In this article, we discuss the top 10 stock picks of John D. Gillespie’s Prospector Partners.
John Gillespie has been the managing member at Prospector Partners since 1997, in addition to being the managing member at Prospector Partners Asset Management and the investment advisor to Prospector Funds. Gillespie manages a portfolio worth $778.7 million at Prospector Partners as of September this year, as well as assets under management valued at $780.2 million.
Gillespie completed his Bachelor’s from Bates College in 1980, and received his MBA from the Graduate School of Business at Stanford University in 1986. He joined Geico Corporation in 1980 as a senior financial analyst, shifting to T. Rowe Price Associates, Inc. in 1986, after the completion of his MBA. At T. Rowe Price, Gillespie managed assets for institutional investors, mutual funds, and closed-end investment companies. He left T. Rowe Price Associates, Inc. in 1997, to join Prospector Partners as a managing member.
Gillespie is also an experienced director, having served on the boards of several companies including White Mountains Insurance Group from 1999 until 2015, as well as Montpelier Re, Symetra Financial, Main Street America, Folksamerica, HG Global, Esurance, Tranzact, and One Beacon Insurance Group.
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As of September this year, Gillespie’s investment portfolio is concentrated in the finance, energy, information technology, healthcare, consumer discretionary, and materials sectors, with a top ten holdings concentration of 28.76%. The largest holding in Prospector Partners’ Q3 portfolio is Berkshire Hathaway Inc. (NYSE:BRK-A), which accounts for 5.64% of the fund’s total 13F securities.
The most notable stocks in John Gillespie’s Q3 portfolio include Berkshire Hathaway Inc., eBay Inc. (NASDAQ:EBAY), Microsoft Corporation (NASDAQ:MSFT), and Johnson & Johnson (NYSE:JNJ), among others discussed in detail below.
Our Methodology
We used the Q3 portfolio of John D. Gillespie’s Prospector Partners to select their top 10 stock picks. Each stock is ranked according to Prospector Partners’ stake value in the holding.
Top Stock Picks of John D. Gillespie’s Prospector Partners
10. RenaissanceRe Holdings Ltd. (NYSE:RNR)
Prospector Partners’ Stake Value: $18,245,000
Percentage of Prospector Partners’ 13F Portfolio: 2.34%
Number of Hedge Fund Holders: 31
RenaissanceRe Holdings Ltd. (NYSE:RNR) offers insurance and reinsurance services to clients, having an industry presence of over 25 years. The company also handles investments for its clients, via RenaissanceRe Capital Partners and RenaissanceRe Strategic Investments. Gillespie’s Prospector Partners owns 130,884 shares in RenaissanceRe Holdings Ltd. as of September this year, worth $18.2 million, representing 2.34% of the firm’s portfolio.
RenaissanceRe Holdings Ltd. announced a quarterly cash dividend on November 11 of $0.36 per common share, payable on December 31 to shareholders of record on December 15. The company also declared a $500 million stock repurchase program.
Q3 earnings were posted on October 25 by RenaissanceRe Holdings Ltd., with EPS in the period totaling -$8.98, missing estimates by -$0.21. Revenue for the quarter came in at $1.49 billion, up 65.27% year-over-year. At the end of Q2, 31 hedge funds tracked by Insider Monkey were long RenaissanceRe Holdings Ltd..
Joshua Shankar from BofA on November 8 upgraded RenaissanceRe Holdings Ltd. from Neutral to Buy, raising the price target from $163 to $218. He stated that the company fits his paradigm for increasingly positive reinsurance stocks, from an operations and valuation perspective.
In addition to Berkshire Hathaway Inc., eBay Inc., Microsoft Corporation, and Johnson & Johnson, RenaissanceRe Holdings Ltd. is a top stock pick from Gillespie’s Q3 portfolio.
9. Pioneer Natural Resources Company (NYSE:PXD)
Prospector Partners’ Stake Value: $18,267,000
Percentage of Prospector Partners’ 13F Portfolio: 2.34%
Number of Hedge Fund Holders: 45
Pioneer Natural Resources Company (NYSE:PXD) is a hydrocarbon exploration company from Texas, producing petroleum, natural gas, and natural gas liquids. Gillespie’s Prospector Partners holds an $18.2 million stake in Pioneer Natural Resources Company as of the third quarter of 2021, which represents 2.34% of the fund’s total portfolio.
Jonathan Dawson’s Southport Management is the leading stakeholder in Pioneer Natural Resources Company, with a total stake value of $416.9 million. Overall, 45 hedge funds tracked by the database of Insider Monkey were bullish on Pioneer Natural Resources Company as of Q2.
Citi analyst Scott Gruber resumed coverage of Pioneer Natural Resources Company with a Buy rating on November 8, setting a $216 price target.
Pioneer Natural Resources Company posted its Q3 results on November 3. EPS in the quarter totaled $4.13, beating estimates by $0.28. Revenue for Q3 missed estimates, however, at $4.46 billion, it was up 145.9% year-over-year.
8. Arthur J. Gallagher & Co. (NYSE:AJG)
Prospector Partners’ Stake Value: $18,700,000
Percentage of Prospector Partners’ 13F Portfolio: 2.40%
Number of Hedge Fund Holders: 40
Arthur J. Gallagher & Co. is one of the largest global insurance brokers in the world. Headquartered in Illinois, Arthur J. Gallagher & Co. offers insurance, reinsurance, human capital consultancy, and risk management services to its clients that are spread across 150 countries. Gillespie, via Prospector Partners, holds 125,800 shares in Arthur J. Gallagher & Co., as of the third quarter. This stock accounts for 2.40% of the firm’s Q3 investment portfolio.
As of the second quarter of 2021, of the 873 elite funds monitored by Insider Monkey, 40 hedge funds reported owning stakes in Arthur J. Gallagher & Co., worth $501.3 million. This represents a significant increase as compared to the preceding quarter, when 24 funds were long Arthur J. Gallagher & Co., with a total stake value of $283.9 million.
On October 28, Arthur J. Gallagher & Co. announced Q3 results. EPS for the quarter equaled $1.33, beating estimates by $0.12. The revenue came in at $2.11 billion, exceeding estimated revenue by $153.80 million.
Mark Hughes from Truist raised his FY21 EPS view by $0.14 to $5.52, following the solid Q3 performance. He kept a Buy rating on Arthur J. Gallagher & Co. on October 29, raising the price target from $170 to $200.
7. Globe Life Inc. (NYSE:GL)
Prospector Partners’ Stake Value: $19,547,000
Percentage of Prospector Partners’ 13F Portfolio: 2.51%
Number of Hedge Fund Holders: 28
Globe Life Inc. (NYSE:GL) is a Texas-based holding company offering financial services including life insurance, annuity, and health insurance. Globe Life Inc. was known as the Torchmark Corporation until 2019, when it underwent a corporate rebranding. Gillespie’s Prospector Partners’ owns 219,560 shares in Globe Life Inc. as of September 2021, worth $19.5 million, representing 2.51% of the fund’s total investments.
Credit Suisse analyst Andrew Kligerman on October 19 kept an Outperform rating on Globe Life Inc., lowering the price target from $135 to $130. There were concerns that continuing COVID-19 mortality might impact Globe Life Inc., however, the analyst believes that the heightened mortality will not impact the EPS to a large extent.
Globe Life Inc. posted its Q3 results on October 20. The EPS for Q3 equaled $1.78, missing estimates by -$0.11. Revenue, however, exceeded expectations at $1.28 billion, beating estimates by $15.97 million.
Of the 873 hedge funds in the database of Insider Monkey as of June this year, 28 funds were bullish on Globe Life Inc., with stakes worth over $795 million. This is compared to 33 hedge funds in the preceding quarter, with a total stake value of approximately $844 million.
6. Brown & Brown, Inc. (NYSE:BRO)
Prospector Partners’ Stake Value: $19,709,000
Percentage of Prospector Partners’ 13F Portfolio: 2.53%
Number of Hedge Fund Holders: 26
Brown & Brown, Inc. is a top stock pick of John Gillespie’s Prospector Partners, with the investment firm owning 355,430 shares in Brown & Brown, Inc. as of Q3, worth $19.7 million, representing 2.53% of the firm’s stock portfolio. Brown & Brown, Inc. offers insurance, reinsurance, and federal programs services to customers. Brown & Brown, Inc. serves business, corporate, institutional, and government clients.
As of the second quarter of 2021, 26 hedge funds reported owning stakes in Brown & Brown, Inc., worth $1.2 billion, up from 25 funds in the preceding quarter, with an approximate stake value of $915.4 million.
Brown & Brown, Inc. posted its Q3 results on October 25. The EPS came in at $0.58, beating estimates by $0.05. Revenue for the quarter totaled $770.30 million, exceeding estimates by $9.71 million.
Elyse Greenspan from Wells Fargo on October 29 raised the price target on Brown & Brown, Inc. from $57 to $64 and kept an Equal Weight rating on the stock after the Q3 earnings. She also raised the company’s EPS estimates for 2021 through 2023.
In addition to Berkshire Hathaway Inc., eBay Inc., Microsoft Corporation, and Johnson & Johnson, Brown & Brown, Inc. is a notable stock in Gillespie’s Q3 portfolio.
5. KeyCorp (NYSE:KEY)
Prospector Partners’ Stake Value: $19,952,000
Percentage of Prospector Partners’ 13F Portfolio: 2.56%
Number of Hedge Fund Holders: 40
KeyCorp (NYSE:KEY) is a bank holding company that operates primarily via its subsidiary, KeyBank National Association. KeyBank offers retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage, and investment banking services to individual, corporate, and institutional clients.
Gillespie’s Prospector Partners holds 922,850 shares in KeyCorp as of September end, valued at $19.95 million, representing 2.56% of the firm’s Q3 portfolio. At the end of the second quarter, 40 hedge funds were bullish on KeyCorp, down from 41 in the preceding quarter.
KeyCorp, on October 21, posted its Q3 results. EPS in the period equaled $0.65, beating estimates by $0.08. Revenue for the quarter came in at $1.82 billion, up 8% year-over-year, beating estimates by $78.59 million.
Wedbush analyst Peter Winter reported that Q3 earnings for KeyCorp were solid, credit metrics were improving, and income growth was owed to strong loan momentum. The analyst predicts a solid performance track in Q4 as well, which is why he kept an Outperform rating on KeyCorp, raising the price target from $27 to $39 on October 22.
4. U.S. Bancorp (NYSE:USB)
Prospector Partners’ Stake Value: $20,582,000
Percentage of Prospector Partners’ 13F Portfolio: 2.64%
Number of Hedge Fund Holders: 41
U.S. Bancorp (NYSE:USB), a top stock from Prospector Partners’ Q3 portfolio, is a Minnesota-based bank holding company, which is recognized for its subsidiary, U.S. Bank National Association, which is one of the leading American banks offering trust, mortgage, investment, and payment services to corporate, institutional, individual, and government clients.
Gillespie’s investment firm holds a $20.5 million stake in U.S. Bancorp as of the latest 13F filings, which accounts for 2.64% of the firm’s Q3 portfolio. At the end of June this year, 41 hedge funds monitored by the database of Insider Monkey were long U.S. Bancorp, reporting a stake value of $8.3 billion.
U.S. Bancorp’s Q3 EPS on October 14 came in at $1.30, beating estimates by $0.14. Gerard Cassidy from RBC Capital kept an Outperform rating on U.S. Bancorp on October 15, following the Q3 earnings beat. He also raised the price target from $62 to $66.
Here is what Mairs & Power has to say about U.S. Bancorp in their Q4 2020 investor letter:
“On the negative side, one of the Fund’s biggest detractor in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
3. Comerica Incorporated (NYSE:CMA)
Prospector Partners’ Stake Value: $22,113,000
Percentage of Prospector Partners’ 13F Portfolio: 2.83%
Number of Hedge Fund Holders: 33
Comerica Incorporated (NYSE:CMA) is a financial services company from Texas, and is one of the largest US retail banks operating in multiple states. Comerica Incorporated offers commercial banking, retail banking, and wealth management services to customers. Prospector Partners holds a $22.1 million stake in Comerica Incorporated, which accounts for 2.83% of the firm’s Q3 securities.
As of June this year, 33 hedge funds tracked by Insider Monkey reported owning stakes worth roughly $547 million in Comerica Incorporated.
Earnings for the third quarter were disclosed by Comerica Incorporated on October 20. EPS in Q3 totaled $1.90, beating estimated EPS by $0.26. Comerica Incorporated’s revenue came in at $755 million, up 6.34% year-over-year.
Citi analyst Jill Shea on October 28 raised the price target on Comerica Incorporated from $93 to $100, and kept a Buy rating on the shares. She stated that investors who are looking for high short-term rates ought to choose Comerica Incorporated for their portfolios, especially since commercial loan growth has also improved.
2. Alleghany Corporation (NYSE:Y)
Prospector Partners’ Stake Value: $22,914,000
Percentage of Prospector Partners’ 13F Portfolio: 2.94%
Number of Hedge Fund Holders: 32
Alleghany Corporation (NYSE:Y) is an investment holding company that owns and operates subsidiaries and investments, anchoring its portfolio in property, casualty reinsurance, and insurance companies. According to Andrew Bary from Barron’s, Alleghany Corporation operates on a smaller scale when compared to Berkshire Hathaway Inc., yet the company adopts a similar strategy as Warren Buffett. He also stated that Alleghany Corporation has strong property and casualty insurance businesses that are benefiting from higher industry pricing.
As of the second quarter of 2021, 32 hedge funds in the database of 873 exclusive funds maintained by Insider Monkey were bullish on Alleghany Corporation, down from 34 in the preceding quarter.
1. Berkshire Hathaway Inc. (NYSE:BRK-A)
Prospector Partners’ Stake Value: $43,922,000
Percentage of Prospector Partners’ 13F Portfolio: 5.64%
Number of Hedge Fund Holders: 116
Billionaire Warren Buffett’s Berkshire Hathaway Inc. is the largest holding in John Gillespie’s Q3 portfolio, with Prospector Partners owning 160,920 shares in Berkshire Hathaway Inc., worth $43.92 million, representing 5.64% of the firm’s Q3 portfolio. Berkshire Hathaway Inc. is an American multinational conglomerate holding company that deals in diversified investment, insurance, aerospace, automotive, and real estate sectors, among others. Some of the top wholly owned subsidiaries of Berkshire Hathaway Inc. include Duracell, Helzberg Diamonds, and Dairy Queen, among others. The conglomerate also owns valuable minority holdings in The Kraft Heinz Company (NYSE:KHC), American Express Company (NYSE:AXP), The Coca-Cola Company (NYSE:KO), Apple Inc. (NASDAQ:AAPL), and Bank of America Corporation (NYSE:BAC).
Berkshire Hathaway Inc. reported Q3 earnings on November 6. EPS in the period totaled $6,882, which is comparable to earnings per share of $18,994 in the same period last year. Berkshire Hathaway Inc.’s revenue for the third quarter equaled $70.58 billion, up 11.99% year-over-year.
As of the third quarter of 2021, Bill & Melinda Gates Foundation Trust is the leading stakeholder in Berkshire Hathaway Inc., with roughly 38.6 million shares worth $10.55 billion.
Here is what Black Bear Value Partners has to say about Berkshire Hathaway Inc. in its Q3 2021 investor letter:
“Please see the Q1 letter for our Berkshire on a Napkin investment exercise. We have written on it extensively and will save your eyeballs from extraneous reading. Berkshire is very cheap for owning such high-quality businesses and will continue to grind higher and compound value for us.”
You can also take a look at 10 Stocks to Buy According to Bluegrass Capital Partners and 10 Growth Stocks to Buy According to Jay Chen’s Himension Capital.
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This article is originally published at Insider Monkey.
