In this article, we’ll discuss the investment philosophy and portfolio management strategy of billionaire Louis Bacon. In addition, we will review the top 10 stock picks of billionaire Louis Bacon.
Moore Global Investments, the macro hedge fund founded by billionaire Louis Bacon with $25,000 from his mother’s inheritance, garnered a 17.6% annualized return from inception through 2019. The robust returns are attributed to Louis Bacon’s strong insight into global macro and economic events along with active portfolio management. In addition, his firm has historically generated substantial profits during volatile and uncertain circumstances. Moore Global posted more than 70% return during the pandemic year. The billionaire investor was also one of the prominent investors who profited from the 1990 Japanese stock market crash and the 1992 pound volatility in the UK. From 1995 to 1999, Moore Capital produced annual returns ranging from 23 to 32 percent.
In 1980, Louis Bacon began his career after earning his MBA from Columbia Business School. Initially, he was a runner on the floor of the New York Cotton Exchange before joining Shearson Lehman Brothers as a trader and eventually becoming their member of the futures division. He left Shearson Lehman Brothers in 1987 and founded Remington Trading Partners in 1989, followed by Moore Global Investments in 1990.
As of December 2021, the New York-based investment firm’s $5 billion worth of 13F securities portfolio was spread across many sectors including financials, technology, consumer discretionary, and communications. The top 10 stock picks of billionaire Louis Bacon include MGIC Investment Corporation (NYSE:MTG), Mastercard Incorporated (NYSE:MA), Bill.com Holdings, Inc. (NYSE:BILL), Alphabet Inc. (NASDAQ:GOOG), and Ally Financial Inc. (NYSE:ALLY).
Large-cap tech stocks like Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN) were also among the largest stock holdings of billionaire Louis Bacon’s fund. Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN) were among the most popular stocks among hedge funds, according to data tracked by Insider Monkey. As of December 31, Microsoft Corporation was in 266 portfolios while 282 elite funds were bullish on Amazon.com, Inc..
Louis Bacon Moore of Moore Capital
Our Methodology
For analysis of the top 10 stock picks of billionaire Louis Bacon, we used Moore Global Investments’ 13F portfolio as of December 2021.
Top 10 Stock Picks of Billionaire Louis Bacon
10. MGIC Investment Corporation (NYSE:MTG)
Moore Global Investments’ stake value: $45.9 million
Percentage of Moore Global Investments’ portfolio: 0.91%
Number of hedge fund holders: 32
Moore Global initiated a brand new position in MGIC Investment Corporation during the December quarter by purchasing 3.18 million shares. MGIC Investment Corporation is the parent company of Mortgage Guaranty Insurance Corporation, which provides products and services that protect mortgage investors from credit losses. Unlike Bacon’s large-cap stocks such as Microsoft Corporation and Amazon.com, Inc., MGIC Investment Corporation is a small-cap stock with just over $4 billion in market capitalization. The share price of MGIC Investment Corporation gained strong upside momentum in the past two years before experiencing volatility in 2022. MGIC Investment Corporation also offers a dividend yield of 2.34%, which makes it a good stock to hold for the long term.
In the fourth quarter investor letter, FPA Queens Road Small Cap Value Fund, mentioned a few stocks including MGIC Investment Corporation. Here is what the fund stated about MGIC Investment Corporation:
“We continued to add to mortgage insurer MGIC Investment Corp. The much-maligned private mortgage insurance market is not without its risks, most notably regulatory risk. The risks are real, but we think they are overblown and not existential. The company trades at close to our estimate of adjusted net tangible assets, which protects our downside. The company has $2.5 billion in excess capital, some of which will be used to accelerate its share buybacks. We generally aren’t supportive of large buyback programs, but we believe it’s a smart move in this situation. The company’s tangible net value and attractive valuation more than offset our concerns of increased competition and regulatory risk.”
9. Mastercard Incorporated (NYSE:MA)
Moore Global Investments’ stake value: $46.39 million
Percentage of Moore Global Investments’ portfolio: 0.92%
Number of hedge fund holders: 146
Moore Global continues to show confidence in MasterCard Incorporated, one of its long-standing stock holdings. During the December quarter, billionaire Louis Bacon’s firm lifted its existing stake in Mastercard Incorporated by 24%. Mastercard Incorporated is among the stocks that are likely to benefit from economic reopening and easing travel restrictions. This is also reflected in its share price performance. Shares of Mastercard Incorporated dropped only 1% since the beginning of this year compared to an 8% drop in the S&P 500 index.
In addition to share price outperformance, Mastercard Incorporated also distributes dividends to shareholders. For fiscal 2022, Mastercard Incorporated announced a dividend increase of 11% from the previous year.
In the fourth quarter investor letter, Saturna Capital, an investment management firm, highlighted a few stocks including Mastercard Incorporated. Here is what the firm stated about Mastercard Incorporated:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low-interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our position in Mastercard. Although Mastercard does not charge or collect interest, its association with credit activities was problematic.”
8. Bill.com Holdings, Inc. (NYSE:BILL)
Moore Global Investments’ stake value: $48.6 million
Percentage of Moore Global Investments’ portfolio: 0.96%
Number of hedge fund holders: 65
Billionaire Louis Bacon’s hedge fund initiated a stake in Bill.com Holdings, Inc. during the second quarter of 2021 and sold some of its stake in the following two quarters to capitalize on its share price run. Despite stake sales, Bill.com Holdings, Inc. was among the top 10 stock picks of billionaire Louis Bacon as of December. Bill.com Holdings, Inc. is engaged in providing automated, cloud-based software for financial operations.
Like Microsoft Corporation and Amazon.com, Inc., shares of Bill.com Holdings, Inc. have been under pressure since the beginning of this year due to investors’ move towards value stocks. Besides broader market sentiments, Bill.com Holdings, Inc. appears in a strong financial and fundamental position. For instance, Bill.com Holdings, Inc. posted year over year core revenue growth of 197% in the latest quarter while transaction fees increased by 313%.
In the fourth quarter investor letter, Alger, an investment management firm, mentioned a few stocks including Bill.com Holdings, Inc.. Here is what the investment firm stated about Bill.com Holdings, Inc.:
“Bill.com Holdings, Inc., was among the top detractors from performance. Bill.com provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and medium size businesses. Its software helps customers to generate and process invoices, streamline approvals, send and receive payments, synchronizing data with their accounting system and manage their cash.”
7. Alphabet Inc. (NASDAQ:GOOG)
Moore Global Investments’ stake value: $51.8 million
Percentage of Moore Global Investments’ portfolio: 1.02%
Number of hedge fund holders: 374
Moore Global initiated a brand new position Alphabet Inc. during the December quarter. The shares of Alphabet Inc. have been under pressure over the past couple of months due to broader market trends. Besides that, Alphabet Inc. (NASDAQ:GOOG) appears to be in a strong position to generate sustainable growth in financial numbers. This is because Alphabet Inc. is likely to benefit from growth in increasing advertisement spending from traveling and other industries.
In the fourth quarter investor letter, Vulcan Value Partners, an investment management firm, expressed its confidence in Alphabet Inc. (NASDAQ:GOOG). Here is what the firm stated about Alphabet Inc. (NASDAQ:GOOG):
“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet, performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following the company and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet (Google) again with a margin of safety.”
6. Ally Financial Inc. (NYSE:ALLY)
Moore Global Investments’ stake value: $55 million
Percentage of Moore Global Investments’ portfolio: 1.09%
Number of hedge fund holders: 49
Like Microsoft Corporation and Amazon.com, Inc., Ally Financial Inc. is among the top 10 stock picks of billionaire Louis Bacon. Over the past three quarters, Moore Global has increased its stake in Ally Financial Inc.. Ally Financial Inc. is a bank holding company with a market capitalization of just over $14 billion. Despite struggling to generate a share price upside momentum over the past couple of months, Ally Financial Inc. continued to pay dividends to investors. Ally Financial Inc. offers a dividend yield of 2.8%.
Of the 924 elite funds tracked by Insider Monkey, Ally Financial Inc. was in 49 portfolios as of December 2021. Harris Associates and Arrowstreet Capital were among the leading stakeholders in Ally Financial Inc. (NYSE:ALLY).
5. ServiceNow, Inc. (NYSE:NOW)
Moore Global Investments’ stake value: $56 million
Percentage of Moore Global Investments’ portfolio: 1.11%
Number of hedge fund holders: 90
During the pandemic year and in the first half of 2021, ServiceNow, Inc. (NYSE:NOW) was one of the best-performing stocks, and Moore Capital benefited from the price surge by holding a large stake in the software company. However, the firm reduced its stake in the company in the past two consecutive quarters to take advantage of the recent share price run.
In the fourth quarter investor letter, ClearBridge Investments, an investment management firm, highlighted its confidence in the company. Here is what the firm stated:
“Offsetting the consumer slowdown, the Strategy benefited from resilience among its disruptive IT and communications holdings serving the enterprise market. ServiceNow is also a strong performer in helping businesses streamline their workflows and enhance customer relationships and marketing.”
4. Amazon.com, Inc. (NASDAQ:AMZN)
Moore Global Investments’ stake value: $64 million
Percentage of Moore Global Investments’ portfolio: 1.28%
Number of hedge fund holders: 282
Moore Global saw the dip in Amazon.com, Inc. stock price as a buying opportunity during the December quarter. The firm lifted its stake in the company by more than 1450%. It is ranked fourth on our list of top 10 stock picks of billionaire Louis Bacon. Shares of the world’s largest e-commerce platform have been under pressure over the past six months amid prospects for slower revenue growth in the post COVID environment.
In the fourth quarter investor letter, ClearBridge Investments, an investment management firm, highlighted the confidence in future prospects of Amazon. Here is what the firm stated:
“With Amazon’s capex build largely done in 2020 and 2021, we believe it is now set up to generate robust revenue growth and margin expansion in all three of its key segments: e-commerce, cloud (AWS), and advertising. Amazon rebounded off post-invasion lows on the strength we experienced in e-commerce.”
3. Capital One Financial Corporation (NYSE:COF)
Moore Global Investments’ stake value: $67 million
Percentage of Moore Global Investments’ portfolio: 1.33%
Number of hedge fund holders: 61
Louis Bacon’s investment firm raised its stake in Capital One Financial Corporation (NYSE:COF) by 79% during the fourth quarter of 2021. It appears that Moore Global saw the dip in its share price as a buying opportunity. Shares of the American bank holding company are falling since it hit a 52-weeks high of $177 a share in September 2021. Interest rate hikes and bearish broader market performance negatively impacted its stock price in the past two quarters. On the positive side, the company continues paying dividends to shareholders. It currently offers a dividend yield of 1.80%.
Of the 924 hedge funds tracked by Insider Monkey, 61 were bullish about Capital One Financial Corporation as of December.
2. Microsoft Corporation (NASDAQ:MSFT)
Moore Global Investments’ stake value: $79 million
Percentage of Moore Global Investments’ portfolio: 1.58%
Number of hedge fund holders: 266
Microsoft Corporation is among the favorite stocks of Louis Bacon’s hedge fund. The technology giant has generated double-digit financial growth in the past two years due to increasing demand for its products and services. Consequently, its share price appreciated sharply and the company returned hefty cash to shareholders in the form of dividends. Moreover, the company’s fundamentals appear strong with expectations for more than 15% revenue growth in the quarters ahead.
In the fourth quarter investor letter, Motiwala Capital, an investment management firm, mentioned a few stocks including Microsoft. Here is what Motiwala stated:
“Microsoft re-enters our portfolio after a long gap. MSFT sells enterprise and consumer software products as well as hardware products such as the Xbox video game console and Surface laptops. All business segments experienced double-digit revenue growth and earnings per share have compounded in the mid-double digits over the last 5 years. We believe MSFT continues this momentum in the years ahead.”
1. Fisker Inc. (NYSE:FSR)
Moore Global Investments’ stake value: $132 million
Percentage of Moore Global Investments’ portfolio: 2.61%
Number of hedge fund holders: 21
Fisker Inc. (NYSE:FSR) was the largest stock holding of Moore Global Investments as of December. The huge investment in electric vehicle automakers hints that the billionaire is seeking to capitalize on the world’s move towards electric vehicles. According to a latest update, the Los Angeles-based company received 40,000 orders for its new Fisker Ocean sport utility vehicle, up from the 30,000 orders as of Feb. 14. The company is experiencing strong demand for its Fisker Ocean One launch edition and Fisker Ocean Extreme model, both priced at $68,999.
Bullish hedge fund positions increased in the company recently. It was in 21 portfolios as of December compared to 15 positions in the previous quarter.
You can also take a look at 10 Tech Stocks to Buy Now According to Late Michael Price’s MFP Investors and Consumer Staples Stocks To Buy According To Billionaire Ray Dalio.
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Disclosure: The article Top 10 Stock Picks of Billionaire Louis Bacon is originally published on Insider Monkey.
