5 Dividend Aristocrats Hedge Funds Love

4. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 72

Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer in the United States, and operates roughly 2,000 home improvement and hardware stores across the country. Hedge funds were eager on Lowe’s Companies, Inc. (NYSE:LOW) in the fourth quarter, where 72 hedge funds recorded bullish bets on the firm’s shares, as compared to 60 hedge funds in Q3 2021. Bill Ackman’s Pershing Square was the largest shareholder of Lowe’s Companies, Inc. (NYSE:LOW) in the fourth quarter, holding a position comprising of 10.23 million shares worth $2.64 billion.

On February 23, Baird analyst Peter Benedict noted that Lowe’s Companies, Inc. (NYSE:LOW) ‘capped off an impressive year’ with strong Q4 results, and kept his ‘Outperform’ rating on the shares with a price target of $285. He holds that demand for home improvement products will prove more durable than some in the market fear. As of March 16, Lowe’s Companies, Inc. (NYSE:LOW) has grown 32.61% in the last 12 months, and 10.67% in the last 6 months.

Lowe’s Companies, Inc. (NYSE:LOW) posted an EPS of $1.78 for the fourth quarter, beating estimates by $0.09. Quarterly revenue stood at $21.34 billion, outperforming analysts’ forecasts by $431.25 million.

Pershing Square Capital Management, an investment management firm, mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter. Here’s what the fund said:

“Lowe’s is a high-quality business with significant long-term earnings growth potential

Supportive macroeconomic backdrop

 -Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market

Positioned to grow EPS largely independent of market conditions

-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022

Multi-year business transformation with substantial earnings upside

-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.

Lowe’s continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”