In this piece, we will take a look at the top five stocks to invest in according to Jamie Zimmerman’s Litespeed Capital. If you want more details about the hedge fund executive and other stocks, then head on over to 10 Stocks To Invest In According To Jamie Zimmerman’s Litespeed Capital.
5. SPX FLOW, Inc. (NYSE:FLOW)
Litespeed Capital Management’s Stake Value: $7.43 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 8.19%
Number of Hedge Fund Holders: 28
SPX FLOW, Inc. (NYSE:FLOW) is an industrial products and services provider, whose products allow customers to conduct several different kinds of manufacturing operations. These operations include air filtration, heat separation, and pumping fluids. The company is headquartered in Charlotte, North Carolina, United States.
Barclays increased the company’s price target to $86 from $75 in January 2022, indicating that inflation in the U.S. will benefit the company.
Ms. Zimmerman’s Litespeed Capital Management owned 101,645 SPX FLOW, Inc. (NYSE:FLOW) shares as the third quarter of 2021 came to an end. This resulted in a stake that was worth $7.43 million and represented 8.19% of the firm’s portfolio. During the same time period, 28 of the 867 hedge funds surveyed by Insider Monkey had owned stakes in the company, for an all-time high holding since Q3 2016.
Ian Simm’s Impax Asset Management is SPX FLOW, Inc. (NYSE:FLOW)’s largest investor with a $129 million stake that comes through owning 1.7 million shares.
4. AfterNext HealthTech Acquisition Corp. (NYSE:AFTR)
Litespeed Capital Management’s Stake Value: $8.46 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 9.33%
Number of Hedge Fund Holders: N/A
AfterNext HealthTech Acquisition Corp. (NYSE:AFTR) is a special purpose acquisition company (SPAC), which, as the name suggests, aims to merge with a firm in the healthcare sector. This SPAC was founded in 2021 and is headquartered in Fort Worth, Texas, United States.
By the end of the third quarter of last year, Litespeed Capital had held 850,000 AfterNext HealthTech Acquisition Corp. (NYSE:AFTR) shares which were worth $8.46 million and represented 9.3% of its portfolio.
AfterNext HealthTech Acquisition Corp. (NYSE:AFTR) announced its initial public offering (IPO) on August 11th, 2021. Soon after, the IPO closed within a handful of days, on August 16th. This netted the company a cool $250 million in proceeds to combine with what it terms as a firm ‘combining technology and innovation.’
AfterNext HealthTech Acquisition Corp. (NYSE:AFTR) is backed by the venture capital group TPG Capital LP.
3. ADT Inc. (NYSE:ADT)
Litespeed Capital Management’s Stake Value: $9.01 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 10.03%
Number of Hedge Fund Holders: 18
ADT Inc. (NYSE:ADT) is a home security and automation services provider located in the United States. The company serves all kinds of customers and allows them to address environmental control hazards, such as fire suppression. It also allows customers to control their home security and automation systems through personal computing gadgets such as laptops and smartphones.
Litespeed Capital owned 1.12 million ADT Inc. (NYSE:ADT) shares during Q3 2021. These were worth $9 million and represented 10% of its investment portfolio. Insider Monkey’s 867 hedge fund survey for the same time period revealed that 18 had also held a stake in the automation and security company.
ADT Inc. (NYSE:ADT)’s largest shareholder is John W. Rogers’s Ariel Investments which owns 24 million shares worth $196 million.
Investment firm Ariel Investments mentioned ADT Inc. (NYSE:ADT) in its second-quarter 2021 investor letter, outlining that:
“During the quarter, we initiated a position in ADT, Inc. (ADT) in Ariel Fund and Ariel Appreciation Fund. Buying the same position across both strategies is rare but shows our enthusiasm for the name. Here, we have a 140-year old company that has been in and out of public ownership and as a result, everyone has looked right past it. In our view, ADT’s brand and national presence in the security industry is unmatched, resulting in leading market share, a high recurring revenue base and attractive free cash flow generation. While some are concerned do-it-yourself competition will erode the installation and technology-driven moat around the business, we believe the company is well-positioned to benefit from the secular growth of smart home adoption along with strategic partnerships with companies including Google.”
2. Pitney Bowes Inc. (NYSE:PBI)
Litespeed Capital Management’s Stake Value: $11.1 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 12.3%
Number of Hedge Fund Holders: 24
Pitney Bowes Inc. (NYSE:PBI) is a shipping services provider that covers the postage segment by providing services such as delivery and sorting. It also provides applications for tracking products in transit.
Ms. Zimmerman’s hedge fund owned 1.5 million Pitney Bowes Inc. (NYSE:PBI) shares during Q3 2021. This translated into an $11.1 million stake which represented 12.3% of its investment portfolio. An Insider Monkey survey of 867 hedge funds for the same period revealed that 24 had owned the company’s shares.
Maxim slashed the company’s price target to $7 from $12 in February 2022, stating that the company’s sorting segment performed well but its global e-commerce business had a tough quarter.
Chuck Royce’s Royce & Associates is Pitney Bowes Inc. (NYSE:PBI)’s largest shareholder. It has a $15 million stake through owning 2 million shares.
Miller Value Partners mentioned Pitney Bowes Inc. (NYSE:PBI) in its third-quarter 2021 investor letter. It stated that:
“Pitney Bowes (PBI) was also a recent laggard off nearly 20% during the quarter. The company has been building out an E-commerce business for the past 10 years that is approaching $2B in revenue and growing revenues longer-term at a double digit pace. With the E-commerce segment approaching scale, management has significant new initiatives underway to help improve the segment’s profitability to normalized levels (8-12% EBIT margins) over the next couple of years. Success on achieving normalized profitability for the segment would dramatically enhance Pitney Bowes earnings (>$1 in EPS) and annual free cash flow generation (>$250M). Last quarter we highlighted, the digital service business within Pitney’s E-commerce segment and the significant embedded value that was suggested by recent acquisition of a direct competitor Stamps.com at 8x revenue. However, another recent market transaction suggests the E-commerce business has even greater embedded value. At the end of the second quarter, Global-e (GLBE), a UK company that focuses on cross-border business came public at $25/share or approx. $4B market capitalization. The initial IPO price suggested, 2021 Enterprise value to Revenue >20x. Since the IPO, GLBE has climbed to greater than $50/share. Within Pitney Bowes’s E-commerce segment there is a much larger cross border business representing approximately $500M in revenue. The current valuation of Global-e suggests Pitney’s cross border business is worth significantly more than the company’s current market cap. With the marketplace valuing many businesses in excess of 10x revenue, we believe that Pitney Bowes shares remain significantly mispriced at only .35x of revenue and >30% normalized earnings and free cash flow yield. In our opinion, the shares are becoming increasing attractive as their E-commerce segment appears to be significantly undervalued and has the potential to unlock significant equity value over the next couple of years.”
1. Houghton Mifflin Harcourt Company (NASDAQ:HMHC)
Litespeed Capital Management’s Stake Value: $22.2 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 24.57%
Number of Hedge Fund Holders: 28
Houghton Mifflin Harcourt Company (NASDAQ:HMHC) is an educational services provider which offers products such as digital and physical textbooks, assessment services, book publishing rights, and online courseware.
As its fiscal Q4 came to an end, Houghton Mifflin Harcourt Company (NASDAQ:HMHC) had raked in $417 million in revenue and $0.72 in GAAP EPS, beating analyst estimates for both. The company’s price target was raised to $20 from $19 by BMO Capital in January 2022, who highlighted that stimulus funding and the growing shift to remote learning will benefit the company.
Houghton Mifflin Harcourt Company (NASDAQ:HMHC)’s largest shareholder is Arnaud Ajdler’s Engine Capital which owns 3 million shares worth $40 million.
In its Q2 2021 investor letter, Laughing Water Capital LP mentioned Houghton Mifflin Harcourt Company (NASDAQ:HMHC). It stated that:
“HMHC is the leading provider of instructional materials to students in grades K-12 in the U.S. At the end of this letter you will find a longer writeup, but in brief I believe the combination of a newly cleaned up balance sheet, slimmed down operating structure, a Covid induced acceleration of digital learning, and billions of dollars in federal stimulus set to flood the education world has put HMHC in position to gush cash over the next few years… but the market has failed to appreciate these changes. Given the pending onslaught of federal stimulus dollars I think it will be very difficult to lose money in this investment, and if the company reinvests this cash wisely and the market recognizes how this business has evolved, there is a path to multi-bagger returns looking out a few years.”
Disclosure: None. You can also take a peek at the 10 Best Biotech Stocks to Buy According to Mark Lampert and 10 Best Biotech Stocks Under $5.
