4. LKQ Corporation (NASDAQ:LKQ)
ValueAct Capital’s Stake Value: $1,084,417,000
Percentage of ValueAct Capital’s 13F Portfolio: 12.56%
Number of Hedge Fund Holders: 38
LKQ Corporation (NASDAQ:LKQ) is a Chicago-based provider of automobile components and auto repair parts, operating in North America, Taiwan, and Europe. ValueAct Capital owns 21.5 million LKQ Corporation (NASDAQ:LKQ) shares, worth $1.08 billion, accounting for 12.56% of the firm’s total Q3 investments.
Publishing its third quarter financial results on October 28, LKQ Corporation (NASDAQ:LKQ) posted earnings per share of $1.02, beating estimates by $0.16. Revenue over the period increased 8.28% year-over-year to $3.30 billion, exceeding estimates by $30.45 million.
Barrington analyst Gary Prestopino on October 29 raised the price target on LKQ Corporation (NASDAQ:LKQ) to $65-$70 from $60 and kept an Outperform rating on the shares following the “solid” Q3 beat. LKQ Corporation (NASDAQ:LKQ)’s salvage business and major mechanical product groups exhibited strong growth due to increased quote conversion rates on salvage products versus aftermarket products, according to the analyst.
In Q3 2021, 38 hedge funds in the database of Insider Monkey reported owning stakes worth $1.69 billion in LKQ Corporation (NASDAQ:LKQ). Arrowstreet Capital is one of the leading company stakeholders, increasing its stake in the company by 16% in the third quarter, holding almost 5 million shares worth $248.9 million.
Here is what Bonsai Partners has to say about LKQ Corporation (NASDAQ:LKQ) in their Q1 2021 investor letter:
“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 20.1% during the quarter.
During the quarter, LKQ shared its fourth-quarter results: showing a slight revenue decline and a nearly 30% increase in quarterly profit Vs. the same period last year. COVID has proved a surprising catalyst for my investment thesis which revolves around optimizing their recent large acquisitions that were never efficiently integrated.
Admittedly, in addition to LKQ’s quarterly performance, thematically, there has been broad enthusiasm for “re-opening” trades, of which, LKQ has been a beneficiary. Most importantly, the prior overhang related to LKQ’s debt burden is now all but behind us. Their net debt to EBITDA ratio now sits below 2x, a stark change from the near 3x leverage ratio before the pandemic. At that time, LKQ’s leverage had the potential to spiral upward to nearly 4-5x if the business experienced a prolonged shutdown. It’s good to be past this issue.”
