In this article we present the list of 10 Stocks Canyon Capital Advisors Can’t Live Without.
Berry Global Group Inc (NYSE:BERY), Noble Corporation (NYSE:NE), and Tenet Healthcare Corporation (NYSE:THC) are a few of the intriguing stocks that the expert investors at Canyon Capital Advisors can’t live without.
Canyon Capital Advisors is a Dallas-based hedge fund that was founded by Joshua Friedman and Mitchell Julis in 1990. The two co-founders, who serve as the fund’s co-chairmen and co-chief executive officers, were honored with Institutional Investor’s Lifetime Achievement Award in 2014.
Mr. Julis is a graduate of Princeton, Harvard Law, and Harvard Business School, and managed a portfolio of special situations securities at Drexel Burnham Lambert prior to founding Canyon Capital. Mr. Friedman also worked at Drexel Burnham Lambert before launching Canyon Capital, serving as the Director of Capital Markets for High Yield and Private Placements. He is a graduate of Oxford, Harvard Law, and Harvard Business.
Canyon Capital’s flagship strategy takes a fundamental, value-oriented approach to its investment decisions. The fund invests across geographies, industries, and the corporate capital structure to best take advantage of any opportunities as they present themselves. The fund pays particular attention to companies that are undergoing transitional periods or other disruptive events. Canyon Capital’s flagship fund gained 9.3% in 2021.
Canyon Capital’s $2.7 billion 13F portfolio underwent some major changes during the first quarter, as the fund sold off 30 of its former positions while replacing them with just 11 new holdings. Canyon Capital sold out of the vast majority of its finance-related stocks during the quarter, lowering the fund’s exposure to them to just 4.9% from 24.7% a quarter earlier. In their place, the fund increased its exposure to several other sectors, including real estate, consumer discretionary, energy, and communications.
Joshua Friedman of Canyon Capital Advisors
In the following article we’ll check out the ten stocks that Canyon Capital Advisors can’t live without.
Our Methodology
The following data is gathered from Canyon Capital Advisors‘ latest 13F filing with the SEC. We follow hedge funds like Canyon Capital Advisors because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
10 Stocks Canyon Capital Advisors Can’t Live Without
10. Ardagh Metal Packaging S.A. (NYSE:AMBP)
Value of Canyon Capital Advisors’ 13F Position: $82.6 million
Number of Hedge Fund Shareholders: 28
Berry Global Group Inc (NYSE:BERY), Noble Corporation (NYSE:NE), Tenet Healthcare Corporation (NYSE:THC) are just a few of the stocks that Canyon Capital Advisors can’t live without. Another is Ardagh Metal Packaging S.A. (NYSE:AMBP), which Canyon Capital Advisors owns over 10.15 million shares of as of March 31.
The fund has been a shareholder of the company since Ardagh went public in the third quarter of 2021 through an SPAC merger with Gores Holdings V. Hedge fund ownership of AMBP dipped by 20% during the first quarter of this year.
Ardagh Metal Packaging S.A. (NYSE:AMBP) was recently downgraded to ‘Equal Weight’ from ‘Overweight’ by Wells Fargo, which cited declining demand for beverage cans, cost pressures, and the company’s extended balance sheet as reasons for the downgrade. The firm lowered its price target on the stock to $6.80 from $9.65. However, Barclays had a different outlook on the company just days earlier, upgrading it to ‘Overweight’ from ‘Equal Weight’, with a $9.00 price target. That firm has a much more bullish outlook on the beverage can market, as well as on Ardagh’s refined capital allocation measures.
Rhizome Partners is bullish on Ardagh Metal Packaging S.A. (NYSE:AMBP)’s new dividend, as well as the sustainability of aluminum cans, having this to say about its investment in the company in its Q1 2022 investor letter:
“During the quarter, we sold a small amount of Berry Global and reinvested in Ardagh Metal Packaging. Our exposure in Ardagh Metal Packaging has been largely in five-year warrants. We added exposure in the common stock, since the company recently announced the initiation of a sizable dividend in 2022. We like the dividends because they allow us to create our own style of share buybacks. Although Berry Global is cheaper today both on EV/EBITDA and P/FCF basis, the 2024 EV/EBITDA multiple will be roughly the same. We prefer the long-term secular trends, growth rate, and sustainability of aluminum cans over plastic packaging. We believe the market will rightfully reward a higher terminal value to Ardagh Metal Packaging.”
9. Encompass Health Corporation (NYSE:EHC)
Value of Canyon Capital Advisors’ 13F Position: $82.6 million
Number of Hedge Fund Shareholders: 48
A record number of hedge funds owned Encompass Health Corporation (NYSE:EHC) at the end of Q1 following a 20% jump in the number of smart money shareholders during the quarter. Canyon Capital increased its own stake in the company by 11% during the period, pushing it to 1.16 million shares.
Encompass Health Corporation (NYSE:EHC) completed the spinoff of its Home Health & Hospice division Enhabit a few days ago, which was announced in January following a strategic review launched by the company in December 2020. The spinoff allowed EHC to divest its slowest growing business and focus on its core inpatient rehabilitation services. Activist hedge fund JANA Partners was pushing EHC to consider a merger of the unit, rather than a spinoff, claiming the move would better position Enhabit to handle more challenging health conditions. Despite reported merger interest from multiple sources, including Aveanna Healthcare Holdings, the company instead went ahead with the spinoff.
The Heartland Mid Cap Value Fund believes its patience will be rewarded when it comes to its investment in Encompass Health Corporation (NYSE:EHC), having this to say in its Q4 2021 investor letter:
“COVID complications. Shares of many Health Care companies lagged as the continuing threat of COVID-19 dampened demand for elective medical procedures and health care providers struggled to maintain adequate staffing in the face of burnout and resistance to vaccine mandates. The Strategy’s holdings in the sector trailed the benchmark average, and the group contained a key detractor, Encompass Health Corporation (EHC).
Encompass provides inpatient rehabilitation services as well as home-based health and hospice care. Both businesses enjoy a competitive advantage over many of their peers and, we believe, are well positioned to grow organically, and acquire smaller competitors that could further economies of scale.
A labor shortage has taken a toll on sales and profit margins at Encompass as the company struggles to fill positions in a challenging environment for nursing wages and availability. Revenues have also been hurt by a slowdown in elective surgeries performed, which results in a smaller pool of patients in need of rehabilitation services.
When we took a stake in Encompass late in the summer of 2020, we recognized that COVID-related headwinds could endure longer than anticipated. However, the team believes the current challenges will eventually fade as enhanced nurse recruiting outreach helps mitigate staffing pressures while COVID-19 containment and treatment efforts gain traction. With shares producing an 8% free cash flow yield and trading at just 9x 2022 enterprise value/earnings before interest, taxes, depreciation, and amortization, we believe our patience will be rewarded.”
8. Boyd Gaming Corporation (NYSE:BYD)
Value of Canyon Capital Advisors’ 13F Position: $91.9 million
Number of Hedge Fund Shareholders: 40
Hedge fund ownership of Boyd Gaming Corporation (NYSE:BYD) has soared by 73% over the past year after hitting a 4-year low in the first quarter of 2021. Canyon Capital took a new stake in the casino operator during the third quarter of last year and further built up its stake in Q4. In the latest quarter, it raised the size of its holding by another 3% to just under 1.4 million shares.
Boyd Gaming Corporation (NYSE:BYD), which operates gaming entertainment properties in multiple states, posted strong first quarter results, growing revenue by 14% year-over-year and EBITDAR by 16%. The company’s Q1 operating margins also hit a record year, topping the previous year’s Q1 margins by over 50 basis points. Boyd Gaming resumed making dividend payments on April 15 with a $0.15 per share payout, more than double its previous payout of $0.07.
The Baron Real Estate Fund likes the strong presence of insider ownership at Boyd Gaming Corporation (NYSE:BYD) as well as the company’s potential as an acquisition candidate, having this to say in its Q1 2022 investor letter:
“Following strong share price performance in 2021, the shares of Boyd Gaming Corporation continued to perform well in the first quarter of 2022. Boyd is one of the largest and most successful casino entertainment companies in the U.S. The company owns and operates 28 casino gaming properties in 10 states with a large presence in Las Vegas and a geographic focus on the drive-to, leisure gaming customer. We remain optimistic about the prospects for Boyd’s shares because business conditions are strong, management maintains a liquid and conservatively capitalized balance sheet, insiders own approximately 27% of the company, the shares remain attractively valued at only 7.5 times 2022 estimated cash flow and a double-digit free cash flow yield, and we believe the company could be an attractive acquisition candidate should its current valuation remain discounted relative to recent private market casino and gaming transactions.”
7. Dell Technologies Inc. (NYSE:DELL)
Value of Canyon Capital Advisors’ 13F Position: $104 million
Number of Hedge Fund Shareholders: 59
One of 10 Safe Blue Chip Stocks to Buy in June, Dell Technologies Inc. (NYSE:DELL) was owned by 59 hedge funds on March 31, well above the all-time lows reached during the 2018-2020 period. Canyon Capital trimmed its Dell position by 10% during Q1, maintaining a sizable stake of 2.07 million shares.
A surge in demand for hybrid-based workstations helped Dell Technologies Inc. (NYSE:DELL) top estimates in its fiscal Q1 ended April 29, as commercial PC revenue surged by 22% to $12 billion. That was an impressive and somewhat unexpected result, given that Gartner has forecast PC shipments to decline by 9.5% in 2022.
Overall, Dell pulled in $26.12 billion in revenue, more than $1 billion ahead of estimates, while its $1.84 in adjusted EPS topped estimates by $0.45. Dell Technologies Inc. (NYSE:DELL) does expect its backlog to remain elevated during its fiscal Q2 due to chip shortages and broader supply chain issues, while component costs are also expected to continue rising.
6. Valaris Limited (NYSE:VAL)
Value of Canyon Capital Advisors’ 13F Position: $117 million
Number of Hedge Fund Shareholders: 39
There was a noteworthy increase in smart money ownership of Valaris Limited (NYSE:VAL) during Q1, as the number of hedge funds long the offshore driller jumped by 30%. Canyon Capital cut its position in the company by 30% during the quarter, lowering its stake to 2.25 million shares. The fund has been a Valaris shareholder since the second quarter of last year.
The world’s largest offshore driller in terms of fleet size, Valaris Limited (NYSE:VAL) is benefiting from a surge in demand, having announced in April that it landed a drilling contract off the west coast of Africa with dayrates not seen in seven years.
Given the offshore momentum, it’s not surprising that Valaris Limited (NYSE:VAL) recently had its price target hiked to $80 from $60 by BTIG, which maintained a ‘Buy’ rating on the shares. The firm cited the rising drillship dayrates in its report, noting that “spot work in the U.S. Gulf is now in the $400K range”. It further added that this likely only the early stages of the offshore drilling recovery, which bodes well for one of the industry’s biggest players.
Berry Global Group Inc (NYSE:BERY), Noble Corporation (NYSE:NE), and Tenet Healthcare Corporation (NYSE:THC) are some of the other major names that Canyon Capital can’t live without. Check out the fund’s interest in these stocks at the link below.
5. Noble Corporation (NYSE:NE)
Value of Canyon Capital Advisors’ 13F Position: $125 million
Number of Hedge Fund Shareholders: 31
Canyon Capital Advisors was one of several hedge funds that took a new position in Noble Corporation (NYSE:NE) during the first quarter, buying 3.95 million shares of the offshore driller. There was a 29% jump in the number of hedge funds long NE during the quarter, with John Smith Clark’s Southpoint Capital Advisors and Crispin Odey’s Odey Asset Management among the other funds to build new stakes in the small-cap company.
Noble Corporation (NYSE:NE) is another offshore driller that Canyon Capital has taken a keen interest in. The company has been active since emerging from bankruptcy protection last year, first by acquiring Pacific Drilling, which had also just emerged from bankruptcy protection, and then later by merging with Maersk Drilling. The latter move received shareholder approval in May but is still pending approval from British authorities.
It’s been reported that the deal will likely be approved should the companies execute several proposed remedies, including the selling off several rigs. In late June, Noble Corporation (NYSE:NE) took a big step forward on that front by agreeing to sell five jackup rigs to Shelf Drilling for $375 million. BTIG upgraded Noble Corp. to ‘Buy’ from ‘Neutral’ in early June, with a $60 price target. The firm expects the merger to close in the near-term.
4. Tenet Healthcare Corporation (NYSE:THC)
Value of Canyon Capital Advisors’ 13F Position: $136 million
Number of Hedge Fund Shareholders: 57
Hedge funds are becoming ever more bullish on Tenet Healthcare Corporation (NYSE:THC), one of the 5 Biggest Hospital Companies in the World. There’s been a 39% jump in ownership of the stock among the smart money over the past three quarters, with each successive quarter hitting a new all-time high in ownership. Canyon Capital owns 1.58 million shares as of March 31, down by 6% quarter-over-quarter.
Tenet Healthcare Corporation (NYSE:THC)’s earnings are expected to rise by 17% in 2023, which would put the hospital and pharmacy company’s P/E ratio at just 7x forward earnings. Loop Capital expects the company to address that valuation discrepancy in the future and is bullish on the company’s growing ambulatory segment, which it believes could be generating half of Tenet’s adjusted EBITDA within two years.
On the other hand, Mizuho recently slashed its price target on Tenet Healthcare Corporation (NYSE:THC) to $63 from $103, though it did maintain a ‘Buy’ rating on THC shares. The firm noted that surveys of inpatient and outpatient trends show that volumes are still below pre-pandemic levels, while nurse wage pressure could weigh on the company’s bottom line in the future.
3. Shaw Communications Inc (NYSE:SJR)
Value of Canyon Capital Advisors’ 13F Position: $155 million
Number of Hedge Fund Shareholders: 23
Canyon Capital owns an even 5 million shares of Shaw Communications Inc (NYSE:SJR) as of March 31 after raising its position in the Canadian telecommunications company by 45% during Q1. Several other billionaire money managers were also loading up on Shaw during the quarter, including Jim Simons’ Renaissance Technologies and Israel Englander’s Millennium Management.
Shaw Communications Inc (NYSE:SJR)’s proposed merger with Rogers Communications was blocked by the Canadian antitrust watchdog in late June, though the two sides have since begun a mediation process that could yet see the merger salvaged. Earlier in the month, Rogers and Shaw agreed to sell Shaw’s mobile division, Freedom Mobile, to Quebecor for CAD2.85 billion in an effort to satisfy regulators.
Shaw Communications Inc (NYSE:SJR) suffered year-over-year revenue and earnings declines in its fiscal Q3, which was not unexpected given the challenges the company has faced in regards to chip shortages and legal fees. Revenue slumped to CAD1.35 billion from CAD1.38 billion a year earlier, while EPS cratered to CAD0.41 from CAD0.70.
2. Berry Global Group Inc (NYSE:BERY)
Value of Canyon Capital Advisors’ 13F Position: $164 million
Number of Hedge Fund Shareholders: 42
Canyon Capital appears to be quite bullish on the state of the packaging industry, as it has large stakes in both Ardagh Metal Packaging S.A. (NYSE:AMBP) and Berry Global Group Inc (NYSE:BERY). When it comes to the latter, Canyon Capital raised the size of its BERY holding by 16% to 2.84 million shares during Q1, with the plastic packaging manufacturer ranking as its second-largest 13F long position.
Berry Global Group Inc (NYSE:BERY) was targeted by activist hedge fund Ancora Advisors in late 2021, with the fund pushing the company to explore strategic alternatives, including a sale. Ancora believed that Berry Global could fetch as much as $100 per share in a sale, close to double what the company’s shares currently trade for. The fund also called Berry’s plan to repurchase $50 million of its shares an insult to its investors and urged to company to instead buy back $1 billion worth.
Canyon Capital itself has also pressured Berry Global Group Inc (NYSE:BERY) to consider various options in the past, including the sale of some of its non-core assets with an eye on cutting the company’s debt. Berry Global has aggressively grown through M&A in recent years, which has supercharged its growth rate above the industry’s average, but also ballooned its debt.
1. CBL & Associates Properties, Inc. (NYSE:CBL)
Value of Canyon Capital Advisors’ 13F Position: $276 million
Number of Hedge Fund Shareholders: 19
Topping the list of stocks that Canyon Capital can’t live without is CBL & Associates Properties, Inc. (NYSE:CBL). The fund has a sizable ownership stake in the shopping center REIT, owning nearly 8.4 million shares, or about 42% of its common stock. The fund’s former Partner and Senior Portfolio Manager Jonathan Heller currently serves as the company’s Chairman of the Board.
CBL & Associates Properties, Inc. (NYSE:CBL) has taken strong strides to improve its financial flexibility and cash flow generation following its emergence from chapter 11 bankruptcy in late 2021, so much so that the company recently announced a $0.25 per share quarterly dividend. CBL had a $335 million cash position as of March 31, up from $260 million in cash and cash equivalents on its balance sheet on November 1, 2021, and had reduced its debt by $200 million.
CBL & Associates Properties, Inc. (NYSE:CBL) grew same-center sales per square foot by 13% in the fourth quarter, while its portfolio occupancy rose to 89.3%, up by 90 basis point quarter-over-quarter. Outlet center occupancy was particularly strong during the quarter, rising to 93.6%, up from 89.1% a year earlier. CBL pulled in $349.8 million in adjusted FFO in 2021, compared to just $140.8 million in 2020.
For more on the latest trades made by some of the biggest hedge fund managers in the world, check out 10 Dividend Stocks with Over 10% Yield and 10 Defensive Stocks in Billionaire Ray Dalio’s Latest Portfolio.
Suggested articles:
- 12 Best US Stocks to Buy Now
- 10 European Defense Stocks to Buy Now
- 10 LNG Shipping Stocks to Buy Now
Disclosure: None. 10 Stocks Canyon Capital Advisors Can’t Live Without is originally published at Insider Monkey.
