In this piece we will take a look at the top ten stock picks in billionaire Richard Chilton’s latest portfolio.
Richard Chilton is an American billionaire and hedge fund executive who hails from New Jersey. He is at the helm of the hedge fund Chilton Investment Company, which he helped set up in the early 1990s.
Like his peers in the hedge fund industry, Mr. Chilton also had diverse experience in the financial world prior to setting up his own firm. The executive, who is currently the chairman, chief executive officer, and chief investment officer of his hedge fund, graduated from Alfred University in Western New York in 1980, where he had the honor of being at the top of his class at the time of graduation.
After his graduation, he would go on to work at several financial firms such as Merrill Lynch, Allen & Company, and Alliance Capital. His first job would see Mr. Chilton work with mergers and acquisitions in Merrill Lynch, after which he would become an analyst for Alliance Capital, and go on to spend some time at Allen & Company before setting up his hedge fund in 1992. His investment fund is headquartered in Connecticut, and it has offices in other cities in the U.S., the U.K, and Hong Kong.
Mr. Chilton’s investment philosophy involves incorporating both long and short ratings into an estimate for a firm’s price targets. The long factors include market and management analysis while the short factors include earnings per share estimates, management changes, and insider share transactions, among others. Chilton Investment Company has several funds under its wing, with the flagship fund being the long/short equity fund, Chilton Investment Partners LP. Some of the other funds involve investing in small cap companies, European companies, Asian equity markets, and commodities.
Richard Chilton is also the chief investment officer of the Chilton Trust Company, which is a private wealth management firm. This company serves more than 200 of some of the richest families in the world and it had $7 billion in assets under management as of September 2022. On the other hand, his hedge fund, the Chilton Investment Company, had a portfolio that was worth $3.5 billion as of the second quarter of this year, while Mr. Chilton’s net worth was estimated to sit at a cool $1.5 billion during 2015 by Forbes Magazine.
In this piece, we will take a look at Chilton Investment’s latest portfolio for its top investments. Some well known stocks on the list are Microsoft Corporation (NASDAQ:MSFT), The Home Depot, Inc. (NYSE:HD), and The Sherwin-Williams Company (NYSE:SHW).
Richard Chilton of Chilton Investment Company
Our Methodology
In order to pick out billionaire Richard Chilton’s top investments, we sifted through his firm’s filings with the Securities and Exchange Commission for the second quarter of this year. This allowed us to pick out the top ten firms, following which they were analyzed through a variety of factors such as financial performance, analyst ratings, and hedge fund sentiment generated through Insider Monkey’s Q2 2022 895 fund survey.
Billionaire Richard Chilton’s Latest Portfolio: Top 10 Stock Picks
10. Cintas Corporation (NASDAQ:CTAS)
Chilton Investment Company’s stake value: $130 million
Percentage of Chilton Investment Company’s Portfolio: 3.64%
Number of Hedge Fund Holders: 32
Cintas Corporation (NASDAQ:CTAS) provides uniform garments and other products that are used for cleaning and maintaining buildings and offices.
Chilton Investment held a $130 million stake in Cintas Corporation as the second quarter of this year ended. This came in the form of 350,116 shares and it represented 3.64% of the firm’s investment portfolio. During the same time period, 32 of the 895 hedge funds polled by Insider Monkey had held a stake in the company.
Cintas Corporation has the highest price to book, enterprise value to EBITDA, and enterprise value to free cash flow metrics in its industry, providing its shares with a nice premium over the rival firms. The firm declared a massive $1.15 per share dividend in July 2022, which marked a 21% increase over the previous dividend. Baird increased its share price target to $475 from $440 in August 2022, stating that the firm’s scale and size lend it an advantage during the current economic crisis.
Cintas Corporation’s largest investor is Ian Simm’s Impax Asset Management which owns one million shares that are worth $396 million.
Along with The Home Depot, Inc., Microsoft Corporation, and The Sherwin-Williams Company, Cintas Corporation is a top Richard Chilton stock pick.
9. Mettler-Toledo International Inc. (NYSE:MTD)
Chilton Investment Company’s stake value: $141 million
Percentage of Chilton Investment Company’s Portfolio: 3.95%
Number of Hedge Fund Holders: 39
Mettler-Toledo International Inc. (NYSE:MTD) is an American precision instruments manufacturer and supplier that is headquartered in Columbus, Ohio. The firm provides products such as laboratory equipment including pH meters and reactors, a laboratory software solution, and retail weighing products.
Mettler-Toledo International Inc. is one of the largest medical instrument providers in the world, as it serves more than 140 countries. This allows it to have a diverse revenue base, that is immune to region specific economic shocks. The firm grew its sales by 8.5% during the first half of this year, which was hampered by the strong U.S. dollar, as negating the foreign currency valuation impacts, the sales growth stands at 12%. Stifel set a $1,500 share price target for the company in September 2022, as it shared that the fact that the shares are down 30% year to date is a historic opportunity for buying them.
Mr. Chilton’s investment firm owned 123,335 Mettler-Toledo International Inc. shares as part of its Q2 2022 investments, for a $141 million stake. Insider Monkey’s 895 hedge fund study for this year’s June quarter revealed that 39 had held a stake in Mettler-Toledo International Inc..
Out of these, Terry Smith’s Fundsmith LLP is Mettler-Toledo International Inc.’s largest investor. It owns 540,452 shares that are worth $620 million.
Baron Funds mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Mettler-Toledo International, Inc. is a leading provider of precision instruments and services for life sciences, food, and chemicals companies, among others. Similar to IDEXX, we believe that Mettler’s shares fell chiefly because of widespread investor rotation out of growth stocks. In addition, there were concerns about the potential negative impact of foreign currency fluctuation and the possibility of a European economic slowdown, where Mettler has significant business. We continue to believe Mettler is an exceptionally well-managed business with competitive advantages and attractive long-term growth prospects.”
8. Republic Services, Inc. (NYSE:RSG)
Chilton Investment Company’s stake value: $182 million
Percentage of Chilton Investment Company’s Portfolio: 5.08%
Number of Hedge Fund Holders: 33
Republic Services, Inc. (NYSE:RSG) is an environmental services provider that engages in a multitude of services such as processing recyclable materials, waste collection and disposal, and disposal of non hazardous solid waste. The firm is based in Phoenix, Arizona, the United States.
Chilton Investment Company held a $182 million stake in Republic Services, Inc. during the second quarter of this year, via owning 1.3 million shares of the company. This represented 5.08% of the firm’s investment portfolio. During Q2 2022, 33 of the 895 hedge funds polled by Insider Monkey had also bought the company’s shares.
Republic Services, Inc. operates in more than 40 U.S. states and owns hundreds of waste landfills and transfer stations, making it one of the largest waste disposal players in the industry. It is a solid stock for a defensive portfolio, as close to 80% of its revenue resembles payouts from an annuity – making the firm relatively insulated to broader market downturns. Deutsche Bank raised Republic Services, Inc.’s share price target to $158 from $147 in August 2022, sharing that the firm’s Q2 financial results influenced the decision.
Republic Services, Inc.’s largest investor after Chilton Investment Company is Ian Simm’s Impax Asset Management which owns 1.3 million shares that are worth $174 million.
7. Union Pacific Corporation (NYSE:UNP)
Chilton Investment Company’s stake value: $185 million
Percentage of Chilton Investment Company’s Portfolio: 5.16%
Number of Hedge Fund Holders: 65
Union Pacific Corporation (NYSE:UNP) is an American railroad company that provides transportation services for a wide variety of products such as fertilizers, coal, grain, petroleum, chemicals, and automotive parts. It has access to thousands of miles of railroad across the United States and is headquartered in Omaha, Nebraska.
Union Pacific Corporation’s price to earnings ratio from 2015 stands at 21.45, while its current P/E ratio is 20.38 which then leaves room for share price growth based on historical data. Its latest quarter saw the firm report $6.27 billion in revenue for 14% annual growth. Bernstein reduced the company’s share price target to $230 from $234 in September 2022, as it argued that macroeconomic headwinds inject uncertainty into the stock but maintained that the firm is performing well fundamentally.
Mr. Chilton’s investment company owned 868,167 Union Pacific Corporation shares as part of its Q2 2022 portfolio, for a $185 million stake that represented 5.16% of its holdings. During the same time period, 65 out of the 895 hedge funds part of Insider Monkey’s survey had bought the company’s shares.
Out of these, Union Pacific Corporation’s largest investor is Ken Fisher’s Fisher Asset Management which owns 5.2 million shares that are worth $1 billion.
6. Costco Wholesale Corporation (NASDAQ:COST)
Chilton Investment Company’s stake value: $202 million
Percentage of Chilton Investment Company’s Portfolio: 5.63%
Number of Hedge Fund Holders: 64
Costco Wholesale Corporation (NASDAQ:COST) is an American company that provides membership warehouses, pharmacies, tire installation services, food courts, and other services in the U.S. and other countries. The company is headquartered in Issaquah, Washington.
Chilton Investment Company owned 421,696 Costco Wholesale Corporation shares in the second quarter of this year. These let it have a $202 million stake in the company. Insider Monkey’s Q2 2022 survey of 895 hedge funds saw 64 investors in the company.
Over the past five years, Costco Wholesale Corporation’s share price has returned a massive 260.7%, and over the past ten years, this return jumps to a whopping 592%. However, recently, the shares have dropped in value in the aftermath of the Federal Reserve’s reiteration of continued interest rate hikes to control heavy inflation. UBS kept a $595 share price target for the company in September 2022, citing optimism for its upcoming fourth quarter results and stating that membership growth influenced the positive outlook.
Costco Wholesale Corporation’s largest investor in our database is Ken Fisher’s Fisher Asset Management which owns 4.3 million shares that are worth $2 billion.
Costco Wholesale Corporation joins Microsoft Corporation, The Home Depot, Inc., and The Sherwin-Williams Company in the list of billionaire Richard Chilton’s favorite stocks.
5. The Home Depot, Inc. (NYSE:HD)
Chilton Investment Company’s stake value: $206 million
Percentage of Chilton Investment Company’s Portfolio: 5.76%
Number of Hedge Fund Holders: 80
The Home Depot, Inc. is an American home improvement retailer that is headquartered in Atlanta, Georgia. The firm has thousands of stores all over the United States, and it provides a host of products covering building materials, flooring, cabinets, furnaces, and air conditioning systems.
Chilton Investment Company owned a $206 million stake in The Home Depot, Inc. as part of its Q2 2022 holdings. This came through the firm holding 753,813 shares of the company. During the same time period, 80 of the 895 hedge funds polled by Insider Monkey had also invested in the company.
The Home Depot, Inc. is one of two major home improvement retailers in the U.S., which provides it with a unique advantage as it enjoys cost and scale advantages over other companies that might want to enter the market. The firm has grown its free cash flow at a compounded annual growth rate (CAGR) of 11.4% since 2004, and during the same time period, its share based payments have grown by 7.1% – indicating that the company is keeping up with FCF growth when it comes to returning capital. The Home Depot, Inc. pays a $1.9 dividend for a 2.75% yield.
The Home Depot, Inc. largest investor is Ken Fisher’s Fisher Asset Management which owns 8.3 million shares that are worth $2.2 billion.
4. Canadian Pacific Railway Limited (NYSE:CP)
Chilton Investment Company’s stake value: $227 million
Percentage of Chilton Investment Company’s Portfolio: 6.34%
Number of Hedge Fund Holders: 42
Canadian Pacific Railway Limited (NYSE:CP) is a Canadian company headquartered in Calgary that operates a freight railway system in Canada and the United States. The company transports a host of products such as coal, fertilizers, grain, minerals, and forest products.
Canadian Pacific Railway Limited posted revenue growth of 7% during its second fiscal quarter as it was helped by fuel surcharges and foreign exchange fluctuations despite a small drop in volumes shipped. The company is also on track to develop the only direct Canada to Mexico railroad route, and it is using a strong price environment to lock in prices as much as 6% higher over current rates for future contracts.
Mr. Chilton’s investment firm owned 3.2 million Canadian Pacific Railway Limited shares as part of its investments for the second quarter of this year, allowing it to hold a $227 million stake in the company. Insider Monkey’s 895 hedge fund survey for this year’s June quarter saw 42 having invested in the company.
Chris Hohn’s TCI Fund Management is Canadian Pacific Railway Limited’s largest investor in our database. It owns 55 million shares that are worth $3.9 billion.
Pershing Square Holdings mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
The demand outlook for CP continues to improve, especially given the current geopolitical environment. Russia’s invasion of Ukraine and the resulting supply disruptions have boosted demand for Canadian exports such as grain and potash. Deglobalization has also increased the likelihood of major North American onshoring and energy production, which will accelerate CP’s volume growth in the future. Total volumes declined by 2% in the second quarter due to the smaller than average Canadian grain harvest, while volumes excluding grain increased by 5%. The grain headwind will flip to a tailwind in the fall as CP anticipates a normal grain crop, which supports management’s double-digit volume and revenue growth outlook for the second half of 2022. …” (Click here to read the full text)
3. Ball Corporation (NYSE:BALL)
Chilton Investment Company’s stake value: $246 million
Percentage of Chilton Investment Company’s Portfolio: 6.87%
Number of Hedge Fund Holders: 24
Ball Corporation (NYSE:BALL) is an aluminum can maker that is one of the oldest companies of its kind as it was set up in 1880 and is headquartered in Westminster, Colorado, the United States. The company sells aluminum beverage cans all over the globe.
As the second quarter of this year came to an end, Chilton Investment Company held a $246 million stake in Ball Corporation which came in the form of 3.5 million shares and represented 6.87% of the firm’s holdings. Insider Monkey’s Q2 2022 study of 895 hedge fund portfolios saw 24 investors in the can maker.
Ball Corporation’s business nature leaves it relatively insulated to larger macroeconomic shocks, making it a perfect investment for the currently tumultuous environment. Despite the global economy going into multiple shocks over the past three years, Ball Corporation has managed to consistently grow its return over invested capital (ROIC). However, Barclays reduced the company’s share price target to $55 from $80 in September 2022 following its second quarter results.
Ball Corporation’s largest investor after Chilton Investment Company is Greg Poole’s Echo Street Capital Management which owns 1.3 million shares that are worth $95 million.
NZS Capital mentioned the company in its Q2 022 investor letter. Here is what the fund said:
“We believe the stock valuations of these companies, and their sectors as a whole, reflect an overly pessimistic view of their long-term growth potential and an underestimation of the deflationary forces they bring to the economy, and we therefore added to many existing positions. Aluminum can maker and aerospace company Ball detracted from performance over fears consumers would curtail their large, pandemic-era grocery store beverage purchases.”
2. Microsoft Corporation (NASDAQ:MSFT)
Chilton Investment Company’s stake value: $264 million
Percentage of Chilton Investment Company’s Portfolio: 7.38%
Number of Hedge Fund Holders: 258
Microsoft Corporation is one of the largest technology companies in the world. It originally gained fame through its Windows operating system, and over the years, the firm has diversified its business to include consumer electronics and cloud computing.
Despite the poor recent quarterly performance, Microsoft Corporation continues to be a Wall Street darling as the average price target for the company among 29 analysts is $327 per share – a significant upside over the current share price of $244. An example of a share price target that is above the current share price is from Guggenheim, which set a $292 price target for the company in August 2022, sharing that the company’s office and cloud computing platforms serve to grow its cash flows by the mid teens in the coming future.
Chilton Investment Company owned one million Microsoft Corporation shares as part of its Q2 2022 portfolio, allowing it to hold a $264 million stake in the company. During the same time period, 258 out of the 895 hedge funds polled by Insider Monkey had also held a stake in the company.
Out of these, Ken Fisher’s Fisher Asset Management is Microsoft Corporation’s largest investor as it owns 28 million shares that are worth $7 billion.
1. The Sherwin-Williams Company (NYSE:SHW)
Chilton Investment Company’s stake value: $282 million
Percentage of Chilton Investment Company’s Portfolio: 7.86%
Number of Hedge Fund Holders: 52
The Sherwin-Williams Company is an American company that sells a wide variety of painting and coating products to retail, commercial, professional, and industrial customers. These products include automotive performance finishes, architectural paints, wood finishing, and corrosion inhibitors.
As of the end of June, Mr. Chilton’s investment firm owned 1.2 million The Sherwin-Williams Company shares. These allowed it to hold a $282 million stake in the company and constituted 7.86% of its investment portfolio. Insider Monkey’s study of 895 hedge funds for the same time period revealed that 52 had also bought the company’s shares.
The Sherwin-Williams Company is the leading paint provider in the U.S., with its architectural, stain, aerosol, wood sealer, and auto specialty paint brands being the top brands in the country. The firm also has a wide economic profit spread, which is the difference between its return on invested capital and cost of capital. This spread stands at 31.3%, indicating that the company is vastly more profitable and generates higher returns when compared to investor return requirements. The Sherwin-Williams Company also pays a 60 cent dividend for a 1.08% yield.
The Sherwin-Williams Company’s second largest investor in our database is Thomas Steyer’s Farallon Capital which owns one million shares that are worth $237 million.
ClearBridge Investments mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Rounding out our risk-focused stance, we believe the addition of Sherwin-Williams (NYSE:SHW), a manufacturer of paints and coatings for professional, industrial and retail customers, adds further resilience in the current inflationary environment. Paint is a relatively small part of total project input costs which can be passed through with price during inflation, and the company has a track record of successfully managing through periods of increased commodity costs. We are attracted to the company’s durability of growth by operating a strong franchise with both organic growth and consolidation amassing a strong portfolio of brands. We like Sherwin-Williams over competitors in the paint industry due to higher volumes, a domestically focused revenue base and strong relationships with the home builder and pro community. We believe the company will be able to keep pricing and expand margins as commodity pressures ease.”
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This article is originally published at Insider Monkey.
