband Networks (Broadband), Outdoor Wireless Networks (OWN), Venue and Campus Networks (VCN), and Home Networks (Home) are its four domains in which the company operates. In the second quarter of 2022, Brigade Capital owned 828,192 shares of Commscope Holding Company, Inc. (NASDAQ:COMM) worth about $5 million, representing 0.56% of the total 13F portfolio.
Deutsche Bank analyst Matthew Niknam on August 5 boosted his price objective on Commscope Holding Company, Inc. (NASDAQ:COMM) to $12 from $9 and maintained a Buy recommendation on the stock. CommScope’s Q2 results were far ahead of forecasts across most major financial parameters, according to the analyst, who is now more confident in the company’s ability to meet its EBITDA projections this year.
According to Insider Monkey’s data, Commscope Holding Company, Inc. (NASDAQ:COMM) was part of 28 hedge fund portfolios at the end of Q2 2022, down from 34 funds in the prior quarter. Bob Peck and Andy Raab’s FPR Partners is the leading position holder in the company, with 20 million shares worth $124 million.
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 outdoor advertising displays in the United States and across the world. It works in two segments: the Americas and Europe. In the second quarter of 2022, Don Morgan’s Brigade Capital portfolio held 8.5 million shares of Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), worth about $9.1 million representing 1.02% of the total 13F securities.
Citi analyst Jason Bazinet on July 7 reduced the his price objective for Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) to $1.25 from $1.65 and maintained the stock’s Neutral rating. Most advertising and entertainment equities have decreased as a result of recession worries, according to Bazinet in a research report. However, the market has pressed businesses with lower contractual revenue just as much as it has punished firms with low EBIT margins, which the analyst believes is unfair. He decreased his 2023 projections due to increased spending growth, but mostly maintained his revenue projections. According to Bazinet, recession concerns are “typically most acute for enterprises with high ad exposure and lesser levels of contractual revenue.”
Among the hedge funds tracked by Insider Monkey, 32 funds were bullish on Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) at the end of the second quarter of 2022, down from 37 funds in the prior quarter. Kenneth Mario Garschina’s Mason Capital Management is one of the leading shareholders of the company, with 21 million shares worth $22 million.
Like Valaris Limited (NYSE:VAL), MagnaChip Semiconductor Corporation (NYSE:MX), and Noble Corporation (NYSE:NE), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is receiving a lot of attention from the smart investors.
5. Chesapeake Energy Corporation (NYSE: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 (NYSE:CHK), an independent exploration and production firm, acquires, explores, and develops assets in the United States for the production of oil, natural gas, and natural gas liquids from subterranean reservoirs. Don Morgan’s Brigade Capital owned 115,975 shares of Chesapeake Energy Corporation (NYSE:CHK) as of June 30, worth $9.4 million, and representing a 1.05% chunk of its 13F portfolio’s weighting.
Benchmark analyst Subash Chandra on August 1 commenced coverage of Chesapeake Energy Corporation (NYSE:CHK) with a Buy rating and a $137 price target. Chesapeake has risen from bankruptcy to pursue a long-term return-of-capital strategy “that is not fully reflected in the company’s discount multiple to the E&P industry,” according to Chandra. Chesapeake has bought $5 billion in assets in the previous six months, which has enhanced the company’s capital intensity and requires “proportionately less capital to sustain greater production levels,” according to the analyst.
Among the hedge funds tracked by Insider Monkey, 67 were long Chesapeake Energy Corporation (NYSE:CHK) in Q2 2022, with combined stakes worth $3.5 billion. Howard Marks’ Oaktree Capital Management is a leading position holder in the company, with 10.5 million shares worth $851 million.
Here is what ClearBridge Investments Dividend Strategy has to say about Chesapeake Energy Corporation (NYSE:CHK) in its Q1 2022 investor letter:
“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 (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
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) owns and operates bowling alleys under the AMF and Bowlero brand names. The firm also hosts and manages professional and amateur bowling competitions, as well as associated programming. Don Morgan’s Brigade Capital owned 904,227 shares of Bowlero Corp. (NYSE:BOWL) as of Q2 2022 worth $9.5 million, representing 1.06% of the total holdings.
JPMorgan analyst Kevin Heenan on September 16 raised his price target on Bowlero Corp. (NYSE:BOWL) to $18 from $17 and kept an Overweight rating on the shares following the Q4 beat.
According to Insider Monkey’s data, 18 hedge funds were bullish on Bowlero Corp. (NYSE:BOWL) in Q2 2022, down from 23 funds in the prior quarter.
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 company headquartered in London, England. As of February 16, 2022, it operated a fleet of 20 offshore drilling units, comprising 12 floaters and 8 jackups. In Q2 2022, Brigade Capital held 675,270 shares of Noble Corporation (NYSE:NE) worth over $17.12 million, representing 1.91% of its portfolio.
DNB Markets analyst Martin Huseby Karlsen on July 6 boosted his price objective on Noble Corporation (NYSE:NE) to $49 from $43 and maintained the stock’s Buy rating.
Among the hedge funds tracked by Insider Monkey, 31 funds were long Carvana Co. (NYSE:CVNA) at the end of Q2 2022, with combined stakes worth $457 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) designs and produces analog and mixed-signal semiconductor platform solutions for communications, Internet of Things (IoT), consumer, computer, industrial, and automotive applications. Securities filings for Q2 2022 reveal that Brigade Capital owned 1.29 million shares of Magnachip Semiconductor Corporation (NYSE:MX) worth $18.7 million, representing 2.1% of the total 13F holdings.
On August 10, Needham Analyst Rajvindra Gill highlighted his confidence for Magnachip Semiconductor Corporation (NYSE:MX). He maintained a ‘Buy’ rating on the stock with a $22 price target.
Among the hedge funds tracked by Insider Monkey, 27 funds were bullish on Magnachip Semiconductor Corporation (NYSE:MX) at the end of Q2 2022, with combined stakes worth $210 million. Stephen Perkins’s Toronado Partners is the leading position holder in the company, with 2.5 million shares valued at around $37 million.
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 company that serves the international oil and gas sector. The firm has a fleet of 56 offshore drilling rigs, which includes 11 drill ships, 4 dynamically positioned semisubmersible rigs, 1 moored semisubmersible rig, and 40 jackup rigs.
BTIG analyst Gregory Lewis on June 1 increased his price objective on Valaris Limited (NYSE:VAL) from $60 to $80 and maintained a Buy recommendation on the stock. According to the 13F filings for the second quarter of 2022, Brigade Capital had around 613,690 shares of Valaris Limited (NYSE:VAL), totaling more than $25.92 million and accounting for 2.9% of the fund’s portfolio.
By the end of the second quarter of 2022, 40 hedge funds owned Valaris Limited (NYSE:VAL), up from 39 hedge funds the previous quarter. Alec Litowitz and Ross Laser’s Magnetar Capital is one of the biggest stakeholder of the company with an approximately $953.61 million investment.
You can also take a look at the Top 10 Stock Picks of Mark Kleiman’s Factorial Partners and Top 10 Stock Picks of Minerva Advisors.
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Disclosure: None. 10 Best Stocks to Buy According to Don Morgan’s Brigade Capital is originally published on Insider Monkey.
