In this article, we discuss the top 10 stock picks of Jon Bauer’s Contrarian Capital based on Q2 holdings of the fund.
Jon Bauer holds an MBA from Harvard Business School and a BA from Rutgers College (with Honors). Mr. Bauer has 35 years of experience in actively and passively investing in distressed stocks. He helped form the Trade Claims Buyers Association and served on several bank debt, bond, and trade claims committees. In addition, he has been on the boards of directors of several businesses, including International Coal and Special Metals Corp.
Jon Bauer, Janice Stanton, and Gil Tenzer founded Contrarian Capital in 1995. The trio had previously worked together at Oppenheimer & Co., managing money and seeing opportunities in failed businesses. Bauer founded the company’s Distressed Securities Group and served as its leader. Today, Contrarian is still interested in distressed investments. In the second quarter of 2021, Jon Bauer’s Contrarian Capital 13F public stock portfolio was valued at $675.75 million, with a top 10 holdings concentration of 92.19%. The hedge fund added four stocks to its portfolio in the second quarter of 2021 and sold out two stocks.
Jon Bauer aspires to have a diverse portfolio. His hedge fund invests in small and big companies with excellent fundamentals and the potential to grow in the future. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), Valaris Limited (NYSE:VAL), and Carnival Corp (NYSE:CCL) are among these firms.
Jon Bauer is bullish on oil and gas company Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR). He increased his stake in the company by 29% in the second quarter, ending the period with 7.52 million company shares, worth $91.97 million.
Based on the latest 13F holdings for the second quarter of 2021, Contrarian Capital owns 200,000 shares in Carnival Corp (NYSE:CCL) worth $5.27 million in the second quarter of 2021. On October 25, Citi analyst James Ainley initiated bearish coverage on Carnival Corp.
Photo by Mohamed Hadji on Unsplash
Why do we care about hedge fund activity? 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 more than 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 background in mind, let’s start our list of top 10 stock picks of Jon Bauer’s Contrarian Capital. We used Bauer’s 13F portfolio for Q2 2021 for this analysis.
Top 10 Stock Picks of Jon Bauer’s Contrarian Capital
10. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
Contrarian Capital Stake Value: $12,374,000
Percentage of Contrarian Capital’s 13F Portfolio: 1.83%
Number of Hedge Fund Holders: 27
An outdoor advertising company, Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) stands tenth on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital.
Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) reported third-quarter EPS of -$0.27, missing consensus expectations of $0.05. However, the company’s revenue of $531.08 million managed to beat consensus forecasts by $31.26 million, up 68.7% YoY.
Based on Contrarian Capital’s SEC 13F filings at the end of the second quarter, it currently owns 4.69 million shares of Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) worth $12.37 million. The company accounts for 1.83% of Contrarian Capital’s total portfolio. Mason Capital Management is the leading stakeholder of Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), which owns 22.02 million shares.
9. Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS)
Contrarian Capital Stake Value: $14,408,000
Percentage of Contrarian Capital’s 13F Portfolio: 2.13%
Number of Hedge Fund Holders: 16
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), which operates in the air transportation and associated services industry, ranks ninth on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital. In the second quarter of 2021, Contrarian Capital owned 750,000 shares in the company worth $14.41 million. This represented 2.13% of the investment portfolio of the hedge fund.
Overall, hedge funds are loading up on Controladora, as 16 out of the 873 funds tracked by Insider Monkey held stakes in the company, compared to 14 funds a quarter earlier. As a result, the company’s stock has gained a whopping 130.33% over the last 12 months.
Just like Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), Valaris Limited (NYSE:VAL), and Carnival Corp (NYSE:CCL), Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS) is one of the notable stocks in Jon Bauer’s Contrarian Capital’s 13F portfolio in Q2.
8. Valaris Limited (NYSE:VAL)
Contrarian Capital Stake Value: $26,127,000
Percentage of Contrarian Capital’s 13F Portfolio: 3.86%
Number of Hedge Fund Holders: 29
Valaris Limited (NYSE:VAL), a business specializing in oil and gas well drilling, was awarded a two-year contract for the drillship VALARIS DS-9 by Esso Exploration Angola, an ExxonMobil affiliate. The company is placed eighth on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital.
Valaris is the latest addition to Jon Bauer’s hedge fund portfolio, with Contrarian Capital purchasing 904,674 shares for $26.13 million.
Shares of Valaris surged 36.01% in the last 12 months. The company is also getting the attention of the smart money, as 29 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the second quarter.
7. Arch Resources, Inc. (NYSE:ARCH)
Contrarian Capital Stake Value: $29,927,000
Percentage of Contrarian Capital’s 13F Portfolio: 4.42%
Number of Hedge Fund Holders: 28
On October 4, B. Riley raised its price target on Arch Resources to $120 from $87 and maintained a “Buy” rating on the shares.
The stock accounts for about 4.42% of Contrarian Capital’s portfolio, as the hedge fund owns a $29.93 million stake in the company. In the second quarter, hedge fund managers grew their net positions in Arch Resources, Inc., suggesting they believe the company has more potential. There were 28 hedge funds in our database that held stakes in the company in the second quarter, compared to 25 funds in the previous quarter.
6. iHeartMedia, Inc. (NASDAQ:IHRT)
Contrarian Capital Stake Value: $35,870,000
Percentage of Contrarian Capital’s 13F Portfolio: 5.3%
Number of Hedge Fund Holders: 28
Jon Bauer began building his stake in iHeartMedia, Inc. (NASDAQ:IHRT) back in the third quarter of 2019; he now holds 1.33 million shares worth about $35.87 million. iHeartMedia, Inc., a provider of media and entertainment services, ranks sixth on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital.
On October 20, B. Riley analyst Daniel Day reduced his price objective for iHeartMedia to $39 from $42 while maintaining a “Buy” rating. According to the researcher, supply chain bottlenecks and labor shortages negatively influenced advertising expenditure in crucial categories in the second half of 2021.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), Valaris Limited (NYSE:VAL), and Carnival Corp (NYSE:CCL) are some of the notable stocks in Jon Bauer’s Contrarian Capital’s 13F portfolio in Q2, just like iHeartMedia, Inc. (NASDAQ:IHRT).
5. Ternium S.A. (NYSE:TX)
Contrarian Capital Stake Value: $40,424,000
Percentage of Contrarian Capital’s 13F Portfolio: 5.98%
Number of Hedge Fund Holders: 15
Ternium S.A. stands fifth on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital. According to Morgan Stanley analyst Carlos De Alba, steel prices in the Americas are anticipated to fall from current record levels. On October 18, he downgraded Ternium to “Equal Weight” from “Overweight” and lowered his price objective to $50, down from $60.
In the second quarter, Contrarian Capital raised its position in Ternium S.A. by 19% to 1.05 million shares, accounting for just over 5.98% of the overall portfolio. Out of the hedge funds being tracked by Insider Monkey, Oldfield Partners is a leading shareholder in Ternium S.A. with 1.22 million shares worth more than $46.96 million.
4. Vedanta Limited (NYSE:VEDL)
Contrarian Capital Stake Value: $43,408,000
Percentage of Contrarian Capital’s 13F Portfolio: 6.42%
Number of Hedge Fund Holders: 10
Shares of natural resource company Vedanta Limited (NYSE:VEDL) rallied 206.64% in the last 12 months. The company’s consolidated quarterly revenue was $300.48 billion, up 44% year over year.
The company is placed fourth on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital. Contrarian Capital owns approximately 3.06 million shares in Vedanta Limited, valued at over $43.41 million, accounting for 6.42% of its total holdings. In the second quarter of 2021, the hedge fund raised its holdings by 3%, making it the leading shareholder of Vedanta Limited. At the end of the second quarter of 2021, 10 hedge funds in the database of Insider Monkey held stakes worth $63.95 million in the company.
3. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Contrarian Capital Stake Value: $91,971,000
Percentage of Contrarian Capital’s 13F Portfolio: 13.61%
Number of Hedge Fund Holders: 25
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), a worldwide integrated oil and gas company, reported crude oil output of 2.269 million barrels per day, up 1.9% from the second quarter of 2021 and down 4% from the third quarter of 2020. The company stands third on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital.
Petróleo Brasileiro S.A. announced a 7.2% increase in wholesale gasoline and cooking gas prices in October, as high energy costs worsened Brazil’s most tremendous inflation since 1994. In the second quarter, Jon Bauer increased his stake in Petróleo Brasileiro S.A. by 29%, and his 13.61% stake in the company is now worth about $91.97 million.
Petróleo Brasileiro S.A. saw a decrease in hedge fund sentiment recently. The number of long hedge fund positions declined to 25 at the end of the second quarter compared to 27 positions in the previous quarter. GQG Partners, with 138.95 million shares, is the most significant stakeholder in the company.
2. Gerdau S.A. (NYSE:GGB)
Contrarian Capital Stake Value: $121,822,000
Percentage of Contrarian Capital’s 13F Portfolio: 18.02%
Number of Hedge Fund Holders: 17
Gerdau S.A. (NYSE:GGB), a steel products and services company, ranks second on the list of top 10 stock picks of Jon Bauer’s Contrarian Capital. The hedge fund holds nearly 20.65 million shares of Gerdau worth roughly $121.82 million.
In Q3, Gerdau S.A. posted revenue of $3.84 billion, beating the consensus by $276.51 million. However, on October 18, Morgan Stanley analyst Carlos De Alba downgraded Gerdau from “Overweight” to “Equal Weight,” with a price target of R$32, down from R$40, since he expects steel prices in the Americas to decrease from current highs.
Fund managers added to their Gerdau S.A. holdings in the second quarter. There were 17 hedge funds in our database that held stakes in the company at the end of the second quarter, compared to 11 funds in the previous.
1. Vale S.A. (NYSE:VALE)
Contrarian Capital Stake Value: $198,900,000
Percentage of Contrarian Capital’s 13F Portfolio: 29.43%
Number of Hedge Fund Holders: 27
Vale S.A. (NYSE:VALE) is engaged in the manufacturing and exporting of iron ore, pellets, manganese, and iron alloys. On October 21, RBC Capital analyst Tyler Broda downgraded Vale to “Underperform” from “Outperform” also lowered his price target to $12.50 from $17.
You can also take a peek at Dividend Stock Portfolio: 10 Stock Picks By Hedge Funds and Billionaire DE Shaw’s Top 10 Stock Picks.
Follow Insider Monkey on Twitter
Suggested articles:
- Growth Stock Portfolio: 10 Stock Picks By Hedge Funds
- Top 10 Stock Picks of Terry Smith’s Fundsmith LLP
- George Soros Stock Portfolio: Top 10 Stock Picks
Disclosure: None. Top 10 Stock Picks of Jon Bauer’s Contrarian Capital is originally published on Insider Monkey.
