In this article we present the list of Top 10 New Stocks Billionaire Ken Fisher Just Bought.
Ken Fisher is the billionaire founder, Executive Chairman, Co-Chief Investment Officer, and former CEO of Fisher Investments, one of the largest and most successful financial advisors in the world. The firm, referred to as Fisher Asset Management throughout the remainder of this article, as that is the name used on the company’s SEC filings, continues to grow at a steady pace, hitting over $120 billion in assets under management as of September 30 and managing nearly 70,000 accounts.
The firm has also added over 1,000 employees in the last year, prompting it to construct a new building to house them all at its headquarters in Camas, Washington, which is now home to about 1,700 workers.
Consistently strong results have helped fuel Fisher Asset’s growth. In 2015, Forbes estimated that Fisher Asset Management had outperformed the market by an average of 4.2 percentage points annually over the prior 18 years. We followed that up with our own calculations of Fisher Asset Management’s long positions in companies with market caps of at least $1 billion, which found that the firm’s picks outperformed the market every year between 2015 and 2017, as well as through the first nine months of 2018.
Ken Fisher of Fisher Asset Management
The Covid-19 pandemic is a whole new ball of investing wax however, so we took a look at Fisher Asset Management’s top stock picks at the pandemic’s peak and discovered a similar level of success. Each of the advisor’s top 10 stock picks had outperformed the market through March 2020, a period during which the S&P 500 crumbled by nearly 20%.
Given that Fisher Asset Management’s stock picks can deliver market-beating returns even during a pandemic, we analyzed its latest 13F filing to uncover its top new stock picks added during Q3. The billionaire investor and his team appear confident that the worst is behind the restaurant industry and that now is the time to capitalize on those stocks’ depressed prices, as half of its top 10 new stock picks are restaurant stocks.
While Ken Fisher’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as 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 56 percentage points since March 2017 (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 34% through August 17. 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 enewsletter below to receive our stories in your inbox.
Now then, let’s check out the Top 10 New Stocks Billionaire Ken Fisher Just Bought, beginning with Acuity Brands.
10. Acuity Brands Inc (NYSE:AYI)
Kicking off the countdown of the top new stocks bought by Ken Fisher’s Fisher Asset Management during Q3 is Acuity Brands Inc (NYSE:AYI), 13,442 shares of which were snapped up by the investment firm. The supplier of lighting and building materials and management solutions was owned by 38 of the hedge funds tracked by Insider Monkey as of June 30, up from just 23 a year earlier and that trend appears to be continuing in Q3.
Bill Miller’s Miller Value Partners, which also opened a new position in Acuity Brands during Q3, discussed its motivations for buying the stock in its Q3 investor letter:
“Acuity Brands is a leader in the lighting space. It has historically generated attractive returns on capital. We grew interested when the new CEO Neil Ashe, who we knew from his prior days at CNet and Wal-Mart.com, arrived. The company generates significant free cash flow with sustainable levels of roughly $400M per year (10% yield). While end markets are currently under pressure, Ashe’s vision is to drive a digital transformation in the business. There’s improvement potential from end market recovery along with internal business improvement. We think the stock is worth significantly more than where it’s trading.”
9. Brinker International, Inc. (NYSE:EAT)
Brinker International, Inc. (NYSE:EAT) is the first of multiple restaurants that Fisher Asset Management bought new stakes in during Q3, taking a position of 93,543 shares in the casual dining company, which operates more than 1,600 restaurants under the Chili’s Grill & Bar and Maggiano’s Little Italy brands. Hedge funds abandoned Brinker International in droves at the end of 2019 and into early 2020 but poured back into the stock in Q2, as EAT ownership jumped by 69% among the funds tracked by Insider Monkey.
A big rally in EAT shares following Pfizer Inc. (NYSE:PFE)’s announcement of a promising Covid-19 vaccine was short-lived, as the stock has already given back all of its 15% gains from Monday. Brinker shares had already surpassed their pre-Covid levels prior to the announcement however, climbing by 68% in August alone as investors raved about the company’s implementation of virtual kitchens and product-specific delivery concepts.
8. Ambev SA (NYSE:ABEV)
In addition to restaurant stocks, Fisher Asset Management also took an interest in alcoholic beverage companies in Q3, buying 1.96 million shares of Brazilian brewer Ambev SA (NYSE:ABEV). Hedge fund ownership of Ambev rebounded to 13 at the end of Q2 among the funds tracked by Insider Monkey after sliding to a record low 9 at the end of Q1.
In its Q1 investor letter, Broyhill Asset Management expressed its confidence in Ambev and the company’s strong financial position, stating:
“We also diversified our beer exposure during the quarter, adding a direct investment in Ambev (ABEV) to compliment our existing investment in Anheuser Busch Inbev (BUD). As the current environment has punished highly leveraged businesses like BUD (despite the company’s ability to generate strong and recurring cash flow), the opportunity to own ABEV, with net cash on its balance sheet and the highest returns on capital in the industry—at a lower multiple than its parent—was too good to pass up.”
7. BJ’s Restaurants, Inc. (NASDAQ:BJRI)
BJ’s Restaurants, Inc. (NASDAQ:BJRI) is the next restaurant operator to have fallen under the hungry gaze of Fisher Asset Management. The firm bought 371,280 shares of BJRI during the quarter, taking a 1.67% stake in the company. Only 12 of the hedge funds tracked by Insider Monkey were BJ’s shareholders at the end of June, down from more than 20 in late 2018.
Unlike Brinker, shares of BJRI are up by 12% since Pfizer’s announcement, as the stock had recently been dinged following the release of the company’s Q3 results in late October. Same-store sales were down by 30% year-over-year during the quarter, an improvement from the nearly 60% fall in Q2. The company also exhibited accelerating sales in September after building close to 100 temporary outdoor patios to facilitate more diners.
6. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC)
Fisher Asset Management opened a new stake in WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) during Q3 consisting of 801,684 shares valued at $13.37 million on September 30. Hedge fund ownership of WSC has gradually risen over the past year among the funds tracked by Insider Monkey after declining throughout the latter half of 2018 and into early 2019, so the stock appears to be offering a far more tempting value proposition.
Malcolm Levine of Dendur Capital, which had 10% of the value of its 13F portfolio invested in WSC as of June 30, pitched the company at the Capitalize for Kids Investors Conference in October, making the case that WSC shares have 76% upside potential. They have already gained 21% since his presentation and surpassed their pre-Covid levels, fueled by strong Q3 results.
Below we present the list of Top 5 New Stocks Billionaire Ken Fisher Just Bought. For the full list and background on Ken Fisher, please see Top 10 New Stocks Billionaire Ken Fisher Just Bought.
- The Cheesecake Factory Incorporated (NASDAQ:CAKE)
Fisher Asset Management couldn’t resist taking a bite out of The Cheesecake Factory Incorporated during Q3, buying 542,709 shares totaling 1.19% of the outstanding shares of CAKE. Bullishness for the stock hit a new high at the end of 2019 among the hedge funds tracked by Insider Monkey, but ownership of it declined by 19% during Q1 as the pandemic caused a mass reorganization of investment portfolios.
The Cheesecake Factory has weathered the Covid-19 storm as well as could be expected, expanding its pick-up and delivery options, which captured close to 40% of its sales mix. The company saw strong demand for indoor dining in Q3 as well, as 20 of its 187 locations that are currently serving indoor diners posted positive comparable sales year-over-year despite being limited to about 50% dining capacity.
- Sally Beauty Holdings, Inc. (NYSE:SBH)
Fisher Asset Management bought up nearly 2% of Sally Beauty Holdings, Inc.’s outstanding shares during Q3, 2.22 million in total, making a big investment in the supplier of beauty products. Multiple other hedge funds are extremely bullish on SBH, as Arrowstreet Capital (2.27 million shares) and Cliff Asness’ AQR Capital (3.68 million shares) also had large ownership stakes in the company as of June 30.
Sally Beauty shares are still down by 46% year-to-date, sliding down further on November 11 despite relatively impressive fiscal Q4 results. Net sales of $958 million were down by just 1% year-over-year following a 28% slide in fiscal Q3, while diluted EPS of $0.99 and free cash flow of $131 million were both strong. The company grew e-commerce sales by 69% during the quarter and managed to reduce its debt levels by nearly $450 million during its fiscal 2020.
- Kennametal Inc. (NYSE:KMT)
Kennametal Inc. was one of the largest new purchases made by Fisher Asset Management during Q3, as the investment firm bought just over 800,000 shares of the company that were valued at $23.17 million at the end of September. Hedge fund ownership of KMT sank to a 5-year low at the end of the first quarter of 2020 among the funds tracked by Insider Monkey as confidence in the industrial sector plummeted.
In its second quarter investor letter, John Rogers’ Ariel Investments, which owned 5.81 million KMT shares on June 30, expressed confidence in the initiatives undertaken by Kennametal to mitigate headwinds from Covid-19, stating:
“KMT continues to adjust production levels and is focused on managing costs while executing on its simplification/modernization and restructuring initiatives. We believe the scale, scope, quality, low- cost production and the value proposition of the cutting tools themselves also mitigate pricing pressure. Additionally, KMT continues to execute on its strategic plan to improve economies of scale and generate margin improvement, while gaining share in the marketplace.”
- Denny’s Corporation (NASDAQ:DENN)
Fisher Asset Management has taken a 3.75% stake in Denny’s Corporation after buying 2.39 million shares of the restaurant operator during the September quarter. Denny’s hit a 5-year high in hedge fund ownership at the end of Q2 among the funds tracked by Insider Monkey after there was a 15% increase in DENN ownership during Q2.
Denny’s has been hit particularly hard by Covid due to its exposure to the California market (25%), which has had some of the toughest dining restrictions in the U.S. In addition, the majority of its locations (70%) have been unable to maintain the chain’s customary 24/7 schedule. Same-store sales slid by 33.6% in Q3 and the company expects only slight better results for the full-year, with same-store sales expected to be between 70%-75% of 2019 levels.
- Dine Brands Global, Inc. (NYSE:DIN)
Topping the list, Fisher Asset Management bought 458,262 shares of Dine Brands Global, Inc. during Q3, taking a 2.79% stake in the company as hedge funds increasingly warm up to the quick service restaurant company, which owns and operates IHOP and Applebee’s. Among the hedge funds tracked by Insider Monkey there has been a 66% jump in ownership of DIN between the middle of 2019 and the middle of 2020.
DIN shares have given back most of the gains from their Pfizer announcement bump and remain down by 31% in 2020. Dine Brands announced at the end of October that it would close 100 of breakfast chain IHOP’s underperforming locations over the next six months, primarily locations with expiring leases or which are located in areas where traffic characteristics have deteriorated. The company is confident that it will eventually be able to replace these locations with more vibrant, better performing ones.
If you are in the mood to invest in some smaller companies that Ken Fisher has a ton of conviction in, don’t miss our article about the 10 Best Small-Cap Stocks To Buy Now.
