Josh Friedman’s Canyon Capital Portfolio: Top 10 Stock Picks

In this article, we examined Josh Friedman’s portfolio management strategy and approach to investing in stocks. We also reviewed Canyon Capital’s top 10 stock picks. You can skip our detailed discussion about Josh Friedman’s investment philosophy and portfolio management strategies and jump directly to Josh Friedman’s Canyon Capital Portfolio: Top 5 Stock Picks.

Joshua Friedman, the founder of the $17.8 billion Dallas-based Canyon Capital Advisors, uses a value-oriented investment approach across a wide range of securities described by credit complexity, restructuring, and other forms of disruption that disconnect prices from the real value. From Canyon’s inception in 1993 through August 31, 2014, the firm’s flagship fund garnered annualized returns of 10.7% while returns on its Balanced Fund were 13.4% from 2004 through 2014.

Some of the notable stock picks of Friedman’s fund include Ardagh Metal Packaging S.A. (NYSE:AMBP), Encompass Health Corporation (NYSE:EHC), Boyd Gaming Corporation (NYSE:BYD), Dell Technologies Inc. (NYSE:DELL), and Valaris Limited (NYSE:VAL).

Canyon Capital’s and Josh Fridman’s top 10 stock picks

Joshua Friedman of Canyon Capital Advisors

Our Methodology:

For this analysis, we analyzed Canyon Capital’s 13F portfolio for the second quarter of 2022. 

10. Ardagh Metal Packaging S.A. (NYSE:AMBP)

 

Canyon Capital’s stake value: $62 Million

 

Josh Friedman’s Canyon Capital is the leading stakeholder in Ardagh Metal Packaging S.A. (NYSE:AMBP) with a stake worth $62 million. Ardagh Metal Packaging S.A. (NYSE:AMBP) is a small-cap growth company engaged in supplying metal beverage cans in Europe, the United States, and Brazil. In March, Canyon Capital raised its stake in the company by 2% after the recession and high competition fears caused the share price to plummet. Friedman’s firm has held a stake in the company over the past three quarters. 

Shares of Ardagh Metal Packaging S.A. (NYSE:AMBP) are still presenting a buying opportunity for new investors as the recent share price selloff has helped in soothing its valuation. 

In the first quarter investor letter, Rhizome Partners, an investment management firm, expressed confidence in Ardagh Metal Packaging S.A. (NYSE:AMBP). Here is what Rhizome Partners stated:   

“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)

 

Canyon Capital’s stake value: $19.3 Million

 

Encompass Health Corporation (NYSE:EHC) is among Canyon Capital’s top 10 stock picks. The firm first initiated a position in the healthcare services provider during the third quarter of 2021 after its price began to fall from a 52-week high of about $70, and increased its stake in the following two quarters to capitalize on further declines. In addition, the firm benefited from the spin-off of its home health and hospice business. Like Ardagh Metal Packaging S.A. (NYSE:AMBP), shares of Encompass Health Corporation (NYSE:EHC) are trading at attractive valuations with strong fundamentals. In addition, Encompass Health Corporation (NYSE:EHC) offers a dividend yield of around 1.3%.

Encompass Health Corporation (NYSE:EHC) also continues to gain hedge funds’ confidence. As of the end of March, Encompass Health Corporation (NYSE:EHC) was in 48 hedge fund portfolios compared to 40 in the previous quarter.  Paradice Investment Management and Bailard Inc were among the leading stakeholders in Encompass Health Corporation (NYSE:EHC). 

8. Boyd Gaming Corporation (NYSE:BYD)

 

Canyon Capital’s stake value: $69 Million

 

Like Ardagh Metal Packaging S.A. (NYSE:AMBP) and Encompass Health Corporation (NYSE:EHC), Josh Friedman’s Canyon Capital lifted its stake in Boyd Gaming Corporation (NYSE:BYD) during the March quarter. Boyd Gaming Corporation (NYSE:BYD) shares selloff in the past two quarters due to recession fears is creating an opportunity for value investors.

In the first quarter investor letter, Baron Funds, an asset management firm, highlighted the confidence in Boyd Gaming Corporation (NYSE:BYD). Here’s what Baron Funds stated about Boyd Gaming Corporation (NYSE:BYD):

“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 the recent private market casino and gaming transactions.”

7. Dell Technologies Inc. (NYSE:DELL)

 

Canyon Capital’s stake value: $67 Million

 

Unlike Boyd Gaming Corporation (NYSE:BYD), Ardagh Metal Packaging S.A. (NYSE:AMBP) and Encompass Health Corporation (NYSE:EHC), Canyon Capital has been lowering its stake in Dell Technologies Inc. (NYSE:DELL) over the past few quarters. Due to broader market trends, Dell Technologies Inc. (NYSE:DELL) shares have been under pressure so far this year. 

As of the end of the second quarter, several major hedge funds have stakes in Dell, including Israel Englander’s Millennium Management, Cliff Asness’ AQR Capital and Jim Simons’ Renaissance Technologies.

6. Valaris Limited (NYSE:VAL)

 

Canyon Capital’s stake value: $69 Million

 

Josh Friedman’s firm took advantage of a sharp rise in the stock price of Valaris Limited (NYSE:VAL). During the first quarter, the firm sold 30% of its stake in Valaris Limited (NYSE:VAL) as shares traded near an all-time high. Canyon held a stake worth $69 million in Valaris Limited (NYSE:VAL) at the end of June.

Valaris Limited (NYSE:VAL) is engaged in offshore contract drilling services to the international oil and gas industry. The fundamentals of Valaris Limited (NYSE:VAL) are strong considering its healthy backlog and new contract awards for both floaters and jack-ups. Valaris Limited (NYSE:VAL) is a good stock for value investors. Unlike Ardagh Metal Packaging S.A. (NYSE:AMBP), Encompass Health Corporation (NYSE:EHC), and  Dell Technologies Inc. (NYSE:DELL), Valaris Limited (NYSE:VAL) does not offer dividends to investors. 

 

 

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Disclosure: None. Josh Friedman’s Canyon Capital Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.