In this article, we’ll examine the investment philosophy and portfolio management strategy of legendary value investor Michael Price, who passed away at the age of 70 on March 15. We’ll also review the late investor’s most recent 13F holdings.
Thanks to his value investing acumen and somewhat unusual (for the time) activist investing style, Michael F. Price was able to build a nearly unmatched track record during the 1980’s and 1990’s. Mr. Price developed an interest towards investing when he was a child and bought his first stock when he was still in junior high school.
Mr. Price founded MFP Investors in 1998 shortly after selling Heine Securities to Franklin Resources for $670 million in 1996. MFP Investors focused on long-term value investment opportunities in severely undervalued companies. In 1996, Mr. Price told Fortune magazine that he didn’t buy securities until they were trading at least a 25% discount to their fair value.
“When a company gets into trouble and starts to miss its earnings, analysts drop coverage because they don’t want to embarrass their firm with bad calls,” he told Fortune. “So mainstream Wall Street isn’t looking anymore. Which pond would you rather fish in, one with a lot of fishermen or only a few?”
The late billionaire made headlines in 1995 when he led a successful $10 billion merger between Chase Manhattan Corp. and Chemical Banking Corp., creating the largest U.S. bank at the time. The deal valued Chase’s shares at 70% more than what they cost Michael Price to purchase them when he took a 6% stake in the company, resulting in a $650 million profit for his firm.
Price was also active in philanthropist activities. He donated $18 million to the University of Oklahoma, which named its business school after Price in his honor. In a statement on his death, Joseph Harroz Jr., the university’s president, dubbed Price “an extraordinary friend and benefactor.”
“His generosity transformed OU — both at the College of Business, which bears his name, and all across our campus,” Harroz said. “He has left an indelible impact from which generations of Sooners will benefit. We grieve with the Price family today, but we know that Michael’s remarkable legacy won’t soon be forgotten at OU.”
Fellow billionaire investor Seth Klarman, the founder of Baupost Group, said he learned how to buy undervalued assets from Price, whom he worked with at Heine Securities after graduating from college. He described Price as “very smart and quick”, adding that he was “deeply curious and he would dig and dig” (to uncover investment opportunities).
As of the end of December, Michael Price’s MFP investors had $903 million in 13F securities in its portfolio. The firm’s top 10 stock picks include Twitter, Inc. (NYSE:TWTR), Banc of California, Inc. (NYSE:BANC), Laboratory Corp Of America Holdings (NYSE:LH), Popular, Inc. (NASDAQ:BPOP), and Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI).
Intel Corporation (NASDAQ:INTC) was MFP Investors’ largest and longest-running stock holding as of December 31. Shares of Intel Corporation (NASDAQ:INTC) have underperformed over the past five years compared to peers due to increasing competition. However, the company’s strategy of investing $90 billion in the European market to gain chip market supremacy makes it an interesting stock pick.
S&W Seed Company (NASDAQ:SANW) was Michael Price’s second-largest stock holding. Shares of S&W Seed Company have plummeted sharply during the past five years, which Price’s firm saw as a buying opportunity to increase its stake in the company. Bunge Limited (NYSE:BG) was his third-largest holding and featured prominently in his portfolio after he first took a stake in the company in the second quarter of 2018.
Michael Price of MFP Investors
Our Methodology:
For this analysis, we made use of MFP Investors’ 13F filing for the December quarter, which revealed the fund’s top stock holdings as of December 31.
Top 10 Stock Picks of the Late Billionaire Michael Price
10. Twitter, Inc. (NYSE:TWTR)
MFP Investors’ Stake Value: $21.9 million
Percentage of MFP Investors’ Portfolio: 2.42%
Number of Hedge Fund Holders: 83
Like his top picks Intel Corporation and S&W Seed Company (though unlike Bunge Limited), shares of Twitter, Inc. plummeted sharply in the December quarter, which Michael Price’s hedge fund saw as a buying opportunity, as MFP Investors lifted its stake in Twitter, Inc. by 103% during the final quarter of 2021. The firm held more than 1.1 million shares of Twitter, Inc. after its latest purchase.
While Michael Price bought a big stake in Twitter, Inc., several other hedge funds dumped their positions. Of the 924 hedge funds tracked by Insider Monkey that filed 13Fs for the Q4 period, Twitter, Inc. was in 83 of their portfolios as of December 31, compared to 96 positions in the previous quarter.
In its fourth quarter investor letter, RiverPark Funds, an investment management firm, also expressed confidence in the revenue growth potential of Twitter, Inc.. Here is what RiverPark Funds stated:
“Twitter: Despite reporting in-line third-quarter results, TWTR shares struggled at the end of 2021. For TWTR, the declines could be attributed to a fear of continued headwinds from Apple’s iOS tracking changes, as well as the stock continuing to be a show-me story after posting two disappointing quarters since its investor day in February (prior to this in-line quarter), as well as its recent CEO change (founder Jack Dorsey stepped down and is being succeeded by long-time CTO Parag Agrawal). Investors continue to be concerned with the platform’s user engagement, as total monetizable daily active users (mDAU) grew 13% year over year to 211 million, in line with expectations, but still below management’s long-term target of 20% growth. Management expects mDAU growth to accelerate, driven by continued economic reopening and new features such as Spaces and Communities, and an increase in the number and penetration of Twitter Topics. For the quarter, revenue increased 37% year over year to $1.3 billion and 4Q guidance was strong at about 20% growth, as Twitter has less exposure to Apple’s ATT headwinds.
With $4.8 billion of TTM revenue (only 4% of Facebook’s revenue), the company has a large opportunity to take share in the $200 billion global digital advertising market that continues to flow to mobile, Twitter’s focus. As the company continues to launch and improve its products (including stories, audio chat, podcasting, video, and subscriptions), its platform should become more compelling to both users and advertisers, allowing it to take advertising dollar share through increased user engagement and ad pricing. As Twitter showed this year, we believe that the company can generate 20%+ revenue growth while also driving operating leverage in its already highly profitable business model, generating expanding excess free cash flow growth over time (3Q OCF grew 81% year over year).”
9. Banc of California, Inc. (NYSE:BANC)
MFP Investors’ Stake Value: $22.2 million
Percentage of MFP Investors’ Portfolio: 2.46%
Number of Hedge Fund Holders: 12
MFP Investors has held a stake in Banc of California, Inc. since the first quarter of 2017. Banc of California, Inc. serves the state of California with over 30 branches. The stock price of Banc of California, Inc. has underperformed during the past five years compared to the broader market index. Its shares are currently trading at around 20x earnings.
Banc of California, Inc. was in 12 hedge funds’ portfolios as of December 31. Besides MFP Investors, Forest Hill Capital and EJF Capital were among the leading stakeholders in the company.
8. Laboratory Corp Of America Holdings (NYSE:LH)
MFP Investors’ Stake Value: $25.13 million
Percentage of MFP Investors’ Portfolio: 2.78%
Number of Hedge Fund Holders: 61
Unlike Intel Corporation and S&W Seed Company, Laboratory Corp Of America Holdings was among the top-performing stock holdings of MFP Investors along with Bunge Limited. MFP Investors first initiated a position in Laboratory Corp Of America Holdings in the first quarter of 2021.
Laboratory Corp Of America Holdings is one of the world’s largest clinical laboratory networks, with 36 primary laboratories in the United States. Shares of Laboratory Corp Of America Holdings have surged by nearly 35% over the past 12 months.
In its fourth quarter investor letter, Vltava Fund, an investment management firm, mentioned a few stocks, including Laboratory Corp Of America Holdings. Here is what Vltava Fund stated:
“Three companies that most pleasantly surprised us by their profitability last year (including) LabCorp. LabCorp is earning a lot on COVID-19 PCR tests. While 2 years ago this business did not exist at all, today it is driving the company’s huge growth in profitability. Although we expect – and hope – that the number of tests performed will drop significantly soon (and by the way, LabCorp is able to do 250,000 of them daily), LabCorp’s profitability over the past 2 years has very pleasantly surprised us.”
7. Popular, Inc. (NASDAQ:BPOP)
MFP Investors Stake Value: $25.7 million
Percentage of MFP Investors Portfolio: 2.84%
Number of Hedge Fund Holders: 35
Popular, Inc. is a long-running stock holding of Michael Price’s MFP Investors. The firm first initiated a position in the company in 2014. As of December 31, it held 313,296 shares of Popular, Inc.. The fund’s stake in Popular, Inc. has been a positive contributor to MFP Investors’ returns in recent years, as shares of the company have surged by more than 100% over the past five years.
Popular, Inc. was in 35 hedge funds’ portfolios as of December 31. Polaris Capital Management and AQR Capital Management were among the leading stakeholders in the company.
6. Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI)
MFP Investors’ Stake Value: $25 million
Percentage of MFP Investors’ Portfolio:2.86%
Number of Hedge Fund Holders: 16
MFP Investors has held a stake in Atlantic Capital Bancshares, Inc. since the final quarter of 2015. The firm’s commitment to holding a stake in Atlantic Capital Bancshares, Inc. has paid off recently, as shares of the company have rallied sharply over the last two years over the prospects of a merger with SouthState Corporation (NASDAQ:SSB). Finally, Atlantic Capital Bancshares, Inc. was acquired by SouthState Corporation (NASDAQ:SSB) through a merger agreement in the first quarter of 2022.
Like Intel Corporation, Bunge Limited, and S&W Seed Company, Atlantic Capital Bancshares, Inc. was among the top 10 stock picks of Michael Price as of the end of December 2021. 16 elite funds were bullish about Atlantic Capital Bancshares, Inc..
5. Anterix Inc. (NASDAQ:ATEX)
MFP Investors’ Stake Value: $32 million
Percentage of MFP Investors’ Portfolio: 3.64%
Number of Hedge Fund Holders: NA
MFP Investors has steadily been increasing its stake in Anterix Inc. (NASDAQ:ATEX) over the past two years. Other investors are also showing confidence in the future prospects of the company’s communication services business model. The company’s shares are up by 23% over the past 12 months, extending their five-year gains to over 140%.
Anterix Inc. specializes in the commercialization of its spectrum assets in order to assist utility companies and critical infrastructure operators in deploying private technologies, broadband networks, and solutions.
4. CIT Group Inc. (NYSE:CIT)
MFP Investors’ Stake Value: $33.1 million
Percentage of MFP Investors’ Portfolio: 3.66%
Number of Hedge Fund Holders: 32
CIT Group Inc. (NYSE:CIT) operates 64 branches throughout Southern California and is headquartered in New York City. In October 2020, First Citizen BancShares, Inc. (NASDAQ:FCNCA) announced a merger with the bank, which was completed in March 2022. After the merger, CIT Group will initially operate as a division of First Citizens Bank.
Both companies benefited from the $2.2 billion deal. First Citizens was looking to expand into new markets, while CIT needed lower costs of funding. CIT will support First Citizens’ growing presence in California, where it has 64 branches and offers access to specialized commercial lending lines such as equipment leasing and railroad financing.
3. Bunge Limited (NYSE:BG)
MFP Investors’ Stake Value: $40.6 million
Percentage of MFP Investors’ Portfolio: 4.49%
Number of Hedge Fund Holders: 38
The share price of Bunge Limited has rallied more than 30% during the past 12 months, thanks to acceleration in its financial numbers and the growth in commodities prices. Founded in Bermuda and based in St. Louis, Missouri, Bunge Limited is an agribusiness and food company. Apart from exporting soybeans internationally, it is also engaged in food processing, grain trading, and fertilizer production.
MFP Investors has held a stake in the company since 2018. As of December 31, Bunge Limited was in 38 hedge funds’ portfolios, compared to 37 positions in the previous quarter.
2. S&W Seed Company (NASDAQ:SANW)
MFP Investors’ Stake Value: $47.6 million
Percentage of MFP Investors’ Portfolio: 5.27%
Number of Hedge Fund Holders: 7
Michael Price’s MFP Investors has been building a stake in S&W Seed Company since 2015. As of December 31, the firm held more than 17.44 million shares of the company, accounting for 5.27% of the value of its 13F portfolio. S&W Seed Company was in seven hedge funds’ portfolios as of December 31, compared to six positions in the previous quarter.
S&W Seed Company is an agricultural company specializing in multi-crops and the middle market. The company is engaged in the breeding, production, and sale of agricultural seeds. Shares of the company have been under pressure over the years due to its widening losses. However, higher agriculture product prices and aggressive growth strategies should support its financial numbers in the years ahead.
1. Intel Corporation (NASDAQ:INTC)
MFP Investors’ Stake Value: $106 million
Percentage of MFP Investors’ Portfolio: 11.78%
Number of Hedge Fund Holders: 74
Intel Corporation (NASDAQ:INTC) is the longest-running stock holding of MFP Investors and also the firm’s largest stock holding as of December 31, worth $106 million. Shares of Intel have been under pressure over the past couple of quarters. However, the company plans to improve its revenue base by investing around $90 billion in European markets.
In its fourth quarter investor letter, Third Point Management mentioned a few stocks, including Intel Corporation. Here is what Third Point stated:
“2021 was a highly productive year for Intel‘s new CEO, Pat Gelsinger. Despite the stock’s tepid results, we see a compelling, underappreciated fundamental story. Intel’s “brain drain” – a key part of our thesis when we first sought to help the company confront its long-time underperformance – appears to be reversing. Since joining Intel, Mr. Gelsinger has not only brought back prominent Intel former employees but has also attracted talents from competitors such as AMD, Nvidia, Apple, and, most recently, Micron’s stellar Chief Financial Officer, David Zinsner.
We are encouraged by Intel’s aggressive investment plan, including a recently announced fabrication plant in Ohio and acquisition of Tower Semiconductors. We knew from the start that Intel’s turnaround would be complex and lengthy, and we have been pleased to see Mr. Gelsinger sacrifice near-term earnings for long-term growth.
Finally, after a series of blunders across its PC and Server product lines, Intel is finally receiving good reviews for one of its upcoming processors: Alder Lake. Tom’s Hardware, a preeminent hardware publication, called Alder Lake “a cataclysmic shift in Intel’s battle against AMD’s potent Ryzen 5000 chips.” While this is just one product across a broad lineup, and given it will take time to achieve leadership across them all, we are encouraged by these tangible signs of progress under Mr. Gelsinger’s leadership. With talent returning, an improving product suite, and a willingness to invest for growth, we believe Intel’s prospects have turned the corner. We expect that the company’s upcoming analyst day will be an ideal time for Mr. Gelsinger to articulate the progress he has made and begin to reset expectations for the company.”
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This article is originally published at Insider Monkey.
