In this article, we will discuss Top 10 Stock Picks of Michael Bilger’s 59 North Capital.
Michael Bilger is a managing partner at 59 North Capital. Bilger earned his bachelor’s in Commerce and Economics from the University of Virginia and later got an MBA from Harvard Business School. In 2018, Bilger established 59 North Capital, which is a hedge fund based in New York.
North Capital Management is a hedge fund managing funds of 3 clients. As per the fund’s last reported filing for Q2 2022, the fund held had $349 million in its 13F portfolio. The overall fund size could be much bigger as several assets, including cash, investments in fixed income, etc., are not publicly disclosed.
The majority of the hedge funds’ investments are in large-cap stocks such as D.R. Horton, Inc. (NYSE:DHI), American Homes 4 Rent (NYSE:AMH), NortonLifeLock Inc. (NASDAQ:NLOK), and American Homes 4 Rent (NYSE:AMH) while small caps make a relatively smaller portion of the fund’s portfolio.
59 North Capital currently holds 12 companies across 7 sectors. The fund is more heavily invested in Services as of its last reported filing, followed by Financial and Industrial Goods.
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Our Methodology
We picked top 10 stocks from 59 North Capital’s portfolio as of its Q2 2022 filing.
Top 10 Stock Picks of Michael Bilger’s 59 North Capital
10. NortonLifeLock Inc. (NASDAQ:NLOK)
59 North Capital Stake: $19,736,000
Percentage of 59 North Capital’s Portfolio: 5.65%
Number of Hedge Fund Holders: 43
NortonLifeLock Inc. (NASDAQ:NLOK) is a cybersecurity firm that provides security solutions to its customers. The company offers its products through its two recognizable brands: Norton and LifeLock. 59 North Capital decreased its stake in NortonLifeLock Inc. (NASDAQ:NLOK) by 43% during Q2 2022 and currently has a $19.7 million stake in the company. NortonLifeLock Inc. (NASDAQ:NLOK) constituted 5.65% of the fund’s 13F portfolio at the end of Q2 2022. NortonLifeLock Inc. (NASDAQ:NLOK) is currently trading at a forward P/E of 14x compared to the sector median of 16.85x, which makes the shares of the company appealing to value investors.
NortonLifeLock Inc. (NASDAQ:NLOK) performed well in fiscal Q1 2023, reporting revenue of $708 million, up 2.50% YoY. The company reported normalized EPS of $0.45, beating the market consensus estimate by $0.02 as the company continued to diversify its client base and make inroads in the overseas market.
Here is what ClearBridge Investments had to say about NortonLifeLock Inc. (NASDAQ:NLOK) in its Q4 2021 investor letter:
“However, not every example has a cyclical dynamic. Consumer cybersecurity company NortonLifeLock undoubtedly benefited from the COVID-19 pandemic lockdowns as sales of personal computers and time spent online skyrocketed, as did subscriptions to the company’s security products. The market has lumped Norton into the “COVID winners” bucket and embedded a substantial reduction in subscriptions going forward as the company laps its strong results from the depths of the pandemic. While these concerns are reasonable for many within the COVID winner cohort, it is not the case for Norton. Company-specific improvements in marketing and product development have been just as powerful tailwinds to subscriber growth and would have continued to carry the company’s growth through the most difficult comparisons from 2020 even without the pandemic effect. The market’s concern about tailwinds turning to headwinds is overwrought, and contrary to the decline currently embedded in the stock price, we are confident that Norton’s earnings will continue to compound. Similar to EQT and OneMain, NortonLifeLock has been actively putting its ample cash flow generation to work to crystalize upside for shareholders. In addition to strong dividends and share repurchase activity, last year Norton announced the acquisition of “freemium” competitor Avast. Already attractive from a pricing standpoint, the acquisition creates the potential to generate immense cost and revenue synergies as well as providing Norton a strong foothold outside the North American market and a broader customer acquisition funnel. Once the transaction closes in 2022, Norton will have growing free cash flow generation of $1.5 billion and a clear path to an EPS of $5, yet a resulting valuation of just 5x earnings power. Given the high-single-digit revenue growth that Avast brings to the table, we believe the continuation of a valuation this depressed for Norton is highly unlikely.”
As per Insider’s Monkey database, 43 hedge funds owned stakes in NortonLifeLock Inc. (NASDAQ:NLOK) at the end of June quarter, while Starboard Value LP remained the leading hedge fund with the biggest holding in the stock. The fund owned 19,204,454 shares of the company at the end of Q2 2022.
In addition to NortonLifeLock Inc. (NASDAQ:NLOK), 59 North Capital had investments in Brookdale Senior Living Inc. (NYSE:BKD), Deckers Outdoor Corporation (NYSE:DECK) and News Corporation (NASDAQ:NWS).
9. Viad Corp (NYSE:VVI)
59 North Capital Stake: $22,282,000
Percentage of 59 North Capital’s Portfolio: 6.38%
Number of Hedge Fund Holders: 10
Viad Corp (NYSE:VVI) is a marketing corporation established in the United States. GES and Pursuit are two primary segments of the company. Michael Bilger increased his stake in Viad Corp (NYSE:VVI) by 17% and currently has 807,021 shares of the company in its portfolio. The company represents 6.38% of 59 North Capital’s portfolio at the end of Q2 2022.
Viad Corp (NYSE:VVI) reported a stellar result for Q2 2022 as it reported revenue of $319.2 million, up 421.29%. The company posted normalized EPS of $0.74 for the quarter beating the market consensus estimate by $0.57.
The management, while talking to analysts on the earnings call, highlighted GES’s faster-than-expected recovery from the pandemic as the primary growth driver during Q2 2022.
At the end of Q2 2022, 10 hedge funds in Insider Monkey’s database were long on Viad Corp (NYSE:VVI), and Blue Grotto Capital came out to be the leading stakeholder in the company, with a total holding worth $27 million in the company.
8. D.R. Horton, Inc. (NYSE:DHI)
59 North Capital Stake: $25,238,000
Percentage of 59 North Capital’s Portfolio: 7.23%
Number of Hedge Fund Holders: 44
D.R. Horton, Inc. is one of the biggest homebuilders in the United States. Headquartered in Arlington, Texas, the company has operations in 98 markets across 31 states. 59 North Capital doubled down on its investment in D.R. Horton, Inc., increasing its stake in the company by 218% during Q2 2022. The hedge fund now owns D.R. Horton, Inc. shares worth $25.2 million, which constitutes 7.23% of the total portfolio of the hedge fund’s portfolio at the end of Q2 2022.
D.R. Horton, Inc. performance in fiscal Q3 2022 remained underwhelming as the company reported revenue of $8.79 billion missing the market consensus estimate of $8.91 billion. The slowdown in the housing market with high mortgage rates is reflected in the company’s result as home deals slowed down in the quarter.
Palm Valley Capital Management mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Vidler Water was acquired by homebuilder D.R. Horton (NYSE:DHI) during the second quarter for $15.75 per share, a modest 19% premium to the 90-day volume weighted average price. D.R. Horton can use Vidler’s water rights to satisfy government requirements to have water resources available before it breaks ground on new housing developments in Nevada. The takeover price was below our valuation, but D.R. Horton was the only real buyer who stepped up to the plate for Vidler’s assets. The deal appears to have leaked early, since the stock surged in the weeks before the announcement.”
On September 19th, KeyBanc’s analyst Kenneth Zener upgraded his rating on several housing sector stocks including D.R. Horton, Inc. The analyst believes that the sector has been under pressure during this year and has underperformed as compared with market indexes. He believes that at the current levels, there is limited downside left and hence has now given a buy rating on the stocks. The analyst has a target price of $84 on D.R. Horton, Inc.
7. MSC Industrial Direct Co., Inc. (NYSE:MSM)
59 North Capital Stake: $31,268,000
Percentage of 59 North Capital’s Portfolio: 8.96%
Number of Hedge Fund Holders: 27
Headquartered in New York, the United States, MSC Industrial Direct Co., Inc. (NYSE:MSM) is one of the major industrial distributors specializing in metalworking repair and services. 59 North Capital increased its stake in MSC Industrial Direct Co., Inc. (NYSE:MSM) by 54% in the second quarter, taking the total stake of the hedge fund in the company to $31.2 million. The fund held 416,291 shares of the company at the end of Q2 2022.
MSC Industrial Direct Co., Inc. (NYSE:MSM) recently reported fiscal Q3 2022 results with revenue of $958.6 million, up 10.7% YoY from $866.3 million in Q3 2021, driven by price and growth incentives taken by the management. The company reported a normalized EPS of $1.82, beating the market consensus estimate by $0.08.
The company has been making some changes in its management structure and earlier this month appointed Martina McIsaac as a chief operating officer of the company. Martina McIsaac previously served as the CEO of Hilti Corporation.
6. American Homes 4 Rent (NYSE:AMH)
59 North Capital Stake: $31,484,000
Percentage of 59 North Capital’s Portfolio: 9.02%
Number of Hedge Fund Holders: 29
American Houses 4 Rent (NYSE:AMH) is a real estate investment trust that focuses on investments in single-family homes. 59 North Capital reduced its position in American Homes 4 Rent (NYSE:AMH) during Q2 2022 by 10%. The fund now owns 888,362 shares of the company, amounting to a total value of approximately $31 million.
American Homes 4 Rent (NYSE:AMH) recently reported Q2 2022 results with revenue of $361.88 million, up 15.37% YoY. The company reported a normalized EPS of $0.16, beating the market consensus estimate by $0.05.
Here is what Baron Real Estate Income Fund has to say about American Homes 4 Rent (NYSE:AMH) in its Q2 2022 investor letter:
“Single-Family Rental REITs (7.8%): We are bullish about the Fund’s investments in single-family rental REIT American Homes 4 Rent (NYSE:AMH). Demand conditions for rental homes are attractive due to a decline in home purchase affordability, the propensity to rent, and the strong desire by households to rent homes in suburbs rather than rent apartments in cities. Regarding new construction activity, there is a limited supply of single-family rental homes in the U.S. housing market, increasingly constrained by rising construction costs. Limited inventory combined with strong demand is leading to robust rent growth. American Homes 4 Rent has an opportunity to partially offset inflation given that in-place annual leases are significantly below market rents. Valuations are compelling at less than $400,000 per home and at 5% capitalization rates.
On September 19, Steve Sakwa, an analyst at Evercore ISI, reduced his target price on the company to $38 from the previously stated $39. The analyst is concerned about the company’s growth prospects and has become more conservative in a rising interest rate environment which will lead to higher interest expenses for American Houses 4 Rent.
5. WESCO International, Inc. (NYSE:WCC)
59 North Capital Stake: $31,721,000
Percentage of 59 North Capital’s Portfolio: 9.08%
Number of Hedge Fund Holders: 48
WESCO International, Inc. (NYSE:WCC) is a distributor of industrial products with three reporting segments: electrical and electronic solutions, communications and security solutions, and utilities and broadband solutions.
In the last quarter, Michael Bilger added to his investment in WESCO International, Inc. (NYSE:WCC) by 54%. WESCO International, Inc. (NYSE:WCC) is trading at an attractive valuation of a forward P/E of 7.20x as compared with the sector median of 14.47x, which is perhaps why the fund increased its position in the company.
WESCO International, Inc. (NYSE:WCC) had a strong Q2 2022, reporting revenue at $5.48 billion, up 19.1% YoY, beating the market consensus by $170 million. The company reported a normalized EPS of $4.19, beating the market consensus estimate by $0.26. The management attributed the company’s good performance to the success of WESCO’S value creation and a better new business model.
Here is what Diamond Hill Capital Management specifically said about WESCO International, Inc. (NYSE:WCC):
“A general selloff among industrials stocks tied to heightened expectations for a recession hit WESCO International, Inc. (NYSE:WCC) International particularly hard due to its somewhat elevated leverage. We maintain conviction in WESCO — a leading distributor of electrical, industrial and communications materials and provider of supply chain management and logistics services — as the largest player in a fragmented market. Its recent merger with a large competitor has given it still more bargaining power in an industry where scale is important, along with significant cost-cutting opportunities. Further, we believe the technical sophistication, customization and high cost of many of the products WESCO supplies, as well as the level of value-added services it provides, should allow the company to remain relatively insulated from e-commerce competition.”
As per Insider Money’s proprietary database, 48 hedge funds are bullish on WESCO International, Inc. (NYSE:WCC), as of the end of the second quarter. Leonard Green & Partners has the biggest stake in the company, with a total investment value of $610,470 at the end of the June quarter.
4. Zions Bancorporation (NASDAQ:ZION)
59 North Capital Stake: $34,848,000
Percentage of 59 North Capital’s Portfolio: 9.98%
Number of Hedge Fund Holders: 33
Based in Salt Lake City, Zions Bancorporation (NASDAQ:ZION) is a regional bank with operations across 11 states. The hedge fund raised its stake value in Zions Bancorporation (NASDAQ:ZION) by 95% during Q2 2022, taking the number of shares held to 684,646.
On September 14, Jennifer Demba, who is an analyst at Truist, increased his price target on Zions Bancorporation (NASDAQ:ZION). Since the U.S Fed is continuing to raise interest rates, the analyst believes that the stocks of banks will become more attractive. Hence he has maintained a Buy rating on the stock with a higher target price of $66 from the previous $60.
3. Brookdale Senior Living Inc. (NYSE:BKD)
59 North Capital Stake: $36,588,000
Percentage of 59 North Capital’s Portfolio: 10.48%
Number of Hedge Fund Holders: 20
Brookdale Senior Living Inc. (NYSE:BKD) operates senior living residences across the United States. The company provides facilities for independent living, assisted living, and skilled nursing. 59 North Capital increased its stake in Brookdale Senior Living Inc. (NYSE:BKD) by 29% during the previous quarter, and the total value of the fund’s stake in the company amounted to $36.5 million at the end of Q2 2022.
Brookdale Senior Living Inc. (NYSE:BKD) reported Q2 2022 revenue of $689.52 million, down 4.67% YoY. The normalized EPS of -$0.44 beat the market consensus estimate by $0.01. The management pointed out to the tough labor market for the slowdown in Q2 2022.
At the end of Q2 2022, 20 hedge funds in our database showed a liking for Brookdale Senior Living Inc. (NYSE:BKD) stock. The company’s leading stakeholder at the end of June quarter was Camber Capital Management, with a total holding of $16 million shares.
2. Deckers Outdoor Corporation (NYSE:DECK)
59 North Capital Stake: $36,712,000
Percentage of 59 North Capital’s Portfolio: 10.52%
Number of Hedge Fund Holders: 35
Deckers Outdoor Corporation (NYSE:DECK) produces and distributes footwear, clothes, and accessories for leisure and performance use. The primary brands of the company include UGG, Teva, and Sanuk. 59 North Capital decreased its investment in Deckers Outdoor Corporation (NYSE:DECK) by 42% during Q2 2022. The retail environment has been challenging as of late with decreasing consumer spending, which may have been a reason why Michael Bilger reduced his exposure to the retail sector.
Deckers Outdoor Corporation (NYSE:DECK) reported solid results for the Q1 2023 quarter, reporting revenue of $614.46 million, up 21.8% YoY, beating the market consensus by $46.14 million. The normalized EPS of $1.66 beat the market consensus estimate by $0.45. At the end of the quarter, the management approved the share repurchase of $1.2 billion as well.
Earlier this month, Tom Nikic upgraded his rating on Deckers Outdoor Corporation (NYSE:DECK) from Neutral to Outperform. The analyst remains extremely bullish on the prospects of the company’s ‘Hoka brand’, which he believes will continue to grow, resulting in strong future earnings for Deckers Outdoor Corporation (NYSE:DECK). He currently has a price target of $410 on the stock.
1. News Corporation (NASDAQ:NWS)
59 North Capital Stake: $45,251,000
Percentage of 59 North Capital’s Portfolio: 12.96%
Number of Hedge Fund Holders: 13
News Corporation (NASDAQ:NWS) is a media corporation with a presence in the United States, the United Kingdom, and Australia. Some of the prominent brands of the company include The Wall Street Journal, Herald Sun, and The Times. Michael Bilger continued to add to its position in News Corporation (NASDAQ:NWS) during Q2 2022. 59 North Capital now owns 2,904,459 shares of the company, which makes it the biggest holding of the hedge fund as of Q2 2022.
News Corporation (NASDAQ:NWS) had a strong Q4 2022 quarter, reporting revenue of $2.67 billion, up 7.30% YoY. The company reported a normalized EPS of $0.37, beating the market consensus estimate by $0.29. The company’s digital real estate service segment boomed, recording a growth of 25% to $1.7 billion.
As per Insider Monkey’s database, 13 hedge funds had a long position on the company’s stock at the end of Q2 2022. Yacktman Asset Management remained the leading stakeholder of the company, with a total investment value of $265 million in News Corporation (NASDAQ:NWS).
You can also take a look at These 5 Stocks are Plummeting After the Fed’s Latest Rate Hike and Ken Fisher’s Top 5 Growth Stock Picks.
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Disclosure: None. Top 10 Stock Picks of Michael Bilger’s 59 North Capital. is originally published on Insider Monkey.
