In this article, we discuss the top 10 stock picks of Brian Higgins’ King Street Capital.
Brian Higgins co-founded King Street Capital in 1995, and currently serves as the managing partner and co-portfolio manager at the investment management firm. King Street Capital has a portfolio valued at $1.18 billion, and discretionary assets under management of $21.88 billion as per the 13F filings from September this year.
Higgins completed his bachelor’s in business administration from Villanova University in 1987, and started his career with First Boston’s Merchant Banking Group the same year. He worked in the Special Situations Fund and the Distressed Securities Group at First Boston. In 1995, he moved on to establish his own investment management firm.
King Street Capital primarily focuses on credit markets, and is a registered investment adviser in the US, the UK, Japan, and Singapore. The firm has several funds that it manages on behalf of its customers. Two flagship funds at King Street Capital follow a long/short multi-strategy and look out for event-driven investments to capitalize on market dislocations, offering long-term risk-adjusted returns with minimal volatility to stakeholders. Other funds at the firm specialize in real estate, collateralized loan obligations, dislocations in the credit markets, and investment opportunities arising from the economic impact of the COVID-19 pandemic and energy crises.
The Q3 portfolio at King Street Capital comprises stocks from the real estate, information technology, consumer discretionary, finance, energy, and utilities and telecommunications sectors, with a top ten holdings concentration of 54.23%.
The most notable stocks in Brian Higgins’ portfolio as of September 2021 include Booking Holdings Inc. (NASDAQ:BKNG), The Wendy’s Company (NYSE:WEN), T-Mobile US, Inc. (NASDAQ:TMUS), and Vornado Realty Trust (NYSE:VNO), among others discussed below.
Our Methodology
With this context in mind, let’s discuss the top 10 stock picks of Brian Higgins’ King Street Capital. We used the Higgins’ Q3 portfolio to select these stocks, ranking them according to his stake value in each holding.
Brian Higgins’ King Street Capital Portfolio: Top Stock Picks
10. KKR Acquisition Holdings I Corp. (NYSE:KAHC)
King Street Capital’s Stake Value: $44,910,000
Percentage of King Street Capital’s 13F Portfolio: 3.79%
Number of Hedge Fund Holders: N/A
KKR Acquisition Holdings I Corp. (NYSE:KAHC) is a blank check company that was created with the intention of carrying out different business combinations including mergers, share exchanges, asset acquisition, and corporate restructuring. KKR Acquisition Holdings I Corp. has not engaged in a business combination yet, since its IPO on March 17.
As of Q3 2021, Higgins’ King Street Capital holds 4.5 million shares in KKR Acquisition Holdings I Corp., worth $44.91 million, representing 3.79% of the firm’s total investments.
As of September, Alec Litowitz and Ross Laser’s Magnetar Capital is the leading stakeholder of the company, with 6.68 million shares valued at $66.67 million.
In addition to Booking Holdings Inc., The Wendy’s Company, T-Mobile US, Inc., and Vornado Realty Trust, KKR Acquisition Holdings I Corp. is a notable stock in Brian Higgins’ Q3 portfolio.
9. Arch Capital Group Ltd. (NASDAQ:ACGL)
King Street Capital’s Stake Value: $47,343,000
Percentage of King Street Capital’s 13F Portfolio: 3.99%
Number of Hedge Fund Holders: 31
Arch Capital Group Ltd. (NASDAQ:ACGL), an American insurance, reinsurance, and mortgage insurance provider, is one of Brian Higgins’ top stock picks from the third quarter. As of the third quarter, King Street Capital holds a $47.3 million stake in Arch Capital Group Ltd., which accounts for 3.99% of the firm’s total 13F securities.
Bob Peck and Andy Raab’s FPR Partners is the leading stakeholder in Arch Capital Group Ltd., with 14.4 million shares valued at $551.6 million. The Q3 database maintained by Insider Monkey reported that 31 hedge funds were bullish on Arch Capital Group Ltd., with stakes amounting to $1.21 billion.
Arch Capital Group Ltd., on October 27, posted its Q3 results. EPS in the period equaled $0.74, beating estimates by $0.39. The $2.08 billion revenue, however, failed to meet analysts’ forecasted revenue by -$145.25 million.
Jefferies analyst Yaron Kinar on November 18 initiated coverage of Arch Capital Group Ltd. with a Buy rating and a $50 price target. Arch Capital Group Ltd. is one of Kinar’s top stock picks in the insurance industry, and he expects the stock to grow significantly.
Here is what Baron Partners Fund has to say about Arch Capital Group Ltd. in its Q1 2021 investor letter:
“Arch Capital Group Ltd. is a specialty insurance company based in Bermuda. The stock increased on quarterly earnings that exceeded investor estimates and 15% growth in its book value per share. Pricing trends are favorable in the property & casualty insurance market, and the outlook for the mortgage insurance business has substantially improved as the economy recovers from last year’s pandemic-related uncertainty. We continue to own the stock because we expect earnings growth to resume and admire Arch’s strong management team and underwriting discipline.”
8. MGIC Investment Corporation (NYSE:MTG)
King Street Capital’s Stake Value: $49,144,000
Percentage of King Street Capital’s 13F Portfolio: 4.14%
Number of Hedge Fund Holders: 27
MGIC Investment Corporation (NYSE:MTG) offers insurance products and services to protect mortgage investors from credit losses. Brian Higgins owns 3.28 million MGIC Investment Corporation shares, worth $49.1 million as of September this year. The stock accounts for 4.14% of Higgins’ Q3 portfolio.
MGIC Investment Corporation posted its Q3 earnings on November 3. EPS in the quarter totaled $0.46, beating estimates by $0.01. The revenue was down 0.09% year-over-year, missing analysts’ consensus estimates by -$3.90 million at $295.75 million.
As of the third quarter, 27 hedge funds monitored by Insider Monkey were bullish on MGIC Investment Corporation, with a total stake value of $298 million. The leading stakeholder of the company is Arrowstreet Capital, with 3.47 million shares valued at $51.95 million.
As part of a broader research on the mortgage insurance industry, BofA analyst Mihir Bhatia on November 17 downgraded MGIC Investment Corporation to Neutral from Buy with a price target of $16.50, up from $16.
7. 8×8, Inc. (NYSE:EGHT)
King Street Capital’s Stake Value: $56,136,000
Percentage of King Street Capital’s 13F Portfolio: 4.73%
Number of Hedge Fund Holders: 27
8×8, Inc. (NYSE:EGHT) is a company offering voice over IP products, that represents 4.73% of Higgins’ Q3 portfolio. Higgins, via King Street Capital, holds 2.4 million shares in 8×8, Inc., worth $56.1 million as of Q3 2021.
On November 2, the Q3 EPS for 8×8, Inc. came in at -$0.38, missing estimated EPS by -$0.05. Revenue for the quarter equaled $151.56 million, up 17.37% from the prior-year quarter, outperforming estimates by $3.55 million.
Barclays analyst Ryan MacWilliams revealed in an October 20 report that ever since 8×8, Inc. changed its senior management, investors were becoming interested in the stock despite the industry headwinds. However, he intimated investors about competitive companies offering extensive financial stability, advanced technology, and better partnerships. He initiated coverage of 8×8, Inc. with an Equal Weight rating and a $25 price target.
As of the third quarter, 27 hedge funds in the database of Insider Monkey reported owning stakes in 8×8, Inc., worth $787.1 million. This is compared to 29 funds in the preceding quarter, with a total stake value of $928 million. Daniel Patrick Gibson’s Sylebra Capital Management is the leading stakeholder in 8×8, Inc., with over 13.6 million shares worth $318.3 million.
6. Wells Fargo & Company (NYSE:WFC)
King Street Capital’s Stake Value: $56,852,000
Percentage of King Street Capital’s 13F Portfolio: 4.79%
Number of Hedge Fund Holders: 88
A California-based multinational financial services corporation, Wells Fargo & Company offers services including asset and wealth management, private equity, commodities trading, insurance, and banking. As one of the top stock picks of Brian Higgins, Wells Fargo & Company accounts for 4.79% of his Q3 portfolio. Higgins’ King Street Capital holds a $56.8 million position in the company as of September this year.
The leading Wells Fargo & Company stakeholder as of Q3 2021 is Boykin Curry’s Eagle Capital Management, with a $1.56 billion stake. Overall, 88 hedge funds monitored by Insider Monkey were long Wells Fargo & Company as of the third quarter, down from 94 funds in the preceding quarter.
JPMorgan analyst Vivek Juneja on November 3 kept a Neutral rating on Wells Fargo & Company, stating that the company negatively changed the language in its Q3 filing regarding its regulatory issues, and it would take a lot of time to satisfy regulators after this occurrence.
The Q3 earnings were posted by Wells Fargo & Company on October 14, with EPS in the period being $1.22, beating estimates by $0.28. The $18.83 billion revenue for Q3 also outperformed estimated revenue by $542.17 million.
In addition to Booking Holdings Inc., The Wendy’s Company, T-Mobile US, Inc., and Vornado Realty Trust, Wells Fargo & Company is a notable stock in Brian Higgins’ Q3 portfolio.
Here is what L1 Capital has to say about Wells Fargo & Company in its Q2 2021 investor letter:
“Wells Fargo (Long +16%) was the strongest contributor to portfolio performance over the quarter. Wells Fargo shares rallied given a better outlook for bad debts driven by improving employment and house price trends. The company had been very undervalued due to excessive fears around likely bad debts due to the pandemic, the continued regulatory “asset cap” (a punishment that was put in place in 2017 for numerous compliance failures) and an inability to commence buybacks. The share price has subsequently recovered strongly in recent months as the company has progressed its turnaround program under the leadership of the well-regarded CEO, Charles Scharf (former CEO of Visa and BNY Mellon). Wells Fargo is now closer to getting the asset cap lifted and has announced a huge cost out program (US$8b+) as well as an $18b buyback program to be completed over the next 12 months. Wells Fargo shares have rallied more than 50% since we initiated the position in late 2020. Given the strong rally, we elected to exit our position and rotate into stocks with larger valuation upside.”
5. Radian Group Inc. (NYSE:RDN)
King Street Capital’s Stake Value: $57,368,000
Percentage of King Street Capital’s 13F Portfolio: 4.84%
Number of Hedge Fund Holders: 27
Radian Group Inc. (NYSE:RDN), a mortgage and real estate insurance company, is one of Brian Higgins’ top stock picks from the third quarter, with his firm owning 2.52 million shares in Radian Group Inc., worth $57.36 million. The stock accounts for 4.84% of King Street Capital’s Q3 portfolio.
Radian Group Inc., on November 2, posted Q3 earnings. EPS for the quarter came in at $0.67, missing analysts’ consensus estimates by -$0.04. The $325.76 million revenue was down 13.19% as compared to the prior-year quarter, missing estimated revenue by -$10.46 million.
BofA analyst Mihir Bhatia downgraded Radian Group Inc. on November 17 to Underperform from Buy with a $22.50 price target as part of a broader view on the mortgage insurance sector.
Richard Mashaal’s Rima Senvest Management is the leading Radian Group Inc. stakeholder as of Q3, with a $76.3 million position in the company. Overall, 27 hedge funds in the database of 867 elite funds tracked by Insider Monkey were bullish on Radian Group Inc., down from 30 funds in Q2.
4. ZIM Integrated Shipping Services Ltd. (NYSE:ZIM)
King Street Capital’s Stake Value: $62,637,000
Percentage of King Street Capital’s 13F Portfolio: 5.28%
Number of Hedge Fund Holders: 22
ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) is one of the top 20 global cargo shipping companies, headquartered in Israel. ZIM Integrated Shipping Services Ltd. posted on November 17 solid Q3 earnings. EPS in the quarter equaled $12.16, topping estimates by $2.83. The $3.14 billion revenue also outperformed estimated revenue by $374.27 million. The company announced that it would pay out almost 20% of the net quarterly income as dividends in December, which makes the dividend per common share amount to $2.50.
King Street Capital holds a $62.6 million position in ZIM Integrated Shipping Services Ltd., as of the third quarter, which accounts for 5.28% of the firm’s total 13F securities.
Jim Simons’ Renaissance Technologies is the leading stakeholder in ZIM Integrated Shipping Services Ltd., with 2.34 million shares valued at $118.8 million. Overall, 22 hedge funds monitored by the Q3 database of Insider Monkey were bullish on the stock, with a total stake value of $552.5 million.
Here is what Evermore Global Advisors has to say about ZIM Integrated Shipping Services Ltd. in its Q2 2021 investor letter:
“ZIM Integrated Shipping Services (ZIM) was the largest contributor to the Fund’s performance during the second quarter. With a market cap of $5.2 billion, ZIM is an Israel-based containership operator that had its initial public offering on the New York Stock Exchange this past January. As a reminder, we discussed ZIM at length in the Q1 2021 quarterly commentary as one of the new investments that we initiated during that period.
There were several notable developments during the second quarter. Given the company’s unique asset light business model and targeted, global niche approach, ZIM continued to generate exceptionally strong cash flows. ZIM ended the period with approximately $1.25 billion in cash and about $915 million in net debt. Due to the strong operational performance, the company further strengthened its balance sheet by redeeming its Series 1 and Series 2 unsecured notes due in 2023. With the early redemption of the unsecured notes, ZIM was no longer subject to certain dividend restrictions, and it declared a special dividend of $2 per share, which will be payable on Sept 15th (goes ex on August 24th). Lastly, management revised its 2021 full year EBITDA guidance from $1.4 – 1.6 billion to $2.5 – $2.7 billion, which was a sizable increase compared to the levels set last March. To that end, we continue to have high conviction in our position in ZIM.”
3. Booking Holdings Inc. (NASDAQ:BKNG)
King Street Capital’s Stake Value: $83,560,000
Percentage of King Street Capital’s 13F Portfolio: 7.05%
Number of Hedge Fund Holders: 96
Booking Holdings Inc. is a travel company that owns and manages multiple travel fare aggregators and travel metasearch engines, including Booking.com, Kayak.com, and Cheapflights, among others. Higgins holds an $83.5 million stake in Booking Holdings Inc., which accounts for 7.05% of his Q3 investments.
As of September this year, 96 hedge funds in the database of Insider Monkey were long Booking Holdings Inc., down from 100 funds in the preceding quarter. The total stakes reported by the Q3 hedge funds amounted to $8.42 billion. Harris Associates is the leading stakeholder in the company, with 668,053 shares valued at $1.58 billion.
Booking Holdings Inc. announced Q3 results on November 3. EPS in the period totaled $37.70, outperforming estimates by $4.67. Revenue for the quarter came in at $4.68 billion, up 77.12% year-over-year, exceeding estimated revenue by $385.44 million.
Tigress Financial analyst Ivan Feinseth on November 23 reiterated a Strong Buy rating on Booking Holdings Inc. and a target price of $3,150. The price target represents a potential return of over 35% from current levels.
Here is what L1 Capital has to say about Booking Holdings Inc. in its Q3 2021 investor letter:
“We reinvested the proceeds from our successful investment in Thermo Fisher in Booking Holdings (Booking). Booking was an investment in the Fund at Inception and was featured in our inaugural June 2019 Quarterly Report. The company owns the world’s largest online travel agent (OTA), Booking.com. To say the past 2.5 years has been volatile for Booking is a major understatement. Booking’s management has had to address the COVID-19-driven collapse in demand for travel accommodation, as well as to manage volatile demand as the world gradually recovers, interrupted by second and third waves of COVID-19 as variants arise.
Throughout these volatile market conditions, Booking’s management has executed against a consistent strategy, investing in its platform and network of accommodation providers, and expanded its associated services while improving efficiencies. We believe Booking will come out of the COVID-19 environment a stronger business, with less competition and consumers more predisposed to booking their travel accommodation online. Travel is recovering strongly as vaccination rates increase and COVID-19 related restrictions are lifted, and we expect Booking’s earnings and cash flow to also recover strongly over the coming years.”
2. Valaris Limited (NYSE:VAL)
King Street Capital’s Stake Value: $85,282,000
Percentage of King Street Capital’s 13F Portfolio: 7.19%
Number of Hedge Fund Holders: 26
Valaris Limited (NYSE:VAL), the largest offshore drilling and well drilling company in the world, is one of the top stocks in Brian Higgins’ Q3 portfolio, with his firm owning an $85.2 million stake in the company, which accounts for 7.19% of the total investments at King Street Capital.
Valaris Limited posted on November 2 its Q3 results. EPS in the period totaled -$0.63, beating estimates by $0.08. Revenue for the quarter equaled $326.70 million, missing estimates by -$7.75 million.
As of the third quarter of 2021, 26 hedge funds were reported owning stakes in Valaris Limited, worth over $1 billion. This is compared to 29 funds in the preceding quarter, with a total stake value of $875.4 million.
1. T-Mobile US, Inc. (NASDAQ:TMUS)
King Street Capital’s Stake Value: $99,273,000
Percentage of King Street Capital’s 13F Portfolio: 8.37%
Number of Hedge Fund Holders: 89
T-Mobile US, Inc. is the largest holding in Brian Higgins’ Q3 portfolio, representing 8.37% of his total 13F securities. Higgins, via King Street Capital, holds 777,030 shares in T-Mobile US, Inc., valued at $99.2 million. T-Mobile US, Inc. is the second largest wireless network operator in the United States.
On November 2, the Q3 EPS for T-Mobile US, Inc. amounted to $1.31, beating estimates by $0.82. Revenue for the quarter totaled $19.62 billion, missing estimates by -$593.78 million. After the Q3 earnings, Morgan Stanley analyst Simon Flannery on November 4 raised the price target on T-Mobile US, Inc. to $152 from $148 and kept an Overweight rating on the shares.
As of Q3 2021, 89 hedge funds monitored by Insider Monkey reported owning stakes worth $6.92 billion in T-Mobile US, Inc., with Andreas Halvorsen’s Viking Global being the leading stakeholder in the company, holding a $1.3 billion stake.
Here is what ClearBridge Investments has to say about T-Mobile US, Inc. in its Q1 2021 investor letter:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where T-Mobile trailed after generating robust returns earlier in the recovery.”
You can also take a look at Top 10 Stock Picks of Joe Huber’s Huber Capital Management and 10 Stocks to Sell According to Billionaire James Dinan.
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This article is originally published at Insider Monkey.
