Top 10 Stocks to Invest in Based on Traci Lerner’s Chescapmanager LLC’s Portfolio

In this article, we discuss the top 10 stocks to invest in based on Traci Lerner’s Chescapmanager LLC’s portfolio. If you want to skip our detailed analysis of Traci Lerner’s history, investment philosophy, and hedge fund performance, go directly to the Top 5 Stocks to Invest In Based on Traci Lerner’s Chescapmanager LLC’s Portfolio.

Price volatility and overall uncertainty at the stock market have pummeled entire investment portfolios over the past few years, leaving even market experts scratching their heads. During this time of upheaval, Traci Lerner, the manager of Chescapmanager LLC, has emerged as a dominant name in the industry. Lerner is acclaimed for being one of the few hedge fund managers who have strategically perfected the art of using equity investments to reap substantial returns. Lerner is currently managing over $910 million in assets at her hedge fund with the top 10 holdings comprising 47.49% of the portfolio.

Over the years, Lerner has built credentials for herself not only through her investment exploits but also through her philanthropic work. She is a trustee at Johns Hopkins Hospital Endowment Fund Inc. and a board member at Kennedy Krieger Institute Inc. She was the President/Co-Founder at Chesapeake Partners Management and is a Managing Partner at Chescapmanager LLC. Chesapeake Partners Management, co-founded and led by Lerner, invested in “event specific” stocks with value overlay wagering on takeovers and bankruptcies.

Since its inception in 1991, Chesapeake Partners Management achieved an average yearly return of 14%. However, like others in the finance world, the hedge fund struggled during the 2008 economic crisis. It bounced back from these lows with a record return of 47% in 2009. Reports cited returns of 47% in 2013 but these returns decreased to 13% in 2015 and eventually to 8.2% in 2016. This led to the shutdown of the hedge fund in 2016 for outside money. The Chesapeake Partners Management hedge fund founded initially is now used as a family office to manage Lerner’s money.

Despite the setback, Lerner continued her investments through Chescapmanager LLC, based out of Baltimore. She has a diverse portfolio with investments that are primarily in high-growth industries such as service industry, technology and healthcare. Lerner’s strategic investments in the healthcare industry have been particularly successful. Lerner invested in Cronos Group Inc. (NASDAQ: CRON) acquiring shares at approximately $4.15 apiece. Her bet on Cronos Group Inc. (NASDAQ: CRON) paid off when the stock rose to $12.94, approximately by 33% in 2018. According to Bloomberg, a financial news company, Lerner made a $79 million profit as a consequence of this development.

Chescapmanager, LLC continues to perform well because of Lerner’s experience. The turnover value of the hedge fund at the end of fourth quarter in 2019 was 12.27% which increased to 22.18% in the third quarter of 2020 according to the quarterly filings. According to the most recent 13F filing, the company’s portfolio value at the end of the second quarter was $911.4 million. This is a decrease from the first quarter in which the value was at $937.97 million.

Facebook, Inc. (NASDAQ: FB) is Chescapmanager’s largest investment. Lerner has 250,000 shares (CALL) worth $86.9 million in the company. Since the beginning of the year, Facebook has returned 34.86%, bringing its 12-month returns to 25.64%. On September 15, 2021, the stock was trading at $376.53.

Lerner’s major stock picks as of the second quarter of 2021 include the following: Facebook, Inc. (NASDAQ: FB), Cronos Group Inc. (NASDAQ: CRON), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN) and Vertiv Holding Co (NYSE: VRT).

Why should we pay attention to Traci Lerner’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

With this context in mind, let’s now start our list of the top 10 stocks to invest in based on Traci Lerner’s Chescapmanager LLC’s portfolio. We used Traci Lerner’s Q2 portfolio for this analysis.

Photo by Kaleidico on Unsplash

10. Penn National Gaming, Inc. (NASDAQ: PENN)

Chescapmanager LLC Stake Value: $18.4 million
Percentage of Chescapmanager LLC’ 13F Portfolio: 2.01%
No. of Hedge Fund Holders: 40

Penn National Gaming, Inc. (NASDAQ: PENN), based in Wyomissing, Pennsylvania, is a casino and racetrack operator. The company is tenth on our list of top stocks to buy according to Traci Lerner’s Chescapmanager LLC.

The company has a market cap of $11.7 billion. In the second quarter of 2021 Penn National Gaming, Inc. (NASDAQ: PENN) reported an EPS of $1.17, beating estimates by $0.21. The company’s revenue in the second quarter came in at $1.6 billion, an increase of 407.1% year over year, and beat revenue estimates by $50 million.

On September 14, investment advisory Wells Fargo initiated coverage of Penn National Gaming, Inc. (NASDAQ: PENN) stock with an Equal Weight rating and a price target of $82, noting downside risk to its market share.

Our data shows that HG Vora Capital Management is one of the biggest stakeholders of Penn National Gaming, Inc. (NASDAQ: PENN) with 2.5 million shares worth $191.2 million.

At the end of the second quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Penn National Gaming, Inc. (NASDAQ: PENN), down from 42 the preceding quarter worth $907.5 million.

Just like Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), Microsoft Corporation (NASDAQ: MSFT), Cronos Group Inc. (NASDAQ: CRON) and Vertiv Holdings Co (NYSE: VRT), Penn National Gaming, Inc. (NASDAQ: PENN) is one of the top stocks to invest in based on Traci Lerner’s Chescapmanager LLC’s portfolio.

Here is what Carillon Tower Advisers has to say about Penn National Gaming, Inc. in its Q2 2021 investor letter:

Penn National Gaming is a diversified omnichannel provider of retail and online gaming, live racing, and sports betting entertainment. After a substantial run, Penn National Gaming sold off during the quarter, reflecting a profit taking in a number of sports and online gambling stocks. However, fundamentals are healthy in firm’s regional gaming markets and its sports betting initiatives remain strong.”

9. PAE Incorporated (NASDAQ: PAE)

Chescapmanager LLC Stake Value: $18.6 million
Percentage of Chescapmanager LLC’ 13F Portfolio: 2.03%
No. of Hedge Fund Holders: 15

PAE Incorporated (NASDAQ: PAE) is a defense and government services contractor headquartered in Arlington, Virginia. The company is ninth on our list of top stocks to buy according to Traci Lerner’s Chescapmanager LLC.

The company has a market cap of $549.1 million. In the second quarter of 2021, PAE Incorporated (NASDAQ: PAE) reported an EPS of $0.14, beating estimates by $0.02. The company’s revenue in the second quarter came in at $748.6 million and beat revenue estimates by $13.15 million.

On August 25, investment advisory Morgan Stanley downgraded PAE Incorporated (NASDAQ: PAE) stock to Equal Weight from Overweight with a decrease in price target from $11 to $8, quoting that the company’s revenue is anticipated to suffer as a result of recent events in Afghanistan.

Our data shows that Engine Capital is one of the biggest stakeholders of PAE Incorporated (NASDAQ: PAE) with 2.6 million shares worth $23.4 million.

At the end of the second quarter of 2021, 15 hedge funds in the database of Insider Monkey held stakes worth $92.1 million in PAE Incorporated (NASDAQ: PAE), down from 19 the preceding quarter worth $101.5 million.

Just like Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), Microsoft Corporation (NASDAQ: MSFT), Cronos Group Inc. (NASDAQ: CRON) and Vertiv Holdings Co (NYSE: VRT), PAE Incorporated (NASDAQ: PAE) is one of the top stocks to invest in based on Traci Lerner’s Chescapmanager LLC’s portfolio.

8. Cara Therapeutics, Inc. (NASDAQ: CARA)

Chescapmanager LLC Stake Value: $ 18.6 million
Percentage of Chescapmanager LLC’ 13F Portfolio: 2.04%
No. of Hedge Fund Holders: 17

Cara Therapeutics, Inc. (NASDAQ: CARA) is a biotechnology company specializing in the development of therapeutics to treat pain and inflammation-related diseases. The company is eighth on our list of top stocks to buy according to Traci Lerner’s Chescapmanager LLC.

The company has a market cap of $763.9 million. In the second quarter of 2021 Cara Therapeutics, Inc. (NASDAQ: CARA) reported an EPS of -$0.61, missing estimates by $0.04.

On August 24, investment advisory H.C. Wainwright kept a Buy rating on Cara Therapeutics, Inc. (NASDAQ: CARA) stock and raised the firm’s price target on to $35 from $33, following FDA approval of IV Korsuva to treat moderate-to-severe pruritus.

Our data shows that Farallon Capital is one of the biggest stakeholders of Cara Therapeutics, Inc. (NASDAQ: CARA) with 2 million shares worth $28.5 million.

At the end of the second quarter of 2021, 17 hedge funds in the database of Insider Monkey held stakes worth $70.6 million in Cara Therapeutics, Inc. (NASDAQ: CARA), same as the preceding quarter worth $153.3 million.

Just like Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), Microsoft Corporation (NASDAQ: MSFT), Cronos Group Inc. (NASDAQ: CRON) and Vertiv Holdings Co (NYSE: VRT), Cara Therapeutics, Inc. (NASDAQ: CARA) is one of the top stocks to invest in based on Traci Lerner’s Chescapmanager LLC’s portfolio.

7. Microsoft Corporation (NASDAQ: MSFT)

Chescapmanager LLC Stake Value: $19.2 million
Percentage of Chescapmanager LLC’ 13F Portfolio: 2.1%
No. of Hedge Fund Holders: 238

Microsoft Corporation (NASDAQ: MSFT) is a multinational technology company based in Redmond, Washington, that makes computer software, consumer devices, computers, and related services. The company is seventh on our list of top stocks to buy according to Traci Lerner’s Chescapmanager LLC.

The company has a market cap of $2.3 trillion. In the second quarter of 2021, Microsoft Corporation (NASDAQ: MSFT) reported an EPS of $2.17, beating estimates by $0.25. The company’s revenue in the second quarter came in at $46.2 billion, an increase of 21.5% year over year, and beat revenue estimates by $1.9 billion.

On September 17, investment advisory Tigress Financial maintained a Buy rating on Microsoft Corporation (NASDAQ: MSFT) and raised the price target to $366 from $303, expecting strong performance of cloud-based services from the company.

Our data shows that Crake Asset Management is one of the biggest stakeholders of Microsoft Corporation (NASDAQ: MSFT) with 404,700 shares worth $109.6 billion.

At the end of the second quarter of 2021, 238 hedge funds in the database of Insider Monkey held stakes worth $62.5 billion in Microsoft Corporation (NASDAQ: MSFT), down from 251 the preceding quarter worth $58.9 billion.

Here is what Baron Opportunity Fund has to say about Microsoft Corp. in its Q2 2021 investor letter:

“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft was a top contributor in the period because it trades at reasonable free cash flow and earnings valuations, has cloud and digital transformation tailwinds at its back, reported a solid March quarter, and beat Street expectations by a wide margin. Microsoft’s results continued to be strong across the board, with Azure cloud computing revenues up 46% in constantcurrency (“cc”) terms and commercial cloud bookings growth of 38% cc, the best in years. Microsoft also reported robust profitability growth, with operating income expanding 31% and GAAP earnings up 45%. We believe the company is well positioned for continued solid growth and profitability through market share gains as more companies look to transform and digitize their businesses as they move operations to the cloud.”

6. Us Food Holding Corp. (NYSE: USFD)

Chescapmanager LLC Stake Value: $21.2 million
Percentage of Chescapmanager LLC’ 13F Portfolio: 2.32%
No. of Hedge Fund Holders: 35

US Food Holding Corp. (NYSE: USFD) is a foodservice distributor based in the United States. The company is currently working with over 300,000 restaurants and foodservice operators to help them prosper. It offers a diverse and unique food product as well as a comprehensive suite of e-commerce, technology, and business solutions to its consumers through 28,000 employees and more than 70 sites. The company is sixth on our list of top stocks to buy according to Traci Lerner’s Chescapmanager LLC.

The company has a market cap of $7.4 billion. In the second quarter of 2021, US Food Holding Corp. (NYSE: USFD) reported an EPS of $0.58, beating estimates by $0.23. The company’s revenue in the second quarter came in at $7.66 billion, an increase of 66.5% year over year, and beat revenue estimates by $810 million.

On April 4, investment advisory JPMorgan kept a Neutral rating on US Food Holding Corp. (NYSE: USFD) stock and increased the price target to $44 from $38, stating that the stock will continue to rise for a little while longer.

Our data shows that Leonard Green & Partners is one of the biggest stakeholders of US Food Holding Corp. (NYSE: USFD) with 7 million shares worth $268.5 million.

At the end of the second quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in US Food Holding Corp. (NYSE: USFD), down from 40 the preceding quarter worth $1.5 billion.

Just like Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), Microsoft Corporation (NASDAQ: MSFT), Cronos Group Inc. (NASDAQ: CRON) and Vertiv Holdings Co (NYSE: VRT), US Food Holding Corp. (NYSE: USFD) is one of the top stocks to invest in based on Traci Lerner’s Chescapmanager LLC’s portfolio.

 

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