In this article, we will look at the 10 best stocks to buy for the long term according to ValueAct Capital.
ValueAct Capital is a San Francisco-based activist hedge fund that pioneered less hostile activist investment strategies. The fund was founded back in 2000 by Jeffrey Ubben, who served as the CEO of the firm up till 2020. Mr. Ubben left ValueAct Capital to pursue his career in social investing and founded Inclusive Capital in 2020 with Lynn Forester de Rothschild. Jeffrey Ubben was succeeded by Mason Morfit, who currently serves as the CEO and CIO of ValueAct Capital. Mason Morfit is a graduate of Princeton University and has been with ValueAct Capital since its early days and joined the firm in 2001, after leaving his role as a research analyst at Credit Suisse.
Mr. Morfit has also been an active board member of Microsoft Corporation (NASDAQ:MSFT). When Mason Morfit succeeded Jeffrey Ubben as CEO, he told investors that he plans on keeping ValueAct Capital’s original long-term investment strategies alive and does not plan on changing them. Since its inception, ValueAct Capital has employed a long-only investment approach and is known to maintain a static portfolio and sit on its positions for years before exiting them.
The Friendly Activist
ValueAct Capital is known for its unique approach to activist investing. Instead of calling for a complete reorganization of the board of a company, the fund critically analyzes its potential investment’s business model, operations, and relevant industry trends before it calls for a board meeting. Their ultimate goal is to ensure maximal profits for shareholders while making their investment’s business model more ESG friendly, and therefore suitable for the long term. Instead of overthrowing the board of a company, ValueAct Capital prefers working alongside board members of the organization for the greater good. The hedge fund’s goal is to drive shareholder returns and leave a company in better shape than it was when the fund first went long in it.
ValueAct Capital’s First Time Going Out In Public
Though ValueAct Capital is known for keeping things within a board room and rarely going out in public, the friendly activist hedge fund sent a letter to the board of Seven & I Holdings Co. Ltd (OTC:SVNDY) earlier this year, calling for direct and public shareholder input on key strategic issues and the formation of an external Strategic Review Committee which would be reporting directly to all shareholders. Seven & I Holdings Co. Ltd. (OTC:SVNDY) engages in retail, food, financial, and IT businesses in Japan, North America, and international markets. ValueAct Capital owns a 4.4% interest in Seven & I Holdings Co. Ltd (OTC:SVNDY) and is the largest shareholder in the company.
ValueAct Capital’s Returns
Since its inception in 2000, ValueAct Capital has posted a median annualized return of roughly 14% per year through 2019. In 2020, ValueAct Capital posted an annual gain of 12.5%. Looking at ValueAct Capital’s quarter-on-quarter performance, we can see that the fund’s gains have dipped to a negative 19.61% in the first quarter of 2022 from a negative 5.18% quarter-on-quarter in Q4 2021. Looking at cumulative returns of 2021 and the past three years, ValueAct Capital’s Master Fund posted an annual gain of 26% in 2021 and has compounded at a rate of 23% per year from 2019 up to 2021.
ValueAct Capital’s Current Investment Portfolio
As mentioned above, ValueAct Capital is known to hold its positions for years, typically for 3 to 5 years with some positions hitting the 10-year mark. In the first quarter of 2022, ValueAct Capital went long in one new company, raised its stakes in two of its previously held positions, reduced its position in 4 of its investments, and exited none of its positions. ValueAct Capital has a top 10 holdings concentration of 99.55% and has held onto its top 10 holdings for one-third of 14 quarters, or roughly 3 and a half years.
Some of the best stocks to buy for the long term according to ValueAct Capital include KKR & Co. Inc. (NYSE:KKR), Fiserv, Inc. (NASDAQ:FISV), and CBRE Group, Inc. (NYSE:CBRE).
Our Methodology
To determine the 10 best stocks to buy for the long term according to ValueAct Capital, we reviewed the fund’s 13F portfolio at the close of Q1 2022. Since ValueAct Capital employs a long-only strategy, we selected the fund’s top 10 holdings and ranked them in increasing order of stake. Along with each stock, we have also mentioned the analyst and investor sentiment around it. The hedge fund sentiment was sourced from Insider Monkey’s database which, as of Q1 2022, keeps track of roughly 900 elite hedge funds.
10 Best Stocks to Buy for Long Term According to ValueAct Capital
10. TopBuild Corp. (NYSE:BLD)
ValueAct Capital’s Stake Value: $38,885,000
Percentage of ValueAct Capital’s 13F Portfolio: 0.53%
Number of Hedge Fund Holders: 18
TopBuild Corp. (NYSE:BLD) engages in the installation and distribution of insulation and other building products for the construction industry. The company operates through two business segments: Installation and Specialty Distribution. TopBuild Corp. (NYSE:BLD) is a new addition to ValueAct Capital’s 13F portfolio. As of March 31, the activist hedge fund’s stake in TopBuild Corp. (NYSE:BLD) is valued at $38.88 million, which covers 0.53% of its 13F portfolio.
On May 5, TopBuild Corp. (NYSE:BLD) announced an accelerated share repurchase program of $100 million under its current $200 million share repurchase authorization. As of April 20, JPMorgan analyst Michael Rehaut has a $193 price target and a Neutral rating on TopBuild Corp. (NYSE:BLD).
At the close of Q1 2022, 18 hedge funds were long TopBuild Corp. (NYSE:BLD) with stakes worth $99.87 million. This is compared to 15 positions a quarter ago with stakes worth $65.32 million. The hedge fund sentiment for the stock is positive. ValueAct Capital is the largest shareholder in TopBuild Corp. (NYSE:BLD) as of Q1 2022.
Like KKR & Co. Inc. (NYSE:KKR), Fiserv, Inc. (NASDAQ:FISV), and CBRE Group, Inc. (NYSE:CBRE), TopBuild Corp. (NYSE:BLD) is among ValueAct Capital’s top 10 holdings and is a stock to buy for the long term according to the activist hedge fund.
9. SLM Corporation (NASDAQ:SLM)
ValueAct Capital’s Stake Value: $255,223,000
Percentage of ValueAct Capital’s 13F Portfolio: 3.51%
Number of Hedge Fund Holders: 19
SLM Corporation (NASDAQ:SLM) originates and services private education loans to students and their families to finance the cost of their education in the United States. As of March 31, ValueAct Capital owns 13.9 million shares of SLM Corporation (NASDAQ:SLM) which amount to a stake of $255.22 million. The investment covers 3.51% of ValueAct Capital’s 13F portfolio and the activist hedge fund is the second-largest shareholder in the company.
As of May 2, Citi analyst Arren Cyganovich has a $21 price target and Buy rating on SLM Corporation (NASDAQ:SLM).
SLM Corporation (NASDAQ:SLM) is currently trading at a bargain, and in addition to being undervalued the company is also a dividend payer. As of July 5, SLM Corporation (NASDAQ:SLM) has a trailing-twelve-month PE ratio of 6.75 and a forward dividend yield of 2.66%.
At the close of Q1 2022, 19 hedge funds were bullish on SLM Corporation (NASDAQ:SLM) with stakes worth $757.78 million. This is compared to 18 positions in the prior quarter with stakes worth $819.64 million.
8. Bausch Health Companies (NYSE:BHC)
ValueAct Capital’s Stake Value: $329,746,000
Percentage of ValueAct Capital’s 13F Portfolio: 4.53%
Number of Hedge Fund Holders: 48
Bausch Health Companies (NYSE:BHC) operates as a healthcare company through five segments: Bausch + Lomb, Salix, International Rx, Ortho Dermatologics, and Diversified Products. ValueAct Capital is the third-largest shareholder in Bausch Health Companies (NYSE:BHC).
As of the first quarter of 2022, the activist hedge fund owns over 14.43 million shares in the healthcare company which brings its stakes to $329.74 million. The investment covers 4.53% of ValueAct Capital’s investment portfolio.
Analysts are bullish on Bausch Health Companies (NYSE:BHC). On June 13, JPMorgan analyst Chris Schott resumed coverage of Bausch Health Companies (NYSE:BHC) with a buy-side Overweight rating and a $12 price target.
At the end of the first quarter of 2022, 48 hedge funds were eager on Bausch Health Companies (NYSE:BHC) with stakes worth $3.17 billion. This is compared to 53 positions in the previous quarter with stakes worth $3.86 billion.
In addition to Bausch Health Companies (NYSE:BHC), ValueAct Capital has held onto KKR & Co. Inc. (NYSE:KKR), Fiserv, Inc. (NASDAQ:FISV), and CBRE Group, Inc. (NYSE:CBRE) for over 3 years. Bausch Health Companies (NYSE:BHC) is among the top stocks to buy for the long term according to ValueAct Capital.
7. Insight Enterprises, Inc. (NASDAQ:NSIT)
ValueAct Capital’s Stake Value: $380,250,000
Percentage of ValueAct Capital’s 13F Portfolio: 5.23%
Number of Hedge Fund Holders: 21
Insight Enterprises, Inc. (NASDAQ:NSIT) provides information technology hardware, software, and services solutions in the United States, Canada, Europe, the Middle East, Africa, and the Asia-Pacific. The company’s products portfolio includes cloud enablement services, data & AI, DevOps, digital strategy, intelligent applications & edge, and IoT solutions. As of July 5, Insight Enterprices, Inc. (NASDAQ:NSIT) has a trailing-twelve-month PE ratio of 13.72.
In the first quarter of 2022, ValueAct Capital raised its stakes in Insight Enterprises, Inc. (NASDAQ:NSIT) by 7%, bringing them to $380.25 million. As of March 31, the fund owns over 3.54 million shares of Insight Enterprises, Inc. (NASDAQ:NSIT) and is the largest shareholder in the tech company. The investment covers 5.23% of ValueAct Capital’s Q1 2022 investment portfolio.
Insider Monkey identified 21 hedge funds bullish on Insight Enterprises, Inc. (NASDAQ:NSIT) at the end of Q1 2022. The total stakes of these hedge funds came in at $449.05 million, up from $431.20 million a quarter ago with 18 positions. The hedge fund sentiment for the stock is positive.
6. Citigroup Inc. (NYSE:C)
ValueAct Capital’s Stake Value: $739,382,000
Percentage of ValueAct Capital’s 13F Portfolio: 10.17%
Number of Hedge Fund Holders: 88
On July 1, Piper Sandler analyst Jeffery Harte lowered his price target on Citigroup Inc. (NYSE:C) to $62 from $70 but maintained a buy-side Overweight rating on the shares. As of July 5, Citigroup Inc. (NYSE:C) has a trailing twelve-month PE ratio of 5.46 and is offering a forward dividend yield of 4.35%.
As of the end of Q1 2022, ValueAct Capital owns more than 13.84 million shares of Citigroup Inc. (NYSE:C) which amounts to a stake of $739.38 million. ValueAct Capital is among the top 5 shareholders in the bank holding company and the investment covers 10.17% of the activist hedge fund’s 13F portfolio.
Hedge funds are piling into Citigroup Inc. (NYSE:C). At the close of Q1 2022, Insider Monkey found 88 hedge funds long Citigroup Inc. (NYSE:C) with stakes of $8.11 billion. This is compared to 97 positions in the previous quarter with stakes worth $6.60 billion.
5. LKQ Corporation (NASDAQ:LKQ)
ValueAct Capital’s Stake Value: $796,964,000
Percentage of ValueAct Capital’s 13F Portfolio: 10.96%
Number of Hedge Fund Holders: 35
LKQ Corporation (NASDAQ:LKQ) distributes replacement parts, components, and systems used in the repair and maintenance of vehicles. The company operates through three primary segments: North America, Europe, and Specialty. As of April 28, Barrington analyst Gary Prestopino has a buy-side Outperform rating on LKQ Corporation (NASDAQ:LKQ) and a maximum price target of $70 on the shares.
As of July 5, LKQ Corporation (NASDAQ:LKQ) has a forward dividend yield of 2.02% and a trailing twelve-month PE ratio of 13.20.
As of the end of Q1 2022, ValueAct Capital is the largest shareholder in LKQ Corporation (NASDAQ:LKQ). As of March 31, the fund owns 17.55 million shares of the company which brings its stakes to $796.96 million. The investment covers 10.96% of ValueAct Capital’s 13F portfolio.
At the close of Q1 2022, 35 hedge funds were long LKQ Corporation (NASDAQ:LKQ). These funds held collective stakes worth $1.16 billion in the company, down from $1.58 billion in Q4 2021 with 34 positions.
4. CBRE Group, Inc. (NYSE:CBRE)
ValueAct Capital’s Stake Value: $844,968,000
Percentage of ValueAct Capital’s 13F Portfolio: 11.62%
Number of Hedge Fund Holders: 55
CBRE Group, Inc. (NYSE:CBRE) operates as a commercial real estate services and investment company worldwide. The company has three business segments: Advisory Services, Global Workplace Solutions, and Real Estate Investments. At the close of Q1 2022, 55 hedge funds were bullish on CBRE Group, Inc. (NYSE:CBRE). These funds held collective stakes worth $3.30 billion in the company, down from $3.70 billion in the preceding quarter with 48 positions.
As of April 5, Goldman Sachs analyst Chandni Luthra has a $111 price target and a Buy rating on CBRE Group, Inc. (NYSE:CBRE).
As of March 31, ValueAct Capital owns more than 9.23 million shares of CBRE Group, Inc. (NYSE:CBRE), which brings its stakes in the company to $844.96 million. ValueAct Capital is the second-largest shareholder in CBRE Group, Inc. (NYSE:CBRE) and the investment covers 11.62% of its 13F portfolio.
Here is what Baron Funds had to say about CBRE Group, Inc. (NYSE:CBRE) in its “Baron Real Estate Fund” first-quarter 2022 investor letter:
“Following strong share price performance in 2021, the shares of leading commercial real estate services firm, CBRE Group, Inc. (NYSE:CBRE) declined in the most recent quarter. We believe the current valuations of the company is compelling. Further, we believe the company is well-positioned to benefit from long-term growth opportunities that include a growing list of companies looking to outsource their commercial real estate needs, the growth in institutional ownership of commercial real estate, and attractive acquisition opportunities given their highly desirable global platforms and strong balance sheets.”
3. Seagate Technology plc (NASDAQ:STX)
ValueAct Capital’s Stake Value: $1,207,993,000
Percentage of ValueAct Capital’s 13F Portfolio: 16.61%
Number of Hedge Fund Holders: 32
Seagate Technology plc (NASDAQ:STX) provides data storage technology and solutions in Singapore, the United States, the Netherlands, and internationally. As of March 31, ValueAct Capital owns 13.43 million shares of the company which amounts to a stake value of $1.20 billion. The investment covers 16.61% of the activist hedge fund’s 13F portfolio.
On July 5, Benchmark analyst Mark Miller trimmed his price target on Seagate Technology plc (NASDAQ:STX) to $93 from $100 but reiterated a Buy rating on the shares. Moreover, as of July 5, Seagate Technology plc (NASDAQ:STX) has a trailing-twelve-month PE ratio of 8.80 and is offering a forward dividend yield of 4.05%.
At the end of Q1 2022, 32 hedge funds were eager of Seagate Technology plc (NASDAQ:STX) with stakes worth $1.82 billion in the company. This is compared to 28 positions in the previous quarter with stakes worth $2.80 billion.
2. KKR & Co. Inc. (NYSE:KKR)
ValueAct Capital’s Stake Value: $1,321,735,000
Percentage of ValueAct Capital’s 13F Portfolio: 18.18%
Number of Hedge Fund Holders: 54
KKR & Co. Inc. (NYSE:KKR) is a private equity and real estate investment firm specializing in direct and fund of fund investments. In the first quarter of 2022, ValueAct Capital raised its stakes in KKR & Co. Inc. (NYSE:KKR) by 3%, bringing them to $1.32 billion. ValueAct Capital is the top shareholder in KKR & Co. Inc. (NYSE:KKR) and as of March 31, owns over 22.60 million shares of the company which represents 18.18% of its 13F portfolio.
As of May 19, Deutsche Bank analyst Brian Bedell has a $79 price target and a Buy rating on KKR & Co. Inc. (NYSE:KRR).
As of July 5, KKR & Co. Inc. (NYSE:KKR) has a trailing twelve-month PE ratio of 10.57 and is offering a forward dividend yield of 1.33%.
At the close of Q1 2022, 54 hedge funds held stakes in KKR & Co. Inc. (NYSE:KKR) worth $4.04 billion. This is compared to 55 positions in the previous quarter with stakes worth $5.53 billion.
Third Avenue Management, an investment management firm, recently published its “Real Estate Value Fund” first-quarter 2022 investor letter in which it mentioned KKR & CO. Inc. (NYSE:KKR), here is what they said:
“During the quarter it was reported that US private equity firm KKR (NYSE:KKR) purchased the Japanese fund management platform MC-UBSR, a joint venture between Mitsubishi Corp and UBS (NYSE:UBS) that manages two public Japanese REITs with US $15bn of total assets. The reported purchase price of US $2bn equated to more than 10% of assets under management and 32x trailing EBITDA. The high price paid for MC-UBSR surprised Fund Management. Such high pricing is likely a function of the difficulties foreign asset management firms face when attempting to build a platform in Japan from the ground up, and their frustration given Japan’s standing as one of the most liquid institutional real estate investment markets globally. When looking at the MC-UBSR transaction, the Fund’s investments in Tosei Inc and Nomura Real Estate Holdings are prime examples of the disconnect between public market pricing and private market pricing.”
1. Fiserv, Inc. (NASDAQ:FISV)
ValueAct Capital’s Stake Value: $1,321,769,000
Percentage of ValueAct Capital’s 13F Portfolio: 18.18%
Number of Hedge Fund Holders: 58
Fiserv, Inc. (NASDAQ:FISV) provides payment and financial services technology worldwide. The company operates through three segments: Acceptance, Fintech, and Payments. It is the top 13F holding of ValueAct Capital. As of March 31, ValueAct Capital owns over 13 million shares of Fiserv, Inc. (NASDAQ:FISV), which brings its stakes in the company to $1.32 billion and makes it the second-largest shareholder. The investment covers 18.18% of ValueAct Capital’s 13F portfolio.
On June 30, Truist analyst Andrew Jeffrey slashed his price target on Fiserv, Inc. (NYSE:FISV) to $95 from $105 and maintained a Hold rating on the shares.
Insider Monkey found 58 hedge funds bullish on Fiserv, Inc. (NASDAQ:FISV) at the end of Q1 2022. These funds held collective stakes of $3.87 billion in the company, down from $3.90 billion in the prior quarter with 61 positions.
Here is what ClearBridge Investments had to say about Fiserv, Inc. (NASDAQ:FISV) in its “Value Equity Strategy” fourth-quarter 2021 investor letter:
“While the threat of disruption risk to these established payment companies should not be taken lightly, it is important to note that many of these emerging disruptors are small relative to the massive global payments network and heavily reliant on the very payment infrastructure they are trying to disrupt. This led us to initiate a position in Fiserv, whose stock dropped to a level that embedded projections for negative long-term growth despite no current evidence of disruption. We think Fiserv will continue to grow despite perceived disruption risks given its scale and efficiency. Fiserv also owns cloud-based payments hardware and software system Clover, which is both bigger and faster growing than Square; this provides an additional degree of protection against further disruption risk.
You can also take a look at 10 Safe Stocks To Invest in For Long Term and Top Stocks to Invest In According to Jeffrey Ubben’s ValueAct Capital.
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Disclosure: None. 10 Best Stocks to Buy for Long Term According to ValueAct Capital is originally published on Insider Monkey.
