In this piece, we will take a look at the top 10 stock picks of Don Morgan’s Brigade Capital.
Brigade Capital is an investment management firm based out of New York City, New York. The firm is headed by its chief investment officer and managing partner Mr. Don Morgan. Mr. Morgan is an individual who has years of experience in the financial sector, and this has led him to the helm of affairs at Brigade Capital, which manages a portfolio that has $1.7 billion in assets by the end of June 2021.
Brigade Capital’s investment strategy is focused primarily on targeting entities with distressed balance sheets or hefty amounts in debt. It has offices in major global cities such as Tokyo, Japan and London, United Kingdom alongside a presence in the American state of Colorado. The firm also won the Firm of the Year award from Absolute Return Awards in 2017, to mark another feather in its cap. Brigade often buys the debt of distressed firms and then seeks a return on it.
Mr. Morgan’s investment firm targets companies from different sectors such as telecommunications, energy, finance, healthcare and media. A cursory look at its portfolio reveals that as of June 2021, some of its biggest investments are in Extraction Oil & Gas, Inc., Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) and Magnachip Semiconductor Corporation (NYSE:MX). These companies reflect the portfolio’s diverse nature, as they range from fossil fuel exploration to the technology sector.
Photo by Jason Briscoe on Unsplash
Our Methodology:
In order to gain a deeper insight into Mr. Morgan and Brigade Capital, we sifted through the investment management firm’s 13-F portfolio, which lists down all of its investments. This list also includes the debt bought by Brigade Capita and the positions that it has taken against the shares of several companies. For today’s piece, we focus exclusively on the shares owned by the investment fund.
Why pay attention to hedge fund holdings? 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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). 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.
Top 10 Stock Picks Of Don Morgan’s Brigade Capital
10. Turning Point Brands, Inc. (NYSE:TPB)
Mr. Morgan’s Stake Value: $8.9 million
Percentage of Mr. Morgan’s 13F Portfolio: 0.53%
Number of Hedge Fund Holders: 30
Turning Point Brands, Inc. (NYSE:TPB) is an American company that provides tobacco paraphernalia. It operates through three brands which are ZigZag, Stoker and NewGen. They target several different aspects of tobacco consumption, such as rolling papers, chewable tobacco and non-tobacco products with the compound Nicotine such as liquid vapor products.
By the end of June 2021, Mr. Morgan’s Brigade Capital held 195,498 shares of Turning Point Brands Inc., in a stake that was worth $8.9 million and represented 0.53% of its portfolio.
In an October 2021 analyst note, B. Riley lowered Turning Point Brands, Inc.’s price target to $55 and kept a Buy rating for the shares, explaining that a recent price drop presents a good buying opportunity. A poll of 873 hedge funds conducted at the end of this year’s first half by Insider Monkey revealed that 30 hedge funds had a stake in the company.
In a July 2021 investor letter, Maran Capital Management had the following to say about Turning Point Brands, Inc.:
“We continue to hold core positions in previously disclosed companies (including) Turning Point Brands (TPB). Turning Point Brands remains cheap given its organic growth profile, low capital intensity, and large collection of small, asymmetric bets in vaping and active ingredients. TPB’s Zig Zag brand is among the most well-positioned brands in the US as cannabis legalization marches forward, jurisdiction by jurisdiction.”
9. FirstEnergy Corp. (NASDAQ:FE)
Mr. Morgan’s Stake Value: $10.8 million
Percentage of Mr. Morgan’s 13F Portfolio: 0.64%
Number of Hedge Fund Holders: 36
FirstEnergy Corp. (NASDAQ:FE) is an American electricity company that is responsible for generating, transmitting and distributing electricity throughout several states. These states include Pennsylvania, Ohio, New York, New Jersey, Maryland and West Virginia. FirstEnergy Corp. has thousands of miles of electricity cables laid out throughout the U.S.
Mr. Morgan held 290.500 shares of FirstEnergy Corp. by the end of this year’s second quarter, which amount to $10.8 million and represent 0.64% of his portfolio. Out of the 873 hedge funds polled by Insider Monkey during the same time period, 36 had held a stake in the company.
FirstEnergy Corp. largest shareholder is Carl Icahn’s, Icahn Capital LP with 18.9 million shares worth $705 million.
Some of Don Morgan’s other favorite stocks, alongside FirstEnergy Corp., are Magnachip Semiconductor Corporation, Clear Channel Outdoor Holdings, Inc. and Extraction Oil & Gas, Inc..
8. GrafTech International Ltd. (NYSE:EAF)
Mr. Morgan’s Stake Value: $11.2 million
Percentage of Mr. Morgan’s 13F Portfolio: 0.67%
Number of Hedge Fund Holders: 36
GrafTech International Ltd. (NYSE:EAF) is responsible for researching, developing, manufacturing and selling carbon-based products all over the world. The company is based out of Brooklyn Heights, Ohio, and some of the examples of its products include electrodes and coke for oil refining.
Mr. Morgan’s hedge fund held 969,000 shares of GrafTech International Ltd. by the end of the second quarter of 2021, which were worth $11.2 million and represented 0.67% of his portfolio. The company reported $330 million in revenue and $0.43 in non GAAP EPS for its second quarter 2021, beating analyst estimates on both counts. By the end of July, a poll of 873 hedge funds conducted by Insider Monkey revealed that 36 had held a stake in the company.
RBC Capital lowered GrafTech International Ltd.’s share price target in an August 2021 analyst note to $14 citing valuation model changes due to lower than anticipated sales volume.
GrafTech International Ltd.’s largest investor is Donald Yacktman’s Yacktman Asset Management with 5.2 million shares worth $61 million shares.
7. Albertsons Companies, Inc. (NYSE:ACI)
Mr. Morgan’s Stake Value: $13.3 million
Percentage of Mr. Morgan’s 13F Portfolio: 0.8%
Number of Hedge Fund Holders: 20
Albertsons Companies, Inc. (NYSE:ACI) is a drug and food retailer in the United States, which is headquartered in Boise, Idaho. The company is also one of the oldest in America since it was founded in 1860, which is nearly two centuries ago. In addition to food stores and pharmacies, Albertsons Companies, Inc. also operates distribution and manufacturing centers.
By the end of this year’s first half, Mr. Morgan’s Brigade Capital held 680,000 Albertsons Companies, Inc. shares that were worth $13.3 million and represented 0.8% of its portfolio. During the same time period, 20 out of 873 hedge funds polled by Insider Monkey had held a stake in the company.
Albertsons Companies, Inc.’s largest shareholder is Stephen Feinberg’s Cerberus Capital Management who owns 151 million shares worth $2.8 billion.
6. CommScope Holding Company, Inc. (NASDAQ:COMM)
Mr. Morgan’s Stake Value: $18 million
Percentage of Mr. Morgan’s 13F Portfolio: 1.07%
Number of Hedge Fund Holders: 36
CommScope Holding Company, Inc. (NASDAQ:COMM) allows communications and entertainment companies to provide their services to the end consumer. The company provides equipment for several segments which include residential users, universities, telecommunications service providers, and broadband providers. CommScope Holding Company, Inc. is headquartered in North Carolina and was founded in 1976.
Mr. Morgan’s Brigade Capital held 845,000 shares of the company by June 2021, which were worth $18 million and represented 1.07% of its portfolio.
During H2 2021, a poll of 873 hedge funds conducted by Insider Monkey revealed that 36 had held a stake in CommScope Holding Company, Inc..
CommScope Holding Company, Inc.’s largest shareholder is Bob Peck and Andy Raab’s FPR Partners who owns 16 million shares worth $350 million.
5. PG&E Corporation (NYSE:PCG)
Mr. Morgan’s Stake Value: $18 million
Percentage of Mr. Morgan’s 13F Portfolio: 1.09%
Number of Hedge Fund Holders: 64
PG&E Corporation is an American electricity and natural gas provider that was founded in 1096 and is headquartered in California. The company focuses its distribution in the West Coast state of California and it owns thousands of miles of electricity wires and gas lines.
Mr. Morgan’s Brigade Capital held 1.7 million PG&E Corporation shares by the end of June this year, which were worth $18 million and represented 1.09% of the firm’s total holdings. At the same time, 64 of the 873 hedge funds poled by Insider Monkey held a stake in the company.
PG&E Corporation’s largest shareholder is Daniel Loeb’s Third Point who owns 81 million shares worth $833 million.
4. Magnachip Semiconductor Corporation (NYSE:MX)
Mr. Morgan’s Stake Value: $24 million
Percentage of Mr. Morgan’s 13F Portfolio: 1.47%
Number of Hedge Fund Holders: 35
Magnachip Semiconductor Corporation is a Luxembourgian firm that concerns itself with designing., manufacturing and selling semiconductors for consumers, industrial, automotive and other applications such as the Internet of Things (IoT). Some of the products that it provides are controllers, diodes and transistors for several applications.
By the end of the second quarter 2021, Mr. Morgan held roughly one million Magnachip Semiconductor Corporation shares that were worth $24 million and represented 1.47% of his portfolio. During the same time period, 35 of 873 hedge funds polled by Insider Monkey had held a stake in the company.
Magnachip Semiconductor Corporation’s (NYSE:MX) largest shareholder is Howard Marks’s Oaktree Capital Management who owns 2 million shares worth $47 million.
In a first quarter 2021 investor letter, Wasatch Global Investors mentioned Magnachip Semiconductor Corporation and stated that:
“Magnachip Semiconductor Corp. (MX) also contributed to Fund performance. The company designs, develops and manufactures mixed-signal and digital multimedia semiconductors. We think Magnachip is a classic “growth at a reasonable price” (GARP) company. The stock was a laggard in 2020, but our belief was that Wall Street underappreciated the company’s earnings and that the P/E ratio would exceed expectations going forward. In the first quarter, we think Magnachip benefited from the realization that the company is a steady—if not spectacular—grower as there was a rotation in preference away from higher-priced growth stocks and toward lower-priced growth stocks. The stock also benefited from news that the company has agreed to be acquired.”
3. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
Mr. Morgan’s Stake Value: $29 million
Percentage of Mr. Morgan’s 13F Portfolio: 1.78%
Number of Hedge Fund Holders: 27
Clear Channel Outdoor Holdings, Inc. is an American company founded in 1901, that owns and sells advertisement spaces in the country and all over the globe. Its products cover a large number of segments such as billboards, transit spaces, customized structures and others. Additionally, it also provides furniture and cleaning services.
Clear Channel Outdoor Holdings, Inc.’s biggest shareholder is Kenneth Mario Garschina’s Mason Capital Management with 22 million shares worth $58 million.
Mr. Morgan held 11 million shares of the Clear Channel Outdoor Holdings, Inc. worth $29 million and represented 1.78% of his portfolio by the end of the second quarter. During the same period, 27 of the 873 hedge funds polled by Insider Monkey held a stake in the company.
2. Chesapeake Energy Corporation (NASDAQ:CHK)
Mr. Morgan’s Stake Value: $77.9 million
Percentage of Mr. Morgan’s 13F Portfolio: 4.67%
Number of Hedge Fund Holders: 43
Chesapeake Energy Corporation (NASDAQ:CHK) is an American surveyor, acquirer and developer of fossil fuel reserves. The company primarily focuses on locating and developing oil and gas wells, and it has interests in several such properties all over the U.S.
Mr. Morgan’s Brigade Capital held 1.5 million shares of Chesapeake Energy Corporation by the end of the second quarter, which were worth $77.9 ad 4.67% of his portfolio. At the same time, 43 of 873 hedge funds polled by Insider Monkey held a stake in the company.
Chesapeake Energy Corporation’s largest investor is Howard Marks’s Oaktree Capital Management who owns 11.9 million shares worth $619 million.
1. Extraction Oil & Gas, Inc. (NASDAQ:XOG)
Mr. Morgan’s Stake Value: $82.5 million
Percentage of Mr. Morgan’s 13F Portfolio: 4.94%
Number of Hedge Fund Holders: 19
Extraction Oil & Gas, Inc. is an oil and gas exploration and development firm that focuses its operations in the American state of Colorado. The company has thousands of acres of facilities and thousands of production wells.
Extraction Oil & Gas, Inc.’s largest shareholder after Brigade Capital is Howard Marks’s Oaktree Capital Management who owns 1.1 million shares worth $61 million.
Mr. Morgan held 1.5 million shares of Extraction Oil & Gas, Inc. worth $72 million and represented 4.94% of his portfolio by the end of the second quarter. During the same period, 19 of the 873 hedge funds polled by Insider Monkey held a stake in the company.
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Disclosure. None. Top 10 Stock Picks of Don Morgan’s Brigade Capital is originally published on Insider Monkey.
