Ricky Sandler’s Top 10 Stock Picks

In this article we presented billionaire Ricky Sandler’s top 10 stock picks.

Ricky Sandler is an American hedge fund manager who founded Eminence Capital in 1999. The hedge fund manages about $3.6  billion in a core long/short equity strategy and roughly $4.2 billion in a long equity strategy.

Investing runs in the family of Sandler. His father Harvey Sandler was an investment manager. His brother Andrew Sandler oversees Sandler Plus hedge fund, which surged approximately 9.5% in March, thanks to Andrew’s cautious and bearish approach.

Two Brothers With a Different Investment Approach

During the initial days of the coronavirus outbreak, Ricky Sandler called into a CNBC show and urged viewers to reject any negative sentiments and pile into stocks.

“People are totally missing what is happening here. Every new headline, every new hysteria is making people more nervous and it’s actually very, very positive,” Sandler said.

Immediately after the interview, Ricky’s brother Andrew Sandler posted on his social media that he disagreed with his brother. As it turns out, Andrew was right. Ricky Sandler’s Eminence Capital, which gained 21% in 2019, had to experience massive losses after the coronavirus crisis.

A graduate of the University of Wisconsin, Sandler rose to fame for his successful bet on Keurig Green Mountain. Sandler had built a $195 million position in the company and believed that the stock was worth $85 – $100. Sandler, who co-founded his first hedge Fusion Partners at the age of 25, made millions for his clients when PE firm JAB Group agreed to pay $92 per share, or close to $14 billion, for Keurig in 2015.

In March 2021, Sandler gave an interview to CNBC and talked about several important topics.

Beginning of an Economic Expansion

“We’re still constructive on the markets, clearly not as bullish as we were a year ago. I tend to like to be a little more contrarian today where I think many people are more optimistic. I think that the best opportunities happen in times of a big dislocation, which we’re not seeing today. But having said that since a year ago, the government has done a lot more than I even expected then, even though we expected them to do a lot. The Fed is on your side and I think from a timing standpoint, we’re very much at the beginning of an economic expansion. Very much at the beginning of the economy reopening, the Fed has told you as recently as a couple of days ago that they’re not going to move or even talk about moving for or maybe the whole year. So I think, one can still be optimistic about markets.

Sandler’s Cautiousness

I’d say we’re a lot more selective today. I don’t think it’s sort of buy everything, and buy anything. So there are more pockets of the markets that are interesting, and there are clearly pockets of the market that are speculative and have gotten extended and overvalued. We’re seeing some early signs of behavior or maybe even not early signs but behavior that is less healthy than we’d like to see. Having said that, we are definitely still constructed.

It depends on which parts of the market and which sectors of the market so I think the reasonable amount broadly, but when you take a big picture, look at where interest rates are and the alternatives are for capital. I think business cash flows and equities are still a very reasonable place. I think the big picture risks around inflation business cash flows ought to provide good protection from that, and we think the economy ought to be exceptionally strong, the amount of savings that have been built up through the pandemic, the amount that the government has already done, the amount they’re talking about doing going forward are unprecedented levels, things that nobody that has been investing in these markets have seen. So we think that the level of economic strength over the next 18 months is going to be enormous. I don’t know in terms of percentage terms but certainly from a timing standpoint. It does not feel like the right time to get off the train of the market or where we’ve seen enough of the good news. We haven’t even started to see the economy reopen, we haven’t even started to see the cyclical uplift as it’s just rolling through. So at a minimum, those that would sell the news, that would probably be a back half of 2021 event.

I think we had been positioned pretty optimistically, and I’d say very optimistically in what I would describe as the more cyclical and value sectors, both coming out of the downturn of the early phase of the pandemic, and then going into the vaccine, we have definitely taken some profits, and some things that are up a lot and have reduced kind of overall levels of exposure. We’ve been using some fixed income shorts particularly treasury shorts as a hedge and frankly as a bet given, what we think is happening to the economy, and so I’d say, we’re not as an overall portfolio, dramatically more hedged but probably a little bit more, and I think would continue to use strength as opportunities to do that. I think it’s about being more selective and probably about using a little bit less balance sheet overall, given kind of the individual stock volatility, and maybe we’re heading to, in terms of the point of the cycle we’re at.”

Ricky Sandler is not alone. The entire hedge fund industry is going through difficult times. The industry that once used to post sterling gains is also feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Ricky Sandler of Eminence Capital

Let’s start our list of Ricky Sandler’s top 10 stock picks.

10. Morgan Stanley (NYSE: MS)

Value: $195,975,000
Percent of Ricky Sandler’s 13F Portfolio: 1.83%
No. of Hedge Fund Holders: 66

Morgan Stanley ranks 10th in the list of Ricky Sandler’s top 10 stock picks. Eminence Capital ended the fourth quarter with 2.9 million shares of the company, worth $196 million. CFRA analyst Kenneth Leon recently upgraded the stock to Buy from Hold saying that the collapse of Archegos Capital provides an enhanced buying opportunity. The firm also said that Morgan Stanley will benefit from equity trading volumes and increasing transaction fees. The stock has gained 150% over the last 12 months.

As of the end of the fourth quarter, there were 66 hedge funds in Insider Monkey’s database that held stakes in Morgan Stanley, compared to 70 funds in the third quarter. Eagle Capital Management, with 13 million shares of MS, is the biggest stakeholder in the company.

Artisan Value Fund, in their Q4 2020 investor letter, mentioned Morgan Stanley (NYSE: MS) and emphasized their views on the company. Here is what Artisan Value Fund has to say about Morgan Stanley in their Q4 2020 investor letter:

“Top three contributor Morgan Stanley, a leading global financial services company, came into the portfolio in Q4 as a result of its purchase of E*TRADE. E*TRADE is a great fit on Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily de-risked Morgan Stanley’s business by adding less volatile fee streams and deemphasizing the risk-obtuse culture of prior management. We believe the market will come to appreciate this mix shift over time.”

9. DuPont de Nemours, Inc. (NYSE: DD)

Value: $215,216,000
Percent of Ricky Sandler’s 13F Portfolio: 2.01%
No. of Hedge Fund Holders: 60

Ricky Sandler’s Eminence Capital’s slashed its stake in chemicals giant Dupont De Nemours Inc. by 36% in the fourth quarter, ending the period with 3.03 million shares of the company, worth $215.23 million. The company recently reiterated its full-year adjusted EPS guidance. For 2021, the company sees its operating EBITDA between $3.83 billion – $3.93 billion. Earlier in March, the company approved new $1.5 billion share buyback program which expires on June 30, 2022.

A total of 60 hedge funds tracked by Insider Monkey were bullish DD at the end of the fourth quarter, down from 61 funds a quarter earlier.

Artisan Value Fund, in their Q4 2020 investor letter, mentioned DuPont de Nemours, Inc. (NYSE: DD). Here is what Artisan Value Fund has to say about DuPont de Nemours, Inc. in their Q4 2020 investor letter:

“DuPont de Nemours operates as a holding company engaged in the development of specialty materials, chemicals and agricultural products. It operates through the following segments: electronics and imaging; nutrition and biosciences; transportation and industrial; safety and construction and non-core. We believe DuPont de Nemours has strong fundamentals, but the margin of safety deteriorated due to the lingering effects of trade wars and separation charges related to the sale of its nutrition and bioscience division to International Flavors & Fragrances. We sold in favor of better opportunities.”

8. RealPage, Inc. (NASDAQ: RP)

Value: $248,111,000
Percent of Ricky Sandler’s 13F Portfolio: 2.32%
No. of Hedge Fund Holders: 48

RealPage ranks 8th in the list of Ricky Sandler’s top 10 stock picks and portfolio. The company offers a software platform for the real estate industry. Clients use the company’s platform to gain insights into asset performance, leverage data insights and monetize space to create incremental yields. In the fourth quarter, the company posted adjusted EPS of $0.50, beating the Wall Street estimates by $0.02. Revenue in the quarter jumped 17% to $298.34 million, above the Street forecasts by $3.68 million.

Stockbridge Partners is one of the 48 hedge funds tracked by Insider Monkey having stakes in RP at the end of the fourth quarter. The fund owns over 4.1 million shares of the company.

Carillon Eagle Small Cap Growth Fund, in their Q4 2020 investor letter, mentioned RealPage, Inc. (NASDAQ: RP) and emphasized their views on the company. Here is what Carillon Eagle Small Cap Growth Fund has to say about RealPage, Inc. in their Q4 2020 investor letter:

7. SPDR Gold Shares (NYSE: GLD)

Value: $267,540,000
Percent of Ricky Sandler’s 13F Portfolio: 2.5%
No. of Hedge Fund Holders: 62

Ricky Sandler loaded up on Spdr Gold Trust in the fourth quarter of 2020, as Eminence Capital built a new CALL position in the gold ETF, buying 1.5 million SPDR GOLD Trust shares, worth $267.54 million. Among other hedge funds having CALL options in GLD include Ken Griffin’s Citadel and Josh Donfeld and David Rogers’ Castle Hook Partners.

With a $692.9 million stake in GLD, First Eagle Investment Management owns 3.9 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 62 hedge funds held stakes in GLD as of the end of the fourth quarter, versus 65 funds in the third quarter.

6. Corteva, Inc. (NYSE: CTVA)

Value: $308,464,000
Percent of Ricky Sandler’s 13F Portfolio: 2.89%
No. of Hedge Fund Holders: 38

Corteva Inc. was formerly a part of DowDuPont. It was spun off as an independent company in 2019. The agri-science company is currently under scrutiny from activist investor Jeff Smith’s Starboard Value who has a $558 million stake in the company. Earlier in March, the company said three new independent directors proposed by Starboard will join its board.

According to our database, the number of CTVA’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 38 hedge funds that hold a position in CTVA compared to 36 funds in the third quarter. The biggest stakeholder of the company is Jeffrey Smith’s Starboard Value LP, with 14.4 million shares, worth $558.9 million.

5. Ashland Global Holdings Inc. (NYSE: ASH)

Value: $319,586,000
Percent of Ricky Sandler’s 13F Portfolio: 2.99%
No. of Hedge Fund Holders: 38

Yet another chemicals company in Ricky Sandler’s portfolio, Ashland Global operates various segments including solvents, personal & home care, food, pharmaceuticals and industrials. The stock is up about 90% over the last 12 months. The company in February announced preliminary results for the quarter ended December 31, 2020. EPS in the quarter came in at $0.99, crushing past the Street estimates of $0.57. Revenue in the quarter jumped 3.6% to $552 million, beating the consensus by $11.82 million.

As of the end of the fourth quarter, 38 hedge funds in Insider Monkey’s database of 887 funds held stakes in ASH, compared to 46 funds in the third quarter. Ricky Sandler’s Eminence Capital is the biggest stakeholder in the company, with 4.04 million shares, worth $319.6 million.

4. Nuance Communications, Inc. (NASDAQ: NUAN)

Value: $321,344,000
Percent of Ricky Sandler’s 13F Portfolio: 3.01%
No. of Hedge Fund Holders: 60

Massachusetts-based Nuance ranks 4th in the list of Ricky Sandler’s top 10 stock picks and portfolio as of the end of the fourth quarter. The company makes software for healthcare, speech recognition, AI and customer support. The stock recently jumped after Wedbush analyst Daniel Ives added Nuance to his best ideas list. The analyst has an Outperform rating for the stock, with a price target of $65.

The company is also getting the attention of the smart money, as 60 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 45 funds a quarter earlier.

Artisan Mid Cap Fund, in their Q4 2020 investor letter, mentioned Nuance Communications, Inc. (NASDAQ: NUAN). Here is what Artisan Mid Cap Fund has to say about Nuance Communications, Inc. in their Q4 2020 investor letter:

“We started new investment campaigns in Nuance Communications in Q4. Nuance Communications is a leader in automated voice transcription technologies. The company’s relatively new management team has spent the past couple of years divesting sub-par businesses, paying down high yield debt and refocusing the company on higher growth, cloud-based recurring revenue opportunities primarily in health care, but also in large enterprises. The company has recently launched Dragon Ambient Experience (DAX), a tool physicians can use to automatically document patient encounters efficiently, accurately and consistently in telehealth and in-office settings. Health care practitioners can spend over 20% of their time documenting, and DAX can virtually eliminate this duty so more time can be dedicated to patient care. DAX is very early in its launch and could be a very meaningful profit cycle driver over time.”

3. Macquarie Infrastructure Corporation (NYSE: MIC)

Value: $322,977,000
Percent of Ricky Sandler’s 13F Portfolio: 3.02%
No. of Hedge Fund Holders: 31

Macquarie Infrastructure Corp invests in infrastructure businesses. The company has two main segments: Atlantic Aviation and MIC Hawaii.  Atlantic provides fuel, terminal, aircraft hangaring and other services primarily to owners and operators of general aviation (GA) jet aircraft at over 70 airports in the U.S., while MIC Hawaii processes and distributes gas and provides related services. The stock has gained 34% over the last 12 months. In February, the company announced a tender offer to purchase any and all of its 2.00% convertible senior notes due 2023.

As of the end of the fourth quarter of 2020, Eminence Capital owns 8.6 million shares of MIC worth $322.98 million. MIC accounts for 3.02% of Eminence Capital’s total portfolio.

2. New Relic, Inc. (NYSE: NEWR)

Value: $362,265,000
Percent of Ricky Sandler’s 13F Portfolio: 3.39%
No. of Hedge Fund Holders: 30

Ricky Sandler’s Eminence Capital is bullish on New Relic, which makes monitoring software and various other SaaS and Cloud applications. The hedge fund owns 5.54 million shares of the company, worth $362.27 million.  The stock is up 33% over the last 12 months. In February, UBS downgraded the stock and cut its price target from $89 to $76, saying that the company’s revenue growth recovery is still two to three quarters away.

According to our database, the number of NEWR’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 30 hedge funds that hold a position in New Relic compared to 31 funds in the third quarter. The biggest stakeholder of the company is Ricky Sandler’s Eminence Capital, with 5.5 million shares, worth $362.3 million.

1. Berry Global Group, Inc. (NYSE: BERY)

Value: $367,468,000
Percent of Ricky Sandler’s 13F Portfolio: 3.44%
No. of Hedge Fund Holders: 34

Fortune 500 company Berry Global Group Inc. tops the list of Ricky Sandler’s top 10 stock picks. The company markets plastic packaging products and operates in various segments including health, hygiene, consumer packaging and engineered materials.  The company recently priced the private placement of $775 million of additional 1.57% First Priority Senior Secured Notes due January 15, 2026.

With a $367.5 million stake in BERY, Eminence Capital owns 6.5 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 34 hedge funds held stakes in Berry Global Group as of the end of the fourth quarter, versus 43 funds in the third quarter.

You can also take a peek at Billionaire Izzy Englander’s Top 10 Stock Picks and 10 Best Tech Stocks To Buy Now According To Billionaire Laffont.

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This article is originally published at Insider Monkey.