Top 10 Stock Picks of Glenn Greenberg’s Brave Warrior Capital

Published on August 30, 2022 at 10:14 am by Swati Goyal in Hedge Funds, News

In this article, we discuss the top 10 stock picks of Glenn Greenberg’s Brave Warrior Capital. If you want to skip our detailed analysis of Greenberg’s investment philosophy and performance, go directly to Top 5 Stock Picks of Glenn Greenberg’s Brave Warrior Capital.

Glenn Greenberg is widely known as the founding partner of Chieftain Capital, which he co-founded with John Shapiro in 1984. His fund had an annual return of 18% between 1984 and 2009, versus the market’s 12% return. Additionally, the amount of assets under management rose from $43 million in 1984 to $3 billion in 2009. However, their partnership broke up in late 2009 because of interpersonal issues. Co-founder Shapiro along with two partners — Tom Stern and Joshua Slocum — separated ways to build a new business under the Chieftain Capital moniker. However, Greenberg remained with the company and changed its name to Brave Warrior Capital.

The investment philosophy of Brave Warrior Capital is the same as Chieftain’s: value investing with a concentration on keeping a manageable number of very confident long stock positions. Over the years, the hedge fund has had around 20 holdings, typically spending more than 5% on each holding. It’s not unusual to allocate more than 20% of its portfolio to one investment. Finding top-notch businesses that are resilient to macro-factors and trading at a discount is the aim of the hedge fund when selecting stocks.

In the second quarter of 2022, Greenberg’s Brave Warrior Capital portfolio decreased from $3.39 billion to $2.91 billion. In addition, the number of holdings declined from 24 to 23. The top three stocks represent about 45% of the portfolio. Some of the notable stocks held by the hedge fund in Q2 2022 included Comcast Corporation (NASDAQ:CMCSA), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN).

Our Methodology

We used the second quarter portfolio of Greenberg’s for this analysis. Insider Monkey’s Q2 2022 database, which contains information on almost 900 hedge funds, was used to determine the hedge funds sentiment around the stocks.

Top Stock Picks of Glenn Greenberg’s Brave Warrior Capital

10. OneMain Holdings, Inc. (NYSE:OMF)

Brave Warrior Capital’s Stake Value: $108,001,000

Percentage of Brave Warrior Capital’s 13F Portfolio: 3.7%

Number of Hedge Fund Holders: 28

OneMain Holdings, Inc. (NYSE:OMF) is a provider of financial services focusing on lending to customers with insufficient credit. It is a national corporation with 1,400 branch sites around the country. Year-to-date, the stock price has seen a decline of 27.75% as of August 29.

Among the hedge funds tracked by Insider Monkey at the end of June 2022, 28 funds placed long bets on OneMain Holdings, Inc. (NYSE:OMF), down from 37 in the preceding quarter. Brave Warrior Capital is the leading stakeholder of OneMain Holdings, Inc. (NYSE:OMF). Brave Warrior Capital added OneMain Holdings, Inc. (NYSE:OMF) to its portfolio in the second quarter of 2022. The hedge fund bought 2.89 million company shares worth $108 million, representing 3.7% of the total 13F holdings.

On August 2, RBC Capital analyst Kenneth Lee maintained an ‘Outperform’ rating while lowering his price objective on OneMain Holdings, Inc. (NYSE:OMF) to $51 from $62. Despite his agreement that macro uncertainty increased risk for OneMain Holdings, Inc. (NYSE:OMF) and its non-prime clientele, Lee remained optimistic about the company’s strong ROTCE and capital expansion prospects.

In addition to Comcast Corporation (NASDAQ:CMCSA), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN), Glenn Greenberg’s Brave Warrior Capital remains bullish on OneMain Holdings, Inc. (NYSE:OMF).

Here is what ClearBridge Investments has to say about OneMain Holdings, Inc. (NYSE:OMF) in its fourth quarter 2021 investor letter:

“Similar to the energy sector, the financials sector is also trading at very depressed multiples relative to the market. While the sector’s strong fundamentals received some recognition in 2021, it was rewarded with substantially lower valuations than it should have had. Despite earnings growing over 30% and exceeding the overall market’s, financial stock multiples stayed flat and are currently selling at a discount of roughly 9x forward earnings.

Consumer lender OneMain is an excellent representation of the divide between perception and reality. Similar to the market’s outlook on natural gas prices for EQT, the outlook for consumer credit metrics are worse than the current reality. It is inevitable that record-low delinquencies and loss rates will rise. However, the market’s perception of these headwinds to future earnings growth has been excessive. Higher loan losses are just one piece of a larger pie, and we believe that accelerating loan growth and associated operating leverage provides a buffer to allow OneMain to continue to compound earnings for the foreseeable future. Concerns about credit have completely overshadowed these positive drivers and have resulted in the stock trading at just 5x its projected cash earnings for 2022.”

9. United Rentals, Inc. (NYSE:URI)

Brave Warrior Capital’s Stake Value: $109,686,000

Percentage of Brave Warrior Capital’s 13F Portfolio: 3.76%

Number of Hedge Fund Holders: 37

United Rentals, Inc. (NYSE:URI) does business as a provider of equipment rentals. The corporation runs 1,360 rental outlets across the Americas, Europe, Australia, and New Zealand. United Rentals, Inc. (NYSE:URI) has featured on the Brave Warrior Capital portfolio since the first quarter of 2022. In Q2 2022, the hedge fund boosted its stake in the firm by 84% and held about 451,549 shares of United Rentals, Inc. (NYSE:URI) worth $109.69 million, representing 3.76% of the total portfolio.

On August 22, KeyBanc analyst Steve Barger increased his price objective on United Rentals, Inc. (NYSE:URI) from $375 to $425 and maintained an ‘Overweight’ rating on the stock. The analyst reiterated his strong outlook for United Rentals, Inc. (NYSE:URI) after an interesting Q2 results season.

Among the hedge funds tracked by Insider Monkey, 37 funds were bullish on United Rentals, Inc. (NYSE:URI) at the end of the second quarter of 2022, compared to 47 funds in the earlier quarter. Andrew Wellington and Jeff Keswin’s Lyrical Asset Management is a prominent shareholder of United Rentals, Inc. (NYSE:URI), with 1.17 million shares worth $285.34 million.

Clearbridge Investments mentioned United Rentals, Inc. (NYSE:URI) in its Q1 2022 investor letter. Here’s what the firm said:

“More promising was the performance of several of the portfolio’s core compounding growth names. Construction equipment leasing company United Rentals (NYSE:URI) benefited from continued improvement of non-residential construction trends. The leading contributors to absolute returns during the first quarter included United Rentals.”

8. JPMorgan Chase & Co. (NYSE:JPM)

Brave Warrior Capital’s Stake Value: $195,693,000

Percentage of Brave Warrior Capital’s 13F Portfolio: 6.71%

Number of Hedge Fund Holders: 104

JPMorgan Chase & Co. (NYSE:JPM) is a financial services firm. Its services include financial and investment banking. JPMorgan Chase & Co. (NYSE:JPM) currently has a $336.29 billion market capitalization. The bank recorded fewer charge-offs in July, at 1.02%, compared to 1.18% in June and 1.14% in the same month last year.

Despite the impending macro worries, JPMorgan Chase & Co. (NYSE:JPM) was upgraded by Berenberg analyst Peter Richardson on July 18 from ‘Sell’ to ‘Hold’ with a price objective of $120. According to Richardson, the share price was about 20% below its long-term historical average.

Brave Warrior Capital has consistently held a position in JPMorgan Chase & Co. (NYSE:JPM) since Q3 2014, and in the second quarter of 2022, the hedge fund owned 1.74 million shares of JPMorgan Chase & Co. (NYSE:JPM) worth $195.69 million, representing 6.71% of the total 13F holdings.

According to Insider Monkey’s data, 104 hedge funds were bullish on JPMorgan Chase & Co. (NYSE:JPM) at the end of June 2022, compared to 110 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is a leading shareholder of JPMorgan Chase & Co. (NYSE:JPM), with roughly 7.99 million shares worth $899.69 million.

ClearBridge Investments, an investment management firm, mentioned JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2021 investor letter. Here is what the fund said:

“Our energy and financials holdings kept pace in the 2021 rally. In financials, JPMorgan benefited from strong economic growth, a rise in Treasury yields, and a benign credit environment.”

7. Raymond James Financial, Inc. (NYSE:RJF)

Brave Warrior Capital’s Stake Value: $200,810,000

Percentage of Brave Warrior Capital’s 13F Portfolio: 6.89%

Number of Hedge Fund Holders: 32

Raymond James Financial, Inc. (NYSE:RJF) is a holding company with subsidiaries engaged in various financial services businesses, including the underwriting, distribution, trading, and brokerage of equity and debt securities. This is in addition to selling mutual funds and other investment products. Overall, 32 hedge funds in the database of Insider Monkey owned positions in Raymond James Financial, Inc. (NYSE:RJF) at the end of June, with a collective stake value of $948.54 million.

On August 26, Gerald O’Hara, a Jefferies analyst, maintained a ‘Buy’ rating on Raymond James Financial, Inc. (NYSE:RJF) and boosted his price objective to $130 from $108. On August 25, Raymond James Financial, Inc. (NYSE:RJF) announced a quarterly dividend of $0.34 per share, in line with the previous. The dividend is payable to shareholders of the company on October 17.

In the second quarter of 2022, Glenn Greenberg’s Brave Warrior Capital held 2.25 million shares of Raymond James Financial, Inc. (NYSE:RJF), which amounted to $200.81 million. The company occupied 6.89% of the hedge fund’s total portfolio.

6. Valvoline Inc. (NYSE:VVV)

Brave Warrior Capital’s Stake Value: $218,260,000

Percentage of Brave Warrior Capital’s 13F Portfolio: 7.49%

Number of Hedge Fund Holders: 39

Valvoline Inc. (NYSE:VVV) is a top supplier of branded premium lubricants and automotive services, selling its products in more than 140 countries. On August 9, Citi analyst Chasen Bender maintained a ‘Buy’ rating on the shares of Valvoline Inc. (NYSE:VVV) and decreased his price objective from $37 to $35. He was enthusiastic about the significant growth opportunity that the company’s Retail Services segment presents. However, the analyst thought some investors were anticipating a merger to get a higher sales price for Global Products.

The two operating segments of Valvoline Inc. (NYSE: VVV) were Retail Services and Global Products. However, Valvoline Inc. (NYSE: VVV) stated on August 1 that it had achieved a formal deal with oil giant Saudi Aramco to sell Valvoline’s Global Products division for $2.65 billion in cash.

According to Insider Monkey’s Q2 data, 39 hedge funds were bullish on Valvoline Inc. (NYSE:VVV), with combined stakes worth $767.52 million, compared to 37 funds in the earlier quarter, holding stakes in the company valued at $800.29 million.

Out of the hedge funds being tracked by Insider Monkey, Brave Warrior Capital is a leading shareholder of Valvoline Inc. (NYSE:VVV). The hedge fund started building its position in Valvoline Inc. (NYSE:VVV) in the first quarter of 2021. In the second quarter of 2022, it held 7.57 million shares of the company, valued at $218.26 million. The stock represented 7.49% of the hedge fund’s 13F portfolio. Another major stakeholder of Valvoline Inc. (NYSE:VVV) is Jim Simons’ Renaissance Technologies, which owns 2.79 million shares of Valvoline Inc. (NYSE:VVV).

Like Comcast Corporation (NASDAQ:CMCSA), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN), elite hedge funds are monitoring Valvoline Inc. (NYSE:VVV).

Here is what Wasatch Core Growth Fund said about Valvoline Inc. (NYSE:VVV) in its Q2 2021 investor letter:

“Another significant contributor was Valvoline, Inc. (VVV), a company that manufactures lubricants and car parts and operates oil-change service centers. In addition to benefiting from the economic reopening, the company has discovered the advantages of making a mobile app available. Valvoline customers can use the app to find the closest service center and view live estimated wait times. Certainly, the adoption of technology to improve productivity and convenience isn’t a new theme. But we see mobile digitalization as a highly disruptive innovation that creates additional relationships among companies, distributors and customers. As a result, mobile digitalization is a competitive consideration in more and more of the companies that we evaluate for investment. In the first quarter, Valvoline’s stock declined partially because investors worried about the increasing popularity of electric vehicles (EVs)—which are much less dependent on petroleum products. But the stock rebounded in the second quarter, we think partly based on the realization that EVs still represent a tiny percentage of new cars sold and an even smaller percentage of cars in service. Moreover, Valvoline reported strong earnings and raised projections for the future.”

Click to continue reading and see Top 5 Stock Picks of Glenn Greenberg’s Brave Warrior Capital.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on April 11, 2024 at by Inan Dogan, PhD

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Google CEO: This Will Be Bigger Than Electricity

Published on April 29, 2024 at by Insider Monkey Staff

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

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Should I put my money in Artificial Intelligence?

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Click to continue reading…

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