Top 10 Stock Picks of William Von Mueffling’s Cantillon Capital Management

In this article, we discuss the top 10 stock picks of William Von Mueffling’s Cantillon Capital Management.

William Von Mueffling worked at Lazard Asset Management before launching Cantillon Capital Management in 2003. He rose to fame while at Lazard Asset Management by posting 30% annualized returns during 1998-2003. That level of return during the extended market turmoil was made possible through timely short positions on several Internet high-fliers. Currently, he is the CEO and CIO of Cantillon Capital Management, an investment firm with more than $14 billion in assets under management.

Mueffling used a traditional long/short strategy when he started Cantillon Capital Management. However, the hedge fund saw net withdrawals in 2008 as its funds experienced a loss. To everyone’s surprise, he gave up shorting as an investment strategy the following year, highlighting how difficult it was to short when the government was creating money. Mueffling beat several other hedge funds, although his gains were still relatively small when assessed in terms of absolute returns. His hedge fund dropped 7%-8% up until May 2009.

According to a Wall Street Journal story from 2010, Cantillon Capital Management’s strategy is to look for businesses that deliver above-average returns on shareholder equity but are properly valued in relation to their income streams. Additionally, Mueffling stated in an interview with Graham & Doddsville, the Columbia Business School newsletter:

“One can broadly divide value investing into two camps. The first camp is the Graham & Dodd style which is buying assets at a discount or cash at a discount. The second camp is the Buffett style, which I characterize as buying financial productivity at a discount. We fall into the second camp. We believe that there are many different types of moats to be found, and that a moat around a business should allow it to produce outsized margins and wonderful returns on capital. The trick is being able to buy this stream of cash flows at a discount. Unlike Graham & Dodd investing where you might look at low price-to-book value companies or net-net companies, we are trying to buy high financial productivity at a discount to its intrinsic value.”

Cantillon Capital Management announced 39 portfolio changes in the second quarter of 2022. The hedge fund made additional purchases in 10 stocks, acquired 2 new stocks, and reduced holdings in 27 equities. As a result, the number of total holdings increased from 37 to 39. The hedge fund’s portfolio value decreased from $14.01 billion in Q1 to $11.98 billion in Q2 2022. The top 10 positions make up 40.93% of the total 13F holdings, indicating a highly concentrated portfolio. In the second quarter of 2022, the fund dedicated the largest percentage of its portfolio, nearly 25.15%, to the information technology industry. Some of the fund’s notable investments included Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG).

Our Methodology 

We used the Q2 2022 portfolio of William Von Mueffling’s Cantillon Capital Management for this analysis, selecting the top 10 stocks in Mueffling’s portfolio. The popularity of each company among hedge funds in the second quarter of 2022 was determined using Insider Monkey’s extensive database of 895 hedge funds.

Top Stock Picks of William Von Mueffling’s Cantillon Capital Management

10. Equifax Inc. (NYSE:EFX)

Cantillon Capital Management’s Stake Value: $371,292,000

Percentage of Cantillon Capital Management’s 13F Portfolio: 3.09%

Number of Hedge Fund Holders: 43

Equifax Inc. (NYSE:EFX) provides corporations, governments, and consumers with information solutions and human resources business process automation outsourcing services. In addition, Equifax Inc. announced the launch of Cloud-Control on October 4. This dashboard enhances security and transparency in digital supply chains for businesses utilizing Equifax products and solutions.

In addition to Meta Platforms, Inc., Microsoft Corporation, and Alphabet Inc., William Von Mueffling is bullish on Equifax Inc.. He has consistently held a position in Equifax Inc. since Q4 2016, and in the second quarter of 2022, he owned more than 2.03 million shares of Equifax Inc. worth $371.29 million, representing 3.09% of the total 13F holdings.

On October 4, Barclays analyst Manav Patnaik maintained an ‘Overweight’ recommendation on Equifax Inc. and decreased his price objective from $230 to $225. According to the analyst, his “Street low” fiscal 2023 predictions for the credit bureaus continued to reflect a little economic downturn.

According to Insider Monkey’s data, 34 hedge funds were bullish on Equifax Inc. at the end of June 2022, compared to 43 funds in the earlier quarter. In addition, David Blood and Al Gore’s Generation Investment Management is a significant position holder in Equifax Inc., with roughly 4.65 million shares worth $850.64 million.

9. Fidelity National Information Services, Inc. (NYSE:FIS)

Cantillon Capital Management’s Stake Value: $388,046,000

Percentage of Cantillon Capital Management’s 13F Portfolio: 3.23%

Number of Hedge Fund Holders: 67

Fidelity National Information Services, Inc. (NYSE:FIS) provides solutions, technology, and services to merchants, banks, and capital markets firms. Following a sell-side event on September 23, analyst Trevor Williams of Jefferies reiterated a ‘Buy’ rating and a $110 price target on Fidelity National Information Services. William Von Mueffling added Fidelity National Information Services, Inc. to his portfolio in Q1 2013 and has consistently held his stake over the years. As of Q2 2022, he owns 4.23 million shares of the company worth about $388.05 million.

Among the hedge funds tracked by Insider Monkey, 67 funds were bullish on Fidelity National Information Services, Inc. at the end of the second quarter of 2022, compared to 68 funds in the earlier quarter. Robert Joseph Caruso’s Select Equity Group is a prominent shareholder of the company, with 9.53 million shares worth $873.97 million.

In its Q1 2022 investor letter, Weitz Investment Management, an asset management firm, mentioned Fidelity National Information Services, Inc. was one of them. Here is what the fund said:

“Other fiscal-year detractors included Fidelity National Information Services. FIS has been our most disappointing investment in the Covid era. Unlike Meta, the stock trades well below our average cost. The business itself has been relatively durable, but the stock certainly has not. While the core elements of our bullish thesis remain firmly intact, hindsight tells us that we could have waited for a better entry point. From today’s stock price, which is what matters now, we think the risk/reward balance is favorable.”

8. Agilent Technologies, Inc. (NYSE:A)

Cantillon Capital Management’s Stake Value: $410,797,000

Percentage of Cantillon Capital Management’s 13F Portfolio: 3.42%

Number of Hedge Fund Holders: 41

Agilent Technologies, Inc. (NYSE:A) provides application-specific solutions for the life sciences, diagnostics, and applied chemical sectors. Agilent Technologies has paid dividends for at least 10 years. Agilent Technologies issued a quarterly dividend of $0.21 per share on September 21, in line with the previous, with a 0.66% forward yield.

On August 24, Credit Suisse analyst Dan Leonard initiated coverage of Agilent Technologies, Inc.. He assigned the firm an ‘Outperform’ rating and a $165 price objective. The analyst believed that the firm’s ability to grow towards the top of the market in varied macro circumstances had been under-appreciated by the Street.

Agilent Technologies, Inc. has featured on Cantillon Capital Management’s portfolio since the fourth quarter of 2015. In Q2 2022, the hedge fund held about 3.46 million shares of Agilent Technologies, Inc., worth $410.80 million, representing 3.42% of the total portfolio.

According to Insider Monkey’s data, 41 hedge funds were long Agilent Technologies, Inc. at the end of Q2 2022, down from 43 funds a quarter earlier. Impax Asset Management, with a position worth $495.10 million, stood as the most significant shareholder of Agilent Technologies, Inc..

7. Visa Inc. (NYSE:V)

Cantillon Capital Management’s Stake Value: $453,111,000

Percentage of Cantillon Capital Management’s 13F Portfolio: 3.78%

Number of Hedge Fund Holders: 166

Visa Inc. (NYSE:V) is a company that provides digital payment services. Visa Inc. Canada and TD Securities launched innovative cooperation on October 6 as the first financial institution in Canada to join Visa B2B Connect, a cross-border business-to-business (B2B) payments network that enables account-to-account international transfers rapidly, securely, and reliably.

On August 16, Daiwa analyst Kazuya Nishimura downgraded Visa Inc. from ‘Outperform’ to ‘Neutral’ and trimmed his price objective on the shares from $230 to $225. Border restrictions have almost all vanished in recent years, except for some parts of Asia. Therefore, Nishimura perceived fewer opportunities for profitability to beat market expectations even if Visa continues to forecast positive growth.

William Von Mueffling, in Q2 2022, reduced his hold on Visa Inc. by 1% and revealed holding 2.30 million shares worth $453.11 million, representing 3.78% of the total 13F securities.

According to Insider Monkey’s data, 166 hedge funds were long Visa Inc. at the end of Q2 2022, compared to 159 funds in the earlier quarter. TCI Fund Management is a notable shareholder of the company, with 19.92 million shares worth $3.92 billion.

In its Q2 2022 investor letter, Lakehouse Capital mentioned Visa Inc. and discussed its stance on the firm. Here is what the fund said:

“It was business as usual for Visa Inc. as it delivered another solid quarter driven by strong US growth, the ongoing gradual displacement of cash with digital transactions, and accelerated growth in cross-border volume as travel spending plays catch up post-Covid. Visa processed 49.3 billion transactions on its network, up 16% year-on-year and 39% above pre-pandemic levels, driving $2.7 trillion in total payments volume, both of which have more than recovered from the impacts of the pandemic. The total number of cards in Visa’s network also grew by 8% year-on-year to 3.9 billion.

Cross-border transactions were a key issue for Visa during the pandemic, but this headwind has now turned into a tailwind. Constant currency cross-border volumes rose 40% (48% excluding intra-Europe) in the most recent quarter and we expect this trend will continue to play out in the year ahead. While a potential economic slowdown and geopolitical concerns are always a risk, we take comfort in the fact that Visa has a sixty-plus year track record of successfully overcoming numerous macroeconomic challenges that in the moment appeared insurmountable. We believe this current episode will prove no different and that the combination of a very attractive industry structure and the ongoing secular shift towards digital payments provides a foundation that will enable Visa to continue winning for many years to come.”

6. Thermo Fisher Scientific Inc. (NYSE:TMO)

Cantillon Capital Management’s Stake Value: $466,246,000

Percentage of Cantillon Capital Management’s 13F Portfolio: 3.89%

Number of Hedge Fund Holders: 93

Thermo Fisher Scientific Inc. (NYSE:TMO) designs, produces, and markets a variety of goods. It operates through Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services segments. On October 4, Evercore ISI analyst Vijay Kumar added Thermo Fisher Scientific Inc. to the firm’s “TAP Outperform” list and several other Medtech and Life Science Tools firms. Kumar assigned an ‘Outperform’ rating and a $580 price target on Thermo Fisher Scientific Inc. shares.

Securities filings reveal that Cantillon Capital Management reduced its stake in Thermo Fisher Scientific Inc. by 4,695 shares during the second quarter of 2022. The fund now owns 858,206 shares of Thermo Fisher Scientific Inc., worth over $466.25 million and representing 3.89% of its total 13F portfolio.

As of the end of the second quarter of 2022, 93 hedge funds had ownership positions in Thermo Fisher Scientific Inc., down from 101 hedge funds a quarter earlier. Fisher Asset Management, with a nearly $1.27 billion stake, is a significant shareholder of Thermo Fisher Scientific Inc..

Just like Meta Platforms, Inc., Microsoft Corporation, and Alphabet Inc., Thermo Fisher Scientific Inc. is one of the notable stocks in the second quarter portfolio of William Von Mueffling’s Cantillon Capital Management.

Stewart Asset Management mentioned Thermo Fisher Scientific Inc. in its Q2 2022 investor letter and explained its insights for the company. Here is what the fund said:

“Recently we initiated two new investments. One in Thermo Fischer Scientific, a supplier to the life sciences industry. We have followed the company for many years and the recent downturn in share price gave us a good entry price at which to invest. Thermo has had strong earnings growth for many years and is led by a superb team. The company’s recent acquisitions make it a full-service supplier to the biopharma and biotech industries.”

5. American Tower Corporation (NYSE:AMT)

Cantillon Capital Management’s Stake Value: $471,366,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.93%
Number of Hedge Fund Holders: 52

American Tower Corporation (NYSE:AMT) is a prominent independent multi-tenant communications real estate owner, operator, and developer. More than 220,000 cell towers are owned and operated by American Tower Corporation in the United States, Asia, Latin America, Europe, and Africa. Following the acquisition of CoreSite, it also owns and runs 25 data centers in eight U.S. markets.

American Tower Corporation has a strong dividend history. Since 2012, the corporation has increased its dividend each year. On September 22, American Tower announced a quarterly dividend of $1.47 per share, a 2.8% increase over the previous payout of $1.43.

On October 3, KeyBanc analyst Brandon Nispel reduced his price objective on American Tower Corporation from $300 to $264 and maintained an ‘Overweight’ rating on the stock. The analyst predicted that all towers would likely fall short of 2023 adjusted funds from operations estimates due to rising interest rates.

Akre Capital Management is a prominent stakeholder of American Tower Corporation, with 6.97 million shares of the company, worth over $1.78 billion. Insider Monkey found 52 hedge funds bullish on American Tower Corporation at the close of the second quarter of 2022. Those funds held collective stakes in the company valued at $4.37 billion, up from $4.10 billion in the first quarter of 2022, when 50 hedge funds were long AMT shares.

Here is what Baron Funds had to say about American Tower Corporation in its Q2 2022 investor letter:

“American Tower is a leading global tower company with 220,000 communication sites globally and over 40,000 in the U.S. We added to our position during the market dislocation and as it became increasingly clear that the company would put permanent equity financing in place at better-than-expected terms for its previously announced acquisition of CoreSite (thereby removing the “equity overhang”).

In addition, the company stepped back from a large potential deal in Europe, which would have required significant incremental funding, due to unfavorable contract terms and price. This decision further reinforced our confidence in management’s capital allocation discipline knowing that these were highly sought-after assets.”

4. Analog Devices, Inc. (NASDAQ:ADI)

Cantillon Capital Management’s Stake Value: $473,871,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 3.95%
Number of Hedge Fund Holders: 61

Analog Devices, Inc. (NASDAQ:ADI) is a global high-performance semiconductor firm that designs, develops, manufactures, and sells integrated circuits (ICs). John Armitage’s Egerton Capital Limited is a significant stakeholder of Analog Devices, Inc., with 4.46 million shares worth over $650.84 million.

On October 3, Citi analyst Christopher Danely maintained a ‘Buy’ rating and a $195 price target on Analog Devices, Inc.. According to Danely, Analog Devices, Inc. could succeed during the downturn owing to its high, consistent margins, awareness of and readiness for the slowdown, and end-market positioning.

Analog Devices, Inc. has recently experienced a decrease in hedge fund interest. The company was in 61 hedge fund portfolios at the end of the second quarter of 2022. There were 67 funds in our database with Analog Devices, Inc. positions at the end of the first quarter of 2022. Cantillon Capital Management owned more than 3.24 million shares in the firm valued at over $473.87 million, representing 3.95% of the portfolio of the hedge fund.

3. Broadcom Inc. (NASDAQ:AVGO)

Cantillon Capital Management’s Stake Value: $500,905,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 4.18%
Number of Hedge Fund Holders: 66

Broadcom Inc. (NASDAQ:AVGO) is a significant semiconductor device designer, developer, and global supplier. Fisher Asset Management is the largest stakeholder of Broadcom Inc., with 1.47 million shares worth about $716.29 million.

William Stein, a Truist analyst, reduced his price objective on Broadcom Inc. from $658 to $630 on September 2 while retaining a ‘Buy’ recommendation. Stein stated that owing to the company’s 3.3% dividend yield, his prediction of a 20% dividend growth this year, and the benefits of M&A, investors should purchase shares of Broadcom Inc..

In the second quarter of 2022, 66 hedge funds were long Broadcom Inc., with a total stake value of $4.03 billion. Cantillon Capital Management reduced its stake in Broadcom Inc. by 1% in the second quarter, ending the period with a position worth $500.91 million.

2. Alphabet Inc. (NASDAQ:GOOG)

Cantillon Capital Management’s Stake Value: $647,894,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 5.4%
Number of Hedge Fund Holders: 153

Alphabet Inc., the American technology conglomerate. announced the release of the Pixel 7 and Pixel 7 Pro on October 6 with significant camera upgrades. In addition, the new smartphones come with a number of significant improvements, including new Tensor G2 chips from Google and improved AI-powered apps like Google Assistant.

On October 4, BofA analyst Justin Post maintained a ‘Buy’ rating on Alphabet Inc. while trimming his price objective to $114 from $125. Due to the anticipated top-down effects of a Western economic GDP slump as well as potential headwinds from TikTok commercialization, Amazon.com, Inc. (NASDAQ:AMZN)’s ad growth and new ad-supported streaming competitors, he has lowered his estimates for both Alphabet Inc. and Meta Platforms, Inc..

Cantillon Capital Management held 297,300 shares of Alphabet Inc. on June 30, amounting to a $647.89 million stake and representing 5.4% of the fund’s portfolio. 153 hedge funds from the second quarter database of Insider Monkey reported long bets on Alphabet Inc., with combined stakes worth $22.30 billion. One of the firm’s notable shareholders is Chris Hohn’s TCI Fund Management, which recently increased its stake by 5%, equalling $5.42 billion.

In its Q2 2022 investor letter, Lakehouse Capital mentioned Alphabet Inc.. Here is what the fund said:

“Alphabet Inc. reported another strong quarterly result despite the tough macroeconomic conditions. Revenue increased by 13% as Search proved resilient, primarily led by strength in the travel and retail verticals. YouTube advertising growth was lighter and moderated due to a tough comparison period and a general softening in brand advertising spend. That said, YouTube’s user engagement and time spent still continues to grow which bodes well for future monetisation opportunities. Google Cloud outpaced the company’s overall growth with revenue increasing by 36% and while it has yet to show any signs of profitability, we remain supportive of Alphabet continuing to reinvest in its cloud business given the size of the market opportunity ahead. On the cost front, the company added another 10,000 employees during the quarter, but notably, the CFO mentioned that hiring will likely slow down over the next twelve months as the company focuses on greater operating efficiency. Overall, we’re pleased with how the company has performed and are confident that management will be able to control costs, if or when the economic environment becomes more challenging.”

1. S&P Global Inc. (NYSE:SPGI)

Cantillon Capital Management’s Stake Value: $719,580,000
Percentage of Cantillon Capital Management’s 13F Portfolio: 6%
Number of Hedge Fund Holders: 84

S&P Global Inc. provides credit ratings, benchmarking, statistics, and workflow solutions. On September 28, S&P Global announced a quarterly dividend of $0.85 per share, in line with the previous. S&P Global Inc. has increased its dividend every year for at least the last 49 years and has paid a dividend each year since 1937.

On August 29, Oppenheimer analyst Owen Lau retained an ‘Outperform’ rating on the stock while raising his price objective on S&P Global to $419 from $404. The analyst, who was becoming more positive about the firm, claimed that the shares of S&P Global had a solid start to Q3, rising 8.0% and beating the S&P 500 by 80 basis points.

In the second quarter of 2022, 84 hedge funds were bullish on S&P Global Inc., down from 97 in the preceding quarter. Chris Hohn’s TCI Fund Management is a significant stakeholder of S&P Global Inc., with 8.77 million shares worth over $2.96 billion.

In its Q2 2022 investor letter, Baron Funds mentioned S&P Global Inc.. Here is what the fund said:

“Another example is S&P Global, the leading rating agency and data provider, whose stock declined 29.0% year-to-date and 17.5% during the second quarter as a result of growing investor concerns over the slowdown in debt issuance. While debt issuance volumes have seen a dramatic decline – the worst quarterly decline in a decade (down 41% year-over-year in the second quarter based on Goldman Sachs estimates), – and this led management to withdraw its 2022 guidance in early June, we do not believe it would result in a permanent loss of capital.

First, ratings represent only about 30% of S&P Global’s total revenues. Second, despite inherent volatility in quarterly or annual issuance, over the long-term issuance volumes follow the trends in levels of debt outstanding, which has compounded in the mid-single digits for many years. Lastly, we believe that S&P Global’s strong competitive positioning will enable it to continue benefiting from pricing power, while taking advantage of secular tailwinds such as the growth in passive and ESG investing, international expansion, and the growing demand for data analytics.”

You can also take a peek at Top 9 Stock Picks of Eduardo Costa’s Calixto Global Investors and Top 10 Stock Picks of Roberto Mignone’s Bridger Management.

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This article is originally published at Insider Monkey.