In this article, we discuss the top 10 stock picks of Leon Lowenstein’s Lionstone Capital Management.
Leon Lowenstein is the portfolio manager at Lionstone Capital Management, which is a New York-based investment management firm. As per the latest 13F filings from September, Lowenstein manages a portfolio worth $382.1 million at Lionstone Capital Management, in addition to discretionary assets under management of $507.87 million.
With a top ten holdings concentration of 76.76%, the investment portfolio at Lionstone Capital Management is concentrated in the real estate, industrials, information technology, consumer discretionary, and communications sectors. The largest holding in Lowenstein’s 13F portfolio as of September this year is APi Group Corporation (NYSE:APG), which represents 10.79% of the firm’s total securities.
Lowenstein purchased additional stakes in APi Group Corporation (NYSE:APG) and Black Knight, Inc. (NYSE:BKI) during the third quarter, whereas he reduced holdings in The Liberty Braves Group (NASDAQ:BATRK), Cannae Holdings, Inc. (NYSE:CNNE), Planet Fitness, Inc. (NYSE:PLNT), and SeaWorld Entertainment, Inc. (NYSE:SEAS).
The most notable stocks in Leon Lowenstein’s Q3 portfolio include Meta Platforms, Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOG), Dollar General Corporation (NYSE:DG), and S&P Global Inc. (NYSE:SPGI), among others discussed in detail ahead.
Our Methodology
With this context in mind, let’s discuss the top 10 stock picks by Leon Lowenstein’s Lionstone Capital Management.
We picked these stocks from the Q3 portfolio of Lionstone Capital Management.
Speedcurve Performance Analytics
Top Stock Picks of Leon Lowenstein’s Lionstone Capital Management
10. Aramark (NYSE:ARMK)
Lionstone Capital Management’s Stake Value: $17,513,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 4.58%
Number of Hedge Fund Holders: 36
Aramark (NYSE:ARMK) is an American company offering food service and uniforms to the education sector, healthcare workers, corporate clients, and correctional facilities. The company serves clients in the US and Canada, as well as 20 other countries. Lowenstein’s Lionstone Capital Management holds a $17.5 million stake in Aramark (NYSE:ARMK) as of September, which represents 4.58% of the fund’s Q3 portfolio.
At the end of the second quarter, 36 hedge funds tracked by Insider Monkey were long Aramark (NYSE:ARMK), with stakes worth $1.12 billion. The leading Aramark (NYSE:ARMK) stakeholder is Thomas Steyer’s Farallon Capital, with a stake value of over $601.9 million.
Aramark (NYSE:ARMK) posted its Q3 results on November 16. EPS for the period equaled $0.21, beating estimates by $0.02. Revenue in the quarter amounted to $3.55 billion, up 31.91% from the prior-year quarter. The company believes that it is positioned well to deliver solid results in the recovery period, and expects the FY22 organic growth to increase between 23% to 27%.
In addition to Meta Platforms, Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOG), Dollar General Corporation (NYSE:DG), and S&P Global Inc. (NYSE:SPGI), Aramark (NYSE:ARMK) is a notable stock in Lowenstein’s Q3 portfolio.
9. Ferguson plc (NYSE:FERG)
Lionstone Capital Management’s Stake Value: $22,096,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 5.78%
Number of Hedge Fund Holders: 11
Ferguson plc (NYSE:FERG), a multinational plumbing and heating products manufacturer from England, is a top stock pick of Leon Lowenstein. His investment firm owns 158,368 shares in Ferguson plc (NYSE:FERG), worth over $22 million, representing 5.78% of Lowenstein’s Q3 portfolio.
Ferguson plc (NYSE:FERG) announced on October 27 that it would pay a cash dividend of $0.166 per share to shareholders of record as of October 29, payable on December 10.
At the end of the second quarter, 11 hedge funds monitored by Insider Monkey were long Ferguson plc (NYSE:FERG), up from 5 in the preceding quarter. The total value of the stakes held by these hedge funds is $6.87 billion. The company’s leading stakeholder is Brian Ashford-Russell and Tim Woolley’s Polar Capital, that holds a $4.55 billion position in Ferguson plc (NYSE:FERG).
Morgan Stanley analyst Annelies Vermeulen on October 21 raised the price target on Ferguson plc (NYSE:FERG) to £11,070 from £9,970 and kept an Equal Weight rating on the shares.
8. Meta Platforms, Inc. (NASDAQ:FB)
Lionstone Capital Management’s Stake Value: $25,488,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 6.66%
Number of Hedge Fund Holders: 266
As of Q3 2021, Lionstone Capital Management holds 75,100 shares in Meta Platforms, Inc. (NASDAQ:FB), worth $25.48 million. The tech corporation represents 6.66% of the hedge fund’s 13F portfolio.
Meta Platforms, Inc. (NASDAQ:FB) posted its Q3 earnings on October 25, announcing an EPS of $3.22, beating estimates by $0.04. The company’s revenue stood at $29.01 billion, missing revenue estimates by -$513.23 million.
At the end of the second quarter, Meta Platforms, Inc. (NASDAQ:FB) remained an attractive stock among the smart money, with 266 hedge funds owning stakes in the tech giant, with a total stake value of $42.34 billion. On November 4, Cathie Wood’s ARK Investment Management purchased 102,500 shares in Meta Platforms, Inc. (NASDAQ:FB).
Piper Sandler analyst Thomas Champion categorizes Facebook’s name change to Meta Platforms, Inc. (NASDAQ:FB) as significant. On October 28, he kept a Neutral rating on the shares with a $385 price target.
Polen Capital mentioned Meta Platforms, Inc. (NASDAQ:FB) in its Q3 2021 investor letter. Here is what the fund said:
“Facebook’s stock was pressured on concerns about regulation in the quarter. We are constantly monitoring the potential regulatory risks to Facebook (and all of our holdings). At this point, we see very little chance that regulation changes Facebook’s business model in a meaningful and adverse way. Regarding the recent data shared by a former Facebook employee and the company itself on some of the unfortunate negative consequences of social media, we recognize these types of issues will inevitably linger in different forms and fashions well into the future. We have been focused on the ability of Facebook to identify and mitigate these negative consequences while amplifying the value users typically cite for its apps across a long list of use cases. We continuously monitor the vibrance of the user base on Facebook’s apps to confirm that value.”
7. Copart, Inc. (NASDAQ:CPRT)
Lionstone Capital Management’s Stake Value: $29,272,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 7.65%
Number of Hedge Fund Holders: 44
Copart, Inc. (NASDAQ:CPRT) offers a global platform to auction vehicles online and its services are utilized by automobile resellers including insurance companies, car rental agencies, and individual customers who are looking to sell their personal vehicles. Copart, Inc. (NASDAQ:CPRT) operates in 11 countries including the US, the UK, Canada, and Germany.
As of Q3, Lionstone Capital Management owns 211,013 shares in Copart, Inc. (NASDAQ:CPRT), with a total stake value of $29.27 million. The company represents 7.65% of Lionstone Capital Management’s total investments. Kevin Oram and Peter Uddo’s Praesidium Investment Management Company holds the largest stake in Copart, Inc. (NASDAQ:CPRT), worth $135.6 million. Overall, 44 hedge funds were long Copart, Inc. (NASDAQ:CPRT) at the end of the second quarter.
Copart, Inc. (NASDAQ:CPRT) announced its Q3 results on November 17, posting an EPS of $1.07, exceeding estimates by $0.07. Revenue for the quarter was up 36.63% year-over-year, outperforming estimates by $62.39 million.
In addition to Meta Platforms, Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOG), Dollar General Corporation (NYSE:DG), and S&P Global Inc. (NYSE:SPGI), Copart, Inc. (NASDAQ:CPRT) is a notable stock in Lowenstein’s Q3 portfolio.
Merion Road Capital Management mentioned Copart, Inc. (NASDAQ:CPRT) in its Q2 2021 investor letter. Here is what the they said:
“Many of our companies reported very strong earnings back in April. The market shrugged these off as it pondered how much growth would be sustainable, are inflationary trends transitory, and when interest rates will rise. While a slow-down in the broader economic recovery would hurt our portfolio, I remain positive on our position’s market positioning and longer term trends.
For instance, Copart reported 33% YoY revenue growth with EBIT margins expanding to 45%, an all-time high. While the company benefited from inflation (an interesting hedge the market largely ignored earlier in the year), sustainable increases in ASPs and service offerings bode well for revenue per vehicle growth. Management noted that traffic is still down 20% or more as non-US markets are several months behind the United States on reopening and vaccinations. This volume boost should provide good tailwinds in the coming months.”
6. Dollar General Corporation (NYSE:DG)
Lionstone Capital Management’s Stake Value: $29,321,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 7.67%
Number of Hedge Fund Holders: 45
Dollar General Corporation (NYSE:DG) is an American variety store chain operating 18,000 stores in the US. It is one of Lionstone Capital Management’s top stocks from Q3, with the firm owning 138,215 shares valued at more than $29.32 million in Dollar General Corporation (NYSE:DG). 7.67% of Lowenstein’s 13F portfolio is represented by Dollar General Corporation (NYSE:DG) as of September this year.
R5 Capital analyst Scott Mushkin downgraded Dollar General Corporation (NYSE:DG) on November 5 to Sell from Buy with a price target of $218, down from $294. He reasoned that he had observed several understocked outlets during his in-market store checks, in addition to increasing labor shortages.
As of June, 45 hedge funds in the database of Insider Monkey were bullish on Dollar General Corporation (NYSE:DG), down from 52 in the previous quarter. The largest stakeholder of the company as per Insider Monkey’s records is BlueSpruce Investments, a hedge fund managed by Tim Hurd and Ed Magnus, with a total stake value of $655.2 million.
Here is what Polen Focus Growth Fund has to say about Dollar General Corporation (NYSE:DG) in its Q1 2021 investor letter:
“We have eliminated Dollar General to fund the purchase of Amazon, which we consider a superior investment opportunity. We feel Dollar General has been an excellent “Safety” holding for us, especially in 2020. Since our initial purchase in July 2016, Dollar General shares have more than doubled, beating the S&P 500 and slightly underperforming the Index (our actual returns were higher, as we had added to the position on a drawdown soon after our initial purchase).
During the COVID drawdown in early 2020, Dollar General declined 10% versus 25% for the Index and 29% for the S&P 500. We had expected the company to grow its store footage 5% per year with same-store sales increasing 2-3% and yielding revenue growth of 7-8% over the long term. Slight margin expansion would lead to 10%+ EPS growth, according to our research.
2020 could have pulled forward more than three years of revenue and earnings growth into a single year. The pandemic and quarantining led people to stock up on everyday consumables, and stimulus checks and extended and elevated unemployment benefits have allowed Dollar General customers to spend more. In fact, the company recently reported full-year 2020 results in which revenue grew 22% and EPS grew 60%. These results included over 200 basis points of margin expansion off a low base of 8.3% operating margins in 2019. This compares to margin expansion of tens of basis points in typical market environments. Dollar General now has over 17,000 stores. There could be more than three years of approximately 5% annual square-footage growth left before maturing at over 20,000 stores. Same-store sales growth could be in the 3-4% range for some time, and we think the company remains extremely well run. We simply believe our investment in Amazon is a superior alternative.”
5. S&P Global Inc. (NYSE:SPGI)
Lionstone Capital Management’s Stake Value: $29,402,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 7.69%
Number of Hedge Fund Holders: 71
S&P Global Inc. (NYSE:SPGI) is a New York-based financial services mega corporation that is the parent company to S&P Global Ratings, S&P Global Market Intelligence, S&P Global Platts, and CRISIL. In addition to that, S&P Global Inc. (NYSE:SPGI) also holds a majority stake in S&P Dow Jones Indices.
Lionstone Capital Management as of September this year maintains a steady position in S&P Global Inc. (NYSE:SPGI), with stakes valued at $29.4 million. Chris Hohn’s TCI Fund Management is the largest stakeholder of S&P Global Inc. (NYSE:SPGI), holding a $2.04 stake in the company. Overall, 71 hedge funds were bullish on S&P Global Inc. (NYSE:SPGI) at the end of June.
S&P Global Inc. (NYSE:SPGI) reported solid Q3 results on October 26, posting an EPS of $3.54, beating estimates by $0.39. The $2.09 billion Q3 revenue also exceeded analysts’ consensus estimates by $101.65 million.
Here is what Baron FinTech Fund has to say about S&P Global Inc. (NYSE:SPGI) in its Q1 2021 investor letter:
“S&P Global Inc. provides credit ratings, indexes, data, and analytics to the financial and commodities markets. Shares increased on strong fourth quarter results and 2021 guidance that exceeded Street expectations. Although bond issuance is expected to moderate after two years of exceptional growth, management still expects revenue to grow mid-single-digits this year. Also, shareholders overwhelmingly voted to approve the merger with IHS Markit. We continue to own the stock as we see a long runway for growth and significant competitive advantages for the company.”
4. FirstService Corporation (NASDAQ:FSV)
Lionstone Capital Management’s Stake Value: $29,419,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 7.69%
Number of Hedge Fund Holders: 13
FirstService Corporation (NASDAQ:FSV), a Toronto-based residential real estate company, posted its Q3 earnings on October 26, with EPS for the quarter coming in at $1.50, topping estimates by $0.29. Revenue in the period totaled $849.43 million, up 14.49% year-over-year.
Lowenstein’s Lionstone Capital Management owns 163,006 shares in FirstService Corporation (NASDAQ:FSV), worth $29.4 million, representing 7.69% of the firm’s Q3 portfolio.
The largest FirstService Corporation (NASDAQ:FSV) stakeholder as per Insider Monkey’s database of elite funds is Jim Simons’ Renaissance Technologies, with a $151.1 million stake in the company. Overall, 13 hedge funds were long FirstService Corporation (NASDAQ:FSV) as of June this year.
Alger Weatherbie Specialized Growth Fund mentioned FirstService Corporation (NASDAQ:FSV) in its Q2 2021 investor letter. Here is what the fund said:
“FirstService Corp. was among the top contributors to performance. FirstService is a leading provider of property management services to owners and homeowners associations of community and high-rise properties, as well as branded services such as California Closets and CertaPro Painters for homeowners. FirstService continues to extend its significant scale advantage by using its free cash flow and strong balance sheet to complete value-enhancing acquisitions within the property management industry. We believe its ability to provide a greater breadth of higher quality services has positioned the company to gain significant market share.
The company reported another quarter with mid single-digit revenue growth as expected, while its profit margin improvement exceeded expectations, a result of strong results for its services that support transfer of property ownership during a time period when the company’s amenities services experienced seasonal weakness. Additionally, the company has been building momentum with its branded services such as California Closets as homeowners increasingly embrace do it for me rather than do it yourself. The company also united its restoration subsidiaries under a single brand called ‘First Onsite.’”
3. Black Knight, Inc. (NYSE:BKI)
Lionstone Capital Management’s Stake Value: $34,288,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 8.97%
Number of Hedge Fund Holders: 33
Lionstone Capital Management holds 476,216 shares in Black Knight, Inc. (NYSE:BKI), as of September this year, valued at $34.2 million. The company accounts for 8.97% of the firm’s Q3 portfolio. Black Knight, Inc. (NYSE:BKI) is a Florida-based company that offers tech solutions and data analytics to the mortgage and real estate industries.
Black Knight, Inc. (NYSE:BKI), on November 8, posted its Q3 earnings results. EPS in the period totaled $0.60, beating estimates by $0.03. The $378 million revenue was up 20.92% from the prior-year quarter.
Dan Loeb’s Third Point is the largest stakeholder of Black Knight, Inc. (NYSE:BKI), holding 1.8 million shares worth $129.6 million. Overall, 33 hedge funds in the database of Insider Monkey reported owning stakes in the company, valued at more than $995 million.
2. Alphabet Inc. (NASDAQ:GOOG)
Lionstone Capital Management’s Stake Value: $35,305,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 9.23%
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ:GOOG) stock represents 9.23% of Lionstone Capital Management’s Q3 portfolio, with the firm owning 13,246 shares in the tech corporation, worth $35.3 million as of the third quarter of 2021.
Robert Joseph Caruso’s Select Equity Group is the largest Alphabet Inc. (NASDAQ:GOOG) stakeholder as per Insider Monkey’s records, holding a position worth $96.79 billion in the company. Overall, the Q2 database maintained by Insider Monkey suggests that 155 funds were bullish on Alphabet Inc. (NASDAQ:GOOG).
Alphabet Inc. (NASDAQ:GOOG) posted Q3 results on October 26, with an EPS of $27.99, outperforming estimates by $4.75. Similarly, the $65.12 billion revenue exceeded analysts’ consensus estimates by $1.83 billion. As a result of the solid Q3 performance, Jefferies analyst Brent Thill on October 27 raised the price target on Alphabet Inc. (NASDAQ:GOOG) to $3,500 from $3,325 and kept a Buy rating on the stock.
Here is what Oakmark Funds has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2021 investor letter:
“Alphabet, a U.S. communication services provider, was once again a top contributor for the quarter, solidifying its rank as a top contributing stock for the one-year period. The company’s financial results repeatedly exceeded expectations. In particular, its revenue grew faster than expected and its margin trends improved across all segments. In addition, management has executed $24.4 billion of stock repurchases so far in 2021. After further examination, we recently increased our estimate of Alphabet’s intrinsic value based on the company’s better than expected operating leverage and its notable efficiency improvements. As a result, we continue to believe that Alphabet is trading at a significant discount to its intrinsic value.”
1. APi Group Corporation (NYSE:APG)
Lionstone Capital Management’s Stake Value: $41,256,000
Percentage of Lionstone Capital Management’s 13F Portfolio: 10.79%
Number of Hedge Fund Holders: 34
APi Group Corporation (NYSE:APG) is an American company offering safety, specialty, and industrial services in more than 200 locations around the world. Lowenstein’s Lionstone Capital Management holds a $41.2 million stake in the company, with APi Group Corporation (NYSE:APG) being its largest holding, representing 10.79% of Lowenstein’s Q3 portfolio.
As of the second quarter of 2021, 34 hedge funds monitored by Insider Monkey reported owning stakes in APi Group Corporation (NYSE:APG), up from 33 in the preceding quarter. The total value of these stakes is approximately $1.22 billion. The leading APi Group Corporation (NYSE:APG) stakeholder is Andreas Halvorsen’s Viking Global, which owns 33.3 million shares in the company, worth $678.3 million.
APi Group Corporation (NYSE:APG) on November 10 reported its Q3 results. EPS in the quarter totaled $0.35, beating estimates by $0.01. Revenue for Q3 came in at $1.05 billion, beating estimated revenue by $10.53 million.
Here is what Greystone Capital Management has to say about APi Group Corporation (NYSE:APG) in its Q2 2021 investor letter:
“For remaining clients who owned shares in The APi Group, I fully sold out of the position this quarter following a 70% plus price appreciation in order to allocate to potentially higher IRR opportunities that present better risk/rewards. I remain a fan of the business as well as Martin Franklin and team, and believe the future is bright. There is a chance we will again be owners of APG at some point in the future.”
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Disclosure: None. Top 10 Stock Picks of Leon Lowenstein’s Lionstone Capital Management is originally published on Insider Monkey.
