In this article, we discuss the top 10 stocks to buy in 2022 according to Motley Fool’s 1623 Capital.
1623 Capital was established in 2018 by Jeff Fischer and Brian Richards, the chief investment officer and chief operating officer of the hedge fund. 1623 Capital is a subsidiary of The Motley Fool. A fundamental long/short equity strategy is employed at 1623 Capital’s Pro Fund. The hedge fund is based in Alexandria, Virginia, with discretionary assets under management of $310.5 million and a Q1 portfolio worth $199.5 million. The hedge fund invests in the transports, utilities and telecommunications, information technology, healthcare, finance, consumer staples, and communications sectors.
Securities filings for Q1 2022 reveal that Motley Fool’s 1623 Capital added 11 new stocks to its portfolio, made additional purchases in 13, sold out of 18 companies, and reduced holdings in 12 securities. 1623 Capital strengthened its hold on Dollar General Corporation (NYSE:DG), Visa Inc. (NYSE:V), and FedEx Corporation (NYSE:FDX). Whereas, the hedge fund sold out of Airbnb, Inc. (NASDAQ:ABNB), Meta Platforms, Inc. (NASDAQ:META), and Pinterest, Inc. (NYSE:PINS) in the March quarter.
Some of the most notable stocks held by Motley Fool’s 1623 Capital include Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Block, Inc. (NYSE:SQ).
Our Methodology
We used the Q1 portfolio of Motley Fool’s 1623 Capital for this analysis, selecting the hedge fund’s top 10 holdings. The stocks are ranked according to 1623 Capital’s stake value in each company.
Photo by Austin Distel on Unsplash
Top Stocks to Buy in 2022 According to Motley Fool’s 1623 Capital
10. Broadridge Financial Solutions, Inc. (NYSE:BR)
1623 Capital’s Stake Value: $7,318,000
Percentage of 1623 Capital’s 13F portfolio: 3.66%
Number of Hedge Fund Holders: 17
Broadridge Financial Solutions, Inc. (NYSE:BR) is a New York-based financial technology company that offers proxy statements, annual reports, and other financial data to public companies. Motley Fool’s 1623 Capital owns 47,000 shares of Broadridge Financial Solutions, Inc. (NYSE:BR) as of Q1 2022, worth $7.3 million, representing 3.66% of the total 13F holdings.
On May 12, Broadridge Financial Solutions, Inc. (NYSE:BR) declared a $0.64 per share quarterly dividend, in line with previous. The dividend was paid to shareholders on July 6. The company delivers a dividend yield of 1.75% as of July 5. On June 14, Wells Fargo disclosed its recession stock portfolio, and Broadridge Financial Solutions, Inc. (NYSE:BR) was part of its Info Tech ETF.
According to Insider Monkey’s database, 17 hedge funds were bullish on Broadridge Financial Solutions, Inc. (NYSE:BR) at the end of Q1 2022, with collective stakes worth $123.16 million. Dmitry Balyasny’s Balyasny Asset Management is the leading position holder in the company, with 170,227 shares worth $26.50 million.
Like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Block, Inc. (NYSE:SQ), Broadridge Financial Solutions, Inc. (NYSE:BR) is on the radar of elite investors.
9. ServiceNow, Inc. (NYSE:NOW)
1623 Capital’s Stake Value: $8,409,000
Percentage of 1623 Capital’s 13F portfolio: 4.21%
Number of Hedge Fund Holders: 90
ServiceNow, Inc. (NYSE:NOW) is a California-based software company that specializes in cloud computing and IT service management. Credit Suisse analysts Sami Badri and George Engroff observed that back-office applications and front-office software would potentially see an increase in spending in 2026, compared to 2021 and 2022, which bodes well for ServiceNow, Inc. (NYSE:NOW).
Stifel analyst Brad Reback on May 25 reiterated a Buy rating on ServiceNow, Inc. (NYSE:NOW) but lowered the price target on the shares to $550 from $650. The management updated its long-term model, raising the FY24 and FY26 subscription revenue goals by $1 billion each to $11 billion and $16 billion, respectively. The analyst added that ServiceNow, Inc. (NYSE:NOW) expects to achieve these growth targets organically. He sees these targets as “very achievable” and forecasts that ServiceNow, Inc. (NYSE:NOW)’s growing platform, advanced pipeline, and large deal momentum should allow the company to retain over 20% revenue growth and significant margin expansion. However, the analyst cited “ongoing market turmoil and multiple compression” for a reduced price target.
According to Insider Monkey’s data, 90 hedge funds were bullish on ServiceNow, Inc. (NYSE:NOW) at the end of Q1 2022, with collective stakes worth about $7.5 billion. Chase Coleman’s Tiger Global Management is the leading stakeholder of the company, with 2.4 million shares worth $1.36 billion.
In its Q3 2021 investor letter, Palm Capital, an asset management firm, highlighted a few stocks and ServiceNow, Inc. (NYSE:NOW) was one of them. Here is what the fund said:
“ServiceNow, Inc. (NYSE:NOW) shares were our final top contributor for 3Q on a strong beat and raise quarter. The company reported 31% subscription revenue growth, 30% subscription billings growth, and a 19% non-GAAP FCF margin for the quarter, while raising full year subscription revenue and billings guidance to 29% and 31%, respectively, as well as raising non-GAAP FCF margin by 100 basis points to 31%.
ServiceNow, Inc. (NYSE:NOW) is a best-of-breed provider of both IT Service Management (ITSM) and IT Operations Management (ITOM) solutions to enterprise customers. The company’s products serve mainly its clients’ internal employee base with a current focus on automating the process of IT deployment, configuration and service and management of IT assets across an organization. Both its ITSM and ITOM solutions are delivered as a software-as-a-service (SaaS), and are each leading solutions in growing markets, driven by the secular trend of enterprises transitioning all aspects of their business and operations to the cloud. As the company maintains and adds customers, upsells them, and expands into adjacent markets, we believe ServiceNow, Inc. (NYSE:NOW) should sustain a strong long-term revenue and FCF growth trajectory.”
8. The Charles Schwab Corporation (NYSE:SCHW)
1623 Capital’s Stake Value: $8,853,000
Percentage of 1623 Capital’s 13F portfolio: 4.43%
Number of Hedge Fund Holders: 78
The Charles Schwab Corporation (NYSE:SCHW) is a California-based financial services company that specializes in commercial banking, personal banking, stock brokerage, electronic trading platforms, wealth management, investment management, and financial planning. The company announced in mid-June that it is expecting revenue growth of up to 8.5% in the second quarter. Motley Fool’s 1623 Capital held 15,100 shares of The Charles Schwab Corporation (NYSE:SCHW) in Q1 2022, worth $8.85 million, representing 4.43% of the total 13F portfolio.
Deutsche Bank analyst Brian Bedell on June 28 reiterated a Buy rating on The Charles Schwab Corporation (NYSE:SCHW) but lowered the price target on the shares to $80 from $84. The analyst slashed earnings estimates and price targets across the “rate sensitive” trust banks and online brokers to account for greater deposit from increased near-term interest rate assumptions and marginally higher deposit betas. The analyst reiterated an “increasingly more conservative” stance on trust banks.
According to Insider Monkey’s data, 78 hedge funds were bullish on The Charles Schwab Corporation (NYSE:SCHW) at the end of the first quarter of 2022, up from 72 funds in the preceding quarter. Harris Associates is the largest shareholder of the company, with more than 12 million shares worth $1 billion.
Here is what Giverny Capital Asset Management has to say about The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2022 investor letter:
“My wife likes to kid me for my tendency to praise essays and other commentary by saying, “It was good because I agreed with it.” I cite Jamie Dimon at the top of this letter because I agree with his comments and, in fact, have been writing to you for some time about the problem of unsustainably low interest rates coupled with high levels of inflation. As you know, we own a significant number of companies that should benefit from higher interest rates, including brokerage Charles Schwab. Turning to trading, during the first quarter we lightly trimmed our holding Charles Schwab. We trimmed Schwab after a big run-up. It remains one of our top five holdings.”
7. Equinix, Inc. (NASDAQ:EQIX)
1623 Capital’s Stake Value: $9,270,000
Percentage of 1623 Capital’s 13F portfolio: 4.64%
Number of Hedge Fund Holders: 40
Equinix, Inc. (NASDAQ:EQIX) is an American multinational company that specializes in internet connections and data centers. In the beginning of May, Equinix, Inc. (NASDAQ:EQIX) acquired four data centers in Chile, which adds to its Latin America market share. Securities filings for Q1 2022 reveal that Motley Fool’s 1623 Capital held 12,500 shares of Equinix, Inc. (NASDAQ:EQIX), worth $9.27 million, representing 4.64% of the total 13F portfolio.
On June 30, Jefferies analyst Jonathan Petersen upgraded Equinix, Inc. (NASDAQ:EQIX) to Buy from Hold, raising the price target to $790 from $750, citing pricing power and robustness in a recession. He thinks REITs underperforming in a recession is “not a given”, observing that real estate delivered “robust returns” during previous stagflation periods. The analyst recommends properties with rent inflation potential to negate occupancy headwinds, such as Industrial, Storage, Residential, Data Centers, Towers, and Senior Housing.
Among the hedge funds tracked by Insider Monkey, 40 funds were long Equinix, Inc. (NASDAQ:EQIX) at the conclusion of the first quarter of 2022, compared to 45 funds in the last quarter. Ian Simm’s Impax Asset Management is the biggest shareholder of the company, with 661,963 shares worth roughly $491 million.
Here is what Baron Funds has to say about Equinix, Inc. (NASDAQ:EQIX) in its Q2 2021 investor letter:
“The shares of Equinix, Inc. gained 18% in the most recent quarter. Equinix is the premier global data center company in the world. We believe the company is exceptionally well positioned to continue to benefit from powerful secular demand trends including strong growth in information technology outsourcing, increased cloud computing adoption, multi-year increases in mobile data traffic, global internet traffic, and the number of connected devices.”
6. American Tower Corporation (NYSE:AMT)
1623 Capital’s Stake Value: $10,049,000
Percentage of 1623 Capital’s 13F portfolio: 5.02%
Number of Hedge Fund Holders: 50
American Tower Corporation (NYSE:AMT) is a real estate investment trust that owns and operates wireless and broadcast communications infrastructure worldwide. On July 1, KeyBanc analyst Brandon Nispel maintained an Overweight rating on American Tower Corporation (NYSE:AMT) but lowered the price target on the stock to $283 from $286. He forecasts a “relatively strong outlook” for the U.S. Tower new leasing in the coming few years, though added that 2023 “appears to represent the peak growth, which is likely to keep Tower stocks range bound” in the short-term.
Securities filings for the first quarter of 2022 reveal that Motley Fool’s 1623 Capital owned 40,000 shares of American Tower Corporation (NYSE:AMT), worth $10 million, representing 5.02% of the total 13F holdings.
Among the hedge funds tracked by Insider Monkey, 50 funds were bullish on American Tower Corporation (NYSE:AMT) at the end of Q1 2022, compared to 53 funds in the earlier quarter. Charles Akre’s Akre Capital Management is the leading stakeholder of the company, with approximately 7 million shares worth $1.75 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Block, Inc. (NYSE:SQ), American Tower Corporation (NYSE:AMT) is one of the top stock picks of Motley Fool’s 1623 Capital.
Here is what Qualivian Investment Partners has to say about American Tower Corporation (NYSE:AMT) in its Q3 2021 investor letter:
“What Attracts Us
Superior Business:
- High barriers to entry resulting from low bargaining power of suppliers (land owners) and customers (wireless companies). Neither can find reasonable substitutes for existing cell towers. Combined with low possibility of disruption, this results in a business oligopoly and pricing power.
- Stable business with consistent high returns on equity, low maintenance capital required, and strong cash generation.
− Ten-year, non-cancelable contracts with built in pricing escalators and high renewal rates
− 1%-2% churn
Superior Reinvestment Opportunities:
- Strong growth for the foreseeable future due to increasing demand for wireless data usage, resulting in wireless carriers Capex equipment spend on existing and new towers.
- Low maintenance capital expenditure requirements; most of capital expenditure is for growth
Superior Management / Capital Allocation:
- Capital reinvested back in business has had returns well above cost of capital
• Company has purchased stock opportunistically…” (Click here to see the full text)
5. Apple Inc. (NASDAQ:AAPL)
1623 Capital’s Stake Value: $10,657,000
Percentage of 1623 Capital’s 13F portfolio: 5.34%
Number of Hedge Fund Holders: 131
Motley Fool’s 1623 Capital owns 61,032 shares of Apple Inc. (NASDAQ:AAPL), worth $10.65 million, representing 5.34% of the total 13F portfolio. On July 5, Morgan Stanley analyst Katy Huberty revealed that Apple Inc. (NASDAQ:AAPL)’s App Store net revenue growth slowed to 2.5% year-over-year in June, down from 4% growth in May. App Store net revenue increased 5% year-over-year to $6.5 billion for the second quarter, which is about $67 million under her present prediction of 6% year-over-year growth in the quarter. The analyst reiterated an Overweight rating and a $185 price target on Apple Inc. (NASDAQ:AAPL) shares.
According to Insider Monkey’s first quarter database, 131 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL) at the end of Q1 2022, compared to 134 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest shareholder of the company, with approximately 891 million shares worth $155.5 billion.
Here is what Weitz Investment Management Partners III Opportunity Fund has to say about Apple Inc. (NASDAQ:AAPL) in its Q1 2022 investor letter:
“Changes to Apple’s (NASDAQ:AAPL) mobile operating system have temporarily impacted growth of Meta’s advertising business just as the company’s investments in Instagram’s “Reels” feature ramp ahead of full monetization. (Shareholders can read research analyst Jon Baker’s in-depth discussion of current events impacting Meta and reasons why we’re optimistic about the company in our recent Analyst Corner feature.) CoreCard (formerly Intelligent Systems) struggled early in the fiscal year to hire and train staff to handle growth from new and existing clients. Lately, Apple-related headlines also took a bite out of CoreCard shares, as reports suggest Apple is exploring a transition of its credit card and other financial services to internally built solutions. Such a move would create revenue headwinds for its partners, which CoreCard is widely believed to be. We are monitoring these developments and stress-testing our model accordingly.”
4. Amazon.com, Inc. (NASDAQ:AMZN)
1623 Capital’s Stake Value: $11,084,000
Percentage of 1623 Capital’s 13F portfolio: 5.55%
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) is one of the top stocks to buy in 2022 according to Motley Fool’s 1623 Capital. The hedge fund owns 3,400 shares of the company as of Q1, worth over $11 million, representing 5.55% of the total 13F portfolio. Redburn analyst Alex Haissl on June 29 initiated coverage of Amazon.com, Inc. (NASDAQ:AMZN) with a Buy rating and a $270 price target, citing his view that Amazon Web Services is worth $3 trillion, or “almost 3x Amazon’s current market cap”.
According to Insider Monkey’s data, 271 hedge funds were bullish on Amazon.com, Inc. (NASDAQ:AMZN) at the end of March 2022, compared to 279 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is the largest shareholder of the company, with 2.3 million shares worth $7.70 billion.
Here is what Weitz Investment Management Partners III Opportunity Fund has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter:
“Amazon.com’s (NASDAQ:AMZN) stock was down modestly in the quarter, but opportunistic purchases helped the position contribute positively to the Fund. Our index short positions against ETFs tracking market indexes provided helpful ballast during the first quarter drawdown but were otherwise detractors for the fiscal year. During the quarter, we covered roughly 20% of our S&P 500 short and 50% of our Nasdaq 100 short at progressively lower prices. Among our long equities, we added materially to high-conviction holdings Amazon.com.”
3. FedEx Corporation (NYSE:FDX)
1623 Capital’s Stake Value: $11,570,000
Percentage of 1623 Capital’s 13F portfolio: 5.79%
Number of Hedge Fund Holders: 52
FedEx Corporation (NYSE:FDX) is an American multinational conglomerate that specializes in transportation, e-commerce, and related services. Motley Fool’s 1623 Capital boosted its FedEx Corporation (NYSE:FDX) by 39% in Q1 2022. The hedge fund owned 50,000 shares of the company, worth $11.5 million, representing 5.79% of the total portfolio.
On July 1, Berenberg analyst William Howard downgraded FedEx Corporation (NYSE:FDX) to Hold from Buy and lowered the price target to $275 from $333. The stock has had “something of a reprieve in the past few weeks, after the company changed its CEO and the apparent influence of an activist investor prompted some strategy changes”, the analyst told investors. However, with short-term earnings risks increasing, the shares may “pause for breath until the macroeconomic outlook becomes clearer”, said the analyst.
According to the first quarter database of Insider Monkey, 52 hedge funds were long FedEx Corporation (NYSE:FDX), compared to 64 funds in the prior quarter. Mason Hawkins’ Southeastern Asset Management is a significant shareholder of the company, with 1.38 million shares worth $321.2 million.
Here is what Artisan Value Fund has to say about FedEx Corporation (NYSE:FDX) in its Q3 2021 investor letter:
“Our weakest Q3 performers included FedEx. Shares of FedEx Corporation (NYSE:FDX), a global shipping and logistics firm, were held back by disappointing business results as labor cost headwinds and air network disruptions overshadowed solid top-line trends. We think the company should be able to overcome these near-term issues. Importantly, FedEx Corporation (NYSE:FDX) has strong pricing power as it operates in a consolidated global shipping industry. In September, the company announced it would increase its shipping rates by an average of 5.9% across most of its services, which is the first time in several years that its annual increase would exceed 5.0%. The industry’s renewed pricing discipline is a welcome change, reflecting a broader commitment to earn better returns on invested capital. FedEx Corporation (NYSE:FDX) is also closer to fully integrating TNT, a European-focused parcel company it acquired in 2016. The market is beginning to incorporate a higher probability FedEx will fully integrate TNT, which will provide a significant boost to profits. The stock now trades at a near-trough multiple of less than 12X 2022 earnings, so we added to our position on weakness.”
2. Visa Inc. (NYSE:V)
1623 Capital’s Stake Value: $11,709,000
Percentage of 1623 Capital’s 13F portfolio: 5.86%
Number of Hedge Fund Holders: 159
Visa Inc. (NYSE:V) is an American multinational financial services corporation that offers credit cards and payment systems. Securities filings for Q1 2022 reveal that Motley Fool’s 1623 Capital owned 52,800 shares of Visa Inc. (NYSE:V), worth $11.70 million, representing 5.86% of the total 13F portfolio. In Q1 2022, the hedge fund strengthened its hold on the company by 65%.
Piper Sandler analyst Christopher Donat on July 6 reiterated an Overweight rating on Visa Inc. (NYSE:V) but lowered the price target on the shares to $204 from $239. The analyst stated that his largest concern for the Q2 earnings season in the payments space is guidance for the second half of 2022. He believes that inflation and economic concerns “could disrupt discretionary spending, such as cross-border travel”.
According to Insider Monkey’s Q1 data, 159 hedge funds were bullish on Visa Inc. (NYSE:V), up from 142 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the largest shareholder of the company, with approximately 20 million shares worth $4.4 billion.
Here is what Polen Global Growth Fund has to say about Visa Inc. (NYSE:V) in its Q1 2022 investor letter:
“We added to both Visa and Mastercard during the final quarters of 2021, based on the belief that both businesses were trading at attractive prices and poised to deliver double-digit returns over the next three to five years. Cross-border transactions–a highly profitable business segment for both companies–represent roughly 10% of Visa and Mastercard’s volumes and 25% of their gross revenues, so lockdowns have severely impacted this segment due to stifled travel. While it was impossible to know when people would begin traveling again, we accepted this reality with the belief that travel would eventually return. Both companies have commented that as soon as a country or geography reopens, cross-border volumes reignite, amplifying each business’s growth and profitability. We think these near- term headwinds have created an attractive long-term investment opportunity.”
1. Dollar General Corporation (NYSE:DG)
1623 Capital’s Stake Value: $12,624,000
Percentage of 1623 Capital’s 13F portfolio: 6.32%
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE:DG) is the largest holding of Motley Fool’s 1623 Capital, with the hedge fund owning 56,702 shares of the company, worth $12.6 million, representing 6.32% of the total 13F portfolio. Dollar General Corporation (NYSE:DG) is an American discount retailer. The company declared on May 31 a $0.55 per share quarterly dividend, in line with previous. The dividend is payable on July 19, to shareholders of record on July 5.
Morgan Stanley analyst Simeon Gutman on June 16 upgraded Dollar General Corporation (NYSE:DG) to Overweight from Equal Weight, raising the price target to $250 from $225. The analyst observed that Dollar General Corporation (NYSE:DG) fits his theme of “favoring quality, defensive retailers with offensive characteristics”. He sees a favorable risk/reward skew, with 50% upside and 25% downside in his $340 bull case and $175 bear case, respectively.
According to Insider Monkey’s Q1 data, 53 hedge funds held bullish positions in Dollar General Corporation (NYSE:DG), up from 44 funds in the last quarter. William B. Gray’s Orbis Investment Management is the largest shareholder of the company, with 2.3 million shares worth $519.2 million.
Here is what LRT Capital Management has to say about Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.
The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.
Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”
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Disclosure: None. Top 10 Stocks to Buy in 2022 According to Motley Fool’s 1623 Capital is originally published on Insider Monkey.
