In this piece, we will look at the top 10 stock picks of Amy Minella’s Cardinal Capital. If you want to skip the hedge fund introduction and jump directly to the top 5 stocks in the list, then look at the Top 5 Stock Picks of Amy Minella’s Cardinal Capital.
Since 1995, Cardinal Capital Management has focused on small- and mid-cap value equity investing. Its principal goal is to deliver high-quality investment results for investors. Founded by Amy Minella, this investment management firm employs a disciplined, bottom-up investment process.
Amy Minella holds an MBA from Stanford Graduate School of Business. Prior to founding Cardinal Capital Management, she was a Managing Director of Deltec Asset Management. There she created both the high yield management group in 1986 and the value equity group in 1992. Before joining Deltec in 1983, she was working in the corporate finance department at Merrill Lynch and in the credit department at Chase Manhattan Bank. Cardinal Capital Management offers a broad range of services, including portfolio management for individuals and small businesses, investment companies, pooled investment vehicles, and institutional clients.
Talking about Cardinal Capital Management’s approach to investing, the investment team does not select investment ideas on the basis of valuation, but they generate ideas by focusing on market niches where they have a structural advantage. Cardinal Capital Management makes investments on a long-term time horizon and the investment team focuses on the absolute, not relative, risk of owning a company. From the market and opportunity perspective, this investment management firm believes that if there is no change, earnings are a good proxy for cash flow. They also believe that if there is good analyst coverage, the equity market is relatively efficient.
Cardinal Capital Management firmly believes that a company’s ability to make excess cash flow and re-employ that cash for enhancing shareholder value helps in determining long-term value. Some of the renowned holdings include Lithia Motors, Inc. (NYSE:LAD), Starwood Property Trust, Inc. (NYSE:STWD), Nexstar Media Group, Inc. (NASDAQ:NXST), and PacWest Bancorp (NASDAQ:PACW).
To list the top 10 stock picks of Amy Minella’s Cardinal Capital, we went through the fund’s 13F portfolio for the second quarter of 2022.
10. ACI Worldwide, Inc. (NASDAQ:ACIW)
Cardinal Capital Management’s Stake Value: $93 million
ACI Worldwide, Inc. (NASDAQ:ACIW) is in the business of developing, marketing and installing a portfolio of software products mainly focused on facilitating electronic payments.
The company has recently announced a definitive agreement to offload its corporate online banking solutions to One Equity Partners.
At the end of Q1 2022, 27 elite hedge funds reported owning stakes in ACI Worldwide, Inc. (NASDAQ:ACIW) worth $536.45 million. In the preceding quarter, 22 hedge funds held stakes worth $657.93 million. However, at the end of June, this number dropped to 20.
Weitz Investment Management, an investment management firm, published its fourth quarter 2021 investor letter and mentioned ACI Worldwide, Inc. (NASDAQ:ACIW). Here is what the fund said:
“Detractors for the year had a consistent theme: they were all – by broad definition – software and data/information service providers. Enterprise software companies including ACI Worldwide (payments) experienced price markdowns. These are extremely good businesses, run by savvy managers, operating in advantaged markets. Each is a leader in its respective area of expertise. Even though they were laggards for the year, we like our chances with this group over the next few years.”
9. Lithia Motors, Inc. (NYSE:LAD)
Cardinal Capital Management’s Stake Value: $108 million
Lithia Motors, Inc. (NYSE:LAD) is a retailer of new and used vehicles and related services. It provides 40 brands of vehicles at 278 stores in 25 states as of 2021. It made an entry into Canada in mid-2021 with the purchase of Pfaff Automotive. It has seen expansion largely through the acquisition of dealerships in smaller regional markets. The company now aims to grow in any part of the U.S.
Insider Monkey’s Q1 2022 hedge fund research disclosed that 46 out of 912 hedge funds invested in the firm. Their stakes were worth $2.5 billion. At the end of June, 40 hedge funds reported owning stakes in the company.
Lithia Motors, Inc. (NYSE:LAD) and Driveway announced that they have expanded their south Florida footprint through the purchase of 9 Lehman Auto World stores and 2 Esserman International stores in Miami-Dade County. These 11 stores are expected to generate $850 million in annualized revenue. These acquisitions were funded with the help of existing on-balance sheet capacity.
Lithia Motors, Inc. (NYSE:LAD) has invested incremental capital in Driveway and DFC and has maintained its accelerated acquisition cadence. It has also provided immediate shareholder return with opportunistic share repurchases.
Oakmark Funds, an investment management firm, published its first quarter 2022 investor letter and mentioned Lithia Motors, Inc. (NYSE:LAD). Here is what the fund said:
“As is typical during periods of significant volatility, we added a new name to the portfolio. Lithia Motors (NYSE:LAD) is the largest franchised auto dealer group in the United States. The company has a long history of creating shareholder value through best-in-class operations and consistent acquisitions of smaller dealers at attractive returns. There is a long runway for management to continue creating value through such acquisitions. Management believes this will drive earnings per share to more than $50 by 2025, even as car prices return to pre-pandemic levels. Meanwhile, Lithia has a significant opportunity to further accelerate growth through Driveway, it’s online auto retailing platform. We believe Lithia’s existing nationwide infrastructure provides Driveway with significant competitive advantages in e-commerce, which smaller dealers will struggle to replicate. Driveway is not generating any earnings today, but it could become a major contributor over the next five to seven years. With the stock priced at less than 7x management’s 2025 EPS target and with substantial future growth potential from Driveway, we believe Lithia shares are a bargain today.”
8. Starwood Property Trust, Inc. (NYSE:STWD)
Cardinal Capital Management’s Stake Value: $105 million
Starwood Property Trust, Inc. (NYSE:STWD) is an American real estate investment trust which mainly originates, acquires, and manages commercial mortgage loans and commercial mortgage-backed securities in the U.S. and Europe. It manages its activities in the Commercial and Residential Lending Segment, Infrastructure Lending Segment, Property Segment, and Investing and Servicing Segment.
Of the 895 funds tracked by Insider Monkey as of the end of June, 13 had stakes in Starwood Property.
7. Spectrum Brands Holdings, Inc. (NYSE:SPB)
Cardinal Capital Management’s Stake Value: $111.4 million
Spectrum Brands Holdings, Inc. (NYSE:SPB) is a consumer product company. It supplies consumer batteries, residential locksets, residential builders’ hardware, plumbing, shaving and grooming products, and other personal care products.
Spectrum Brands Holdings, Inc. (NYSE:SPB) has released its results for the second quarter of fiscal 2022 ended April 3, 2022. The company saw gross margin improvement of 260 basis points against its first-quarter results mainly due to the implementation of pricing actions.
The company continues to work on closing the sale of its Hardware and Home Improvement business to ASSA ABLOY for $4.3 billion. It expects that the transaction will close this year. In fiscal 2022, it expects reported net sales growth to be in the mid-to-high teens, while adjusted EBITDA is expected to increase in the mid-single digits.
6. Silicon Motion Technology Corporation (NASDAQ:SIMO)
Cardinal Capital Management’s Stake Value: $139 million
Silicon Motion Technology Corporation (NASDAQ:SIMO) operates in the semiconductor industry and mainly focuses on designing, developing, and marketing of controllers for managing NAND flash used in embedded storage applications, like eMMC embedded memory. The company’s only operating segment aims to develop NAND flash controllers and SSDs solutions.
Overall, 25 hedge funds in the database of Insider Monkey reported owning stakes in Silicon Motion Technology Corporation (NASDAQ:SIMO) worth $495.8 million, down from 27 funds in the preceding quarter.
At the end of June, 28 hedge funds reported stakes in the company. Billionaire Israel Englander is among the notable shareholders of the company with a $93 million stake.
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Disclosure: None. Top 10 Stock Picks of Amy Minella’s Cardinal Capital is originally published on Insider Monkey.