In this article, we discuss 10 stocks to consider in the portfolio of Michael McCaul.
Michael McCaul is an attorney and politician serving in the United States House of Representatives from the 10th congressional district in Texas. Hailing from the Republican party, McCaul has served in the House since 2005. The lawmaker has been placed on many important committees during his tenure, including the House Committee on Homeland Security in the three previous administrations. McCaul is an active stock trader on Wall Street, disclosing trades worth over $473 million in 2021.
Of the 7,000+ trades that Michael McCaul disclosed in 2021, over 3,300 were related to buying stocks and over 3,700 involved selling them. The former were worth more than $238 million, while the latter valued at almost $234 million. The financial and industrial sectors featured heavily in these trades. Although lawmakers are required by law to disclose stock trades within 45 days of the transactions, many trades that McCaul disclosed in March this year were made in November last year.
Some of the top stocks to consider in the portfolio of Michael McCaul include Visa Inc. (NYSE:V), Micron Technology (NASDAQ:MU), and Henry Schein, Inc. (NASDAQ:HSIC), among others discussed in detail below.
Investments, Finance
Our Methodology
The stocks listed below were picked from the Periodic Transaction Report(s) that Michael McCaul is obliged to file. It is important to clarify that the stocks listed below were picked from the public record of investments McCaul and his family have made in the past few months. The purchases may not have been made by McCaul but only disclosed on behalf of his family.
Hedge fund sentiment was included as a classifier as well. Data from around 900+ elite hedge funds tracked by Insider Monkey at the end of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Michael McCaul Stock Portfolio: Stocks To Consider
10. Smith & Nephew plc (NYSE:SNN)
Number of Hedge Fund Holders: 13
Smith & Nephew plc (NYSE:SNN) makes and sells medical devices. According to a security filing dated March 3, McCaul purchased shares of Smith & Nephew plc (NYSE:SNN) worth somewhere between $15,000 and $50,000 in November last year. The trade was disclosed almost two months after it was made.
Hedge funds have unloaded Smith & Nephew plc (NYSE:SNN) stock in recent months. At the end of the fourth quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $110 million in Smith & Nephew plc (NYSE:SNN), compared to 19 in the preceding quarter worth $106 million.
Just like Visa Inc., Micron Technology, and Henry Schein, Inc., Smith & Nephew plc (NYSE:SNN) is one of the stocks that elite investors are keeping their eye on.
9. Simpson Manufacturing Co., Inc. (NYSE:SSD)
Number of Hedge Fund Holders: 16
Simpson Manufacturing Co., Inc. (NYSE:SSD) markets wood and concrete construction products. Top hedge funds hold bullish positions in the stock. Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Ariel Investments is a leading shareholder in Simpson Manufacturing Co., Inc., with 677,240 shares worth more than $94 million.
Mandatory filings by Michael McCaul dated early March show that the lawmaker purchased Simpson Manufacturing Co., Inc. stock worth somewhere between $1,000 and $15,000 on November 1. The transaction in this regard was disclosed over two months after it was made.
In its Q4 2020 investor letter, Conestoga Capital Advisors, an asset management firm, highlighted a few stocks and Simpson Manufacturing Co., Inc. was one of them. Here is what the fund said:
“Simpson Manufacturing Co., Inc. is a leading provider of structural connectors to the U.S. housing market. Despite reporting better-than-expected growth in its business, investors focused on several negative factors, including concerns about rising raw material prices, tough 2021 comparisons and the halted rollout of mechanical anchors and fasteners with Home Depot. We believe Simpson Manufacturing Co., Inc. will continue to benefit from a strong residential housing market particularly in the Southern and Western parts of the U.S. Additionally, the company’s focus on internal improvement with respect to working capital should drive long-term shareholder returns.”
8. Insight Enterprises, Inc. (NASDAQ:NSIT)
Number of Hedge Fund Holders: 18
Insight Enterprises, Inc. (NASDAQ:NSIT) provides information technology solutions. A Periodic Transaction Report from November 10 last year shows that McCaul purchased Insight Enterprises, Inc. stock worth $1,000-$15,000 and disclosed the transaction in this regard on March 3, 2022.
The hedge fund sentiment around Insight Enterprises, Inc. stock is largely positive. At the end of the fourth quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $431 million in Insight Enterprises, Inc., up from 16 in the preceding quarter worth $357 million.
L1 Capital, in its Q2 2021 investor letter, mentioned Insight Enterprises, Inc.. Here is what the fund has to say in its letter:
“Insight Enterprises, Inc., a previous top-ten holding, was divested in full during the quarter. In conjunction with inline Q1 2021 results, Insight announced the intention for CEO, Ken Lamneck to retire by the end of this year. A new CEO has not yet been announced. Ken Lamneck has been CEO of Insight Enterprises, Inc. for over 11 years and is currently 65 years old, so his retirement was not a shock. However, we do consider Lamneck to have been central to shareholder value creation, including through successful acquisitions. A period of uncertainty while leadership is transitioned to an unknown new CEO, as well as share price appreciation led us to conclude more attractive risk adjusted opportunities lay elsewhere in our Portfolio and Bench of potential investments.”
7. Beacon Roofing Supply, Inc. (NASDAQ:BECN)
Number of Hedge Fund Holders: 19
Beacon Roofing Supply, Inc. (NASDAQ:BECN) markets roofing materials and building products. The company has witnessed a decrease in the number of hedge fund holders in the past few months. At the end of the fourth quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $213 million in Beacon Roofing Supply, Inc., compared to 20 in the preceding quarter worth $242 million.
Latest filings from Michael McCaul reveal that the lawmaker bought Beacon Roofing Supply, Inc. worth between $15,000 and $50,000 in early November last year. The transaction in this regard was disclosed on March 3.
In its Q3 2021 investor letter, Fiduciary Management, an asset management firm, highlighted a few stocks and Beacon Roofing Supply, Inc. was one of them. Here is what the fund said:
“Beacon Roofing Supply, Inc. is the largest publicly traded (#2 overall) distributor of roofing materials and complementary building products in the U.S. and Canada. Beacon serves greater than 90,000 customers and offers 140,000 SKUs from over 400 branches throughout all 50 states (97% of sales) and 6 Canadian provinces (3% of sales). Beacon makes 1.7 million annual deliveries (within a two-hour radius) using its fleet of specialized trucks. Since the sale of the non-core Interiors division (2021), their run-rate sales have been 53% Residential Roofing; 25% Commercial Roofing; and 22% Complementary Building Products (siding, windows, specialty exterior building products, insulation, and waterproofing systems).
Good Business
- Manufacturers and distributors operate in a rational and consolidated market, with the top three distributors accounting for 54% of a $28 billion industry (almost two times what they had ten years ago).
- The industry is led by ABC Supply Co. Inc. (24% share), Beacon Roofing (20% share), and SRS (10% share), with the remaining 46% held by 1,500 smaller distributors.
- It is estimated that roughly 80% of roofing sales are replacement, and that the U.S. housing stock is now over 40 years old on average. Ninety-four percent of U.S. re-roofing demand is thought to be non-discretionary.
- With management’s focus on organic growth and maintaining discipline, rising returns should follow.
- Aided by the Interiors divestiture, the fiscal third quarter 2021 net debt-to-EBITDA ratio dropped to 2.4 times, providing financial flexibility and likely the ability to buy back stock and issue dividends.
- Beacon Roofing Supply, Inc. is a simple scale business, and roofing distribution is unlikely to undergo major change.
Valuation
- Despite newfound financial health and flexibility, and strong fundamentals, Beacon’s shares have receded from $60 in May to $50 in August (-17%), and the stock trades at a discount to its 10-year average for the next twelve months P/E (11 times), enterprise value-to-EBITDA (9 times), and enterprise value-to-sales (0.85 times). With steady execution, we think there is scope for Beacon to trade at a premium to 10-year averages and north of 1 times EV/Sales.
- If Beacon were to grow 4.5% and reach the low end of their EBITDA margin target by fiscal year 2026 (9%-11%) and were ascribed a 15 P/E ratio, the compound return would be approximately 15%.
Management
- New CEO Julian Francis has refocused the company on its core Roofing/Exteriors business (divesting Interiors and substantially de-risking the balance sheet), and inward on branch productivity, margin improvement, organic growth, and realizing the benefits of scale.
- Frank Lonegro, CFO, recently joined Beacon from CSX Corporation, where he was the CFO and Executive VP.
Investment Thesis
Beacon Roofing Supply, Inc. is a simple business driven by largely non-cyclical, non-discretionary demand. While Beacon has achieved scale in an industry that has consolidated substantially over the last decade, under prior management they were saddled with (1) a challenging and costly integration (2) substantial debt and interest costs, and (3) a separate Interiors business. Under their new CEO they sold Interiors, and are progressing on strategic initiatives. Strong industry fundamentals have led to rapid restoration of financial flexibility and Beacon’s future now looks solid. While expecting a sequential slowdown in growth (in part due to lower y/y storm activity) and a decline in margin, we think enhanced focus on organic growth and structural margin improvement should help reaccelerate future earnings, particularly as replacement demand will likely benefit from the strong build period from 2000-2006.”
6. Concentrix Corporation (NASDAQ:CNXC)
Number of Hedge Fund Holders: 23
Concentrix Corporation (NASDAQ:CNXC) provides data processing and related solutions. Filings from March 3 show that McCaul bought Concentrix Corporation stock worth somewhere between $15,000 and $50,000 on November 3 last year.
Hedge funds have been loading up on Concentrix Corporation stock as well. At the end of the fourth quarter of 2021, 23 hedge funds in the database of Insider Monkey held stakes worth $391 million in Concentrix Corporation, compared to 21 in the preceding quarter worth $586 million.
In addition to Visa Inc., Micron Technology, and Henry Schein, Inc., Concentrix Corporation is one of the stocks that hedge funds are monitoring.
In its Q4 2021 investor letter, FPA Queens Road, an asset management firm, highlighted a few stocks and Concentrix Corporation was one of them. Here is what the fund said:
“Concentrix Corporation, a customer experience solutions provider, spun off from one of our other portfolio holdings (Synnex) in December of 2020, continued to validate its value proposition by adding over 24 new clients in the fourth quarter, continuing a trend. Concentrix Corporation, which expects to achieve above-average market growth and improved margins, initiated a dividend during the year. Given the company’s growth expectations and what we believe to be a very reasonable valuation, we like the investment opportunity Concentrix Corporation offers.”
5. Skechers U.S.A., Inc. (NYSE:SKX)
Number of Hedge Fund Holders: 31
Skechers U.S.A., Inc. (NYSE:SKX) makes and sells footwear. Hedge funds have not been keen on the stock in recent months. At the end of the fourth quarter of 2021, 31 hedge funds in the database of Insider Monkey held stakes worth $855 million in Skechers U.S.A., Inc., compared to 35 in the preceding quarter worth $744 million.
Securities filings from Michael McCaul dated March 3 reveal that the lawmaker bought Skechers U.S.A., Inc. stock worth somewhere between $50,000 and $100,000 on November 23 last year, disclosing the transaction in this regard after 42 days.
4. Arch Capital Group Ltd. (NASDAQ:ACGL)
Number of Hedge Fund Holders: 33
Arch Capital Group Ltd. (NASDAQ:ACGL) provides insurance products and services. The latest filings by McCaul have been disclosures on the purchase of Arch Capital Group Ltd. stock. The lawmaker bought shares of the firm on November 4, 2021. The transaction was worth $1,000-$15,000.
Elite hedge funds remain bullish on Arch Capital Group Ltd. stock as well. At the end of the fourth quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Arch Capital Group Ltd., compared to 31 in the preceding quarter worth $1.2 billion.
In its Q4 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Arch Capital Group Ltd. was one of them. Here is what the fund said:
“We repurchased global insurer Arch Capital in Q1 2020 when the pandemic began. As a long-time holding, Arch is a company we know well. It’s an industry leader capably managed by a long-tenured team that has achieved an enviable underwriting record, while at the same time seeking opportunistic growth. Arch’s insurance business is a three-legged stool, with lines covering primary insurance, reinsurance and mortgage insurance. Primary insurance and reinsurance are influenced by conditions in the property casualty industry, where pricing is currently positive following concerns about inadequate pricing over the past few years. The mortgage insurance industry is working its way through complications wrought by the pandemic, but in contrast to other underwriters that pulled back from writing business, Arch has leaned into this business as it saw an opportunity to earn excess returns—once again showing management’s acumen for creating value during a disruption.”
3. Henry Schein, Inc. (NASDAQ:HSIC)
Number of Hedge Fund Holders: 35
Henry Schein, Inc. provides healthcare products and services. Major hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Generation Investment Management is a leading shareholder in Henry Schein, Inc., with 13.4 million shares worth more than $1 billion.
Henry Schein, Inc. has also been on the radar of Michael McCaul. The lawmaker, per filings from November last year, bought new shares of Henry Schein, Inc. on November 5. The transaction was disclosed in March. The shares bought were worth between $1,000 and $15,000.
2. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 83
Micron Technology markets semiconductor products. Mandatory filings from November of last year reveal that Michael McCaul made transactions related to Micron Technology stock on November 9. The shares bought were worth between $1,000 and $15,000.
Hedge funds have been piling into Micron Technology as well. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Micron Technology, compared to 63 in the previous quarter worth $3.8 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology was one of them. Here is what the fund said:
“Micron Technology is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron Technology showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron Technology is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 142
Visa Inc. is a payments technology firm. At the end of the fourth quarter of 2021, 142 hedge funds in the database of Insider Monkey held stakes worth $29 billion in Visa Inc., compared to 143 in the preceding quarter worth $26 billion.
Filings from late November 2021 show that McCaul bought Visa Inc. stock worth somewhere between $100,000 and $250,000 on November 24. The transactions in this regard were disclosed on March 3, 41 days after it was made.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Visa Inc. was one of them. Here is what the fund said:
“To make room for these new names with more attractive outlooks related to the reopening, we sold out of companies where the thesis is not playing out at the pace we expected including Visa Inc..”
You can also take a peek at 10 Best Medical Stocks Under $10 and 15 Best Warren Buffett Stocks to Buy Now.
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This article is originally published at Insider Monkey.
