In this article, we discuss the top 10 stock picks of Thomas Bancroft’s Makaira Partners.
Thomas Bancroft serves as the Managing Partner and Senior Portfolio Manager at Makaira Partners. Prior to that, he worked for 13 years at GEICO, an auto insurance equity company, which is Berkshire Hathaway’s only independently managed portfolio. For his last 6 years at GEICO, Bancroft served as Portfolio Manager and Senior Managing Director.
Thomas Bancroft received his B.S. in Political Science from the University of Colorado in 1988. Right after receiving his degree, he started his career as a staff writer for Financial World Magazine and then joined Forbes Magazine as a reporter. Thomas Bancroft also serves as the Chairman of the Investments Committee and Trustee of Francis Parker School, San Diego.
Makaira Partners was founded by Thomas Bancroft in 2007 and is based in La Jolla, California. It is an employee-owned investment firm and manages investment partnerships for individuals, family offices, and not-for-profit organizations. 99% of the firm’s investments are made in exchange-traded securities and 1% of the portfolio is represented by cash and cash equivalents.
The investment philosophy of Makaira Partners relies on long-term investments, sometimes holding investments for five years or more. The firm’s 50% of the clients are foreign and the firm also advises several private funds.
Bath & Body Works, Inc. (NYSE:BBWI), The Progressive Corporation (NYSE:PGR), and Zebra Technologies Corporation (NASDAQ:ZBRA) are some of the noteworthy companies in Makaira Partner’s portfolio.
Thomas Bancroft of Makaira Partners
Our Methodology
We used the third-quarter investment portfolio of Makaira Partners to make this list. The list was compiled according to the value of each holding in the investment portfolio.
Top 10 Stock Picks of Thomas Bancroft’s Makaira Partners
10. HEICO Corporation (NYSE:HEI)
Makaira Partners’ Stake Value: $4.05 million
Percentage of Makaira Partners’ 13F Portfolio: 0.85%
Number of Hedge Fund Holders: 35
HEICO Corporation (NYSE:HEI) is an aerospace, defense, and electronics company. It primarily focuses on selling parts for aircraft, spacecraft, defense equipment, medical equipment, and telecommunications systems. The company operates from 72 locations across the globe.
On December 17, Truist analyst Michael Ciarmoli raised the price target of HEICO Corporation to $135 up from $125 and kept a Hold rating on the company’s shares. According to the analyst, the price target raise was due to strong fourth-quarter results from the company. However, Ciarmoli believes that the upcoming first-quarter results might be “seasonally weak.”
On December 28, the CEO and Chairman of HEICO Corporation, Laurans A Mendelson, sold 8,869 shares of the company at $144.25 a share The total transaction was approximately $1.3 million.
9. Cactus, Inc. (NYSE:WHD)
Makaira Partners’ Stake Value: $5.09 million
Percentage of Makaira Partners’ 13F Portfolio: 1.07%
Number of Hedge Fund Holders: 10
Cactus, Inc. (NYSE:WHD) is a Texas-based oil and gas equipment and services company that manufactures, sells, and rents wellheads and pressure control equipment. The company has 660 full-time employees and provides 24-hour service crews to assist with their equipment. It has 14 service centers in the United States and 3 in Australia.
On September 16, Cactus, Inc. increased its dividend to $0.10 per share.
According to the Insider Monkey data, 10 hedge funds have been bullish towards Cactus, Inc. in the third quarter of 2021. Todd J. Kantor’s Encompass Capital Advisors held the top position in the company with more than 1 million shares worth $38.7 million.
8. The Progressive Corporation (NYSE:PGR)
Makaira Partners’ Stake Value: $6.83 million
Percentage of Makaira Partners’ 13F Portfolio: 1.44%
Number of Hedge Fund Holders: 47
The Progressive Corporation is the third-largest insurance carrier and the top commercial auto insurer in the United States. The company was the first insurer in the United States to offer 24/7 claims. It ranks at 74 in Fortune 500 rankings for 2021 and recently has expanded its auto insurance operations to Australia.
The Progressive Corporation has been outperforming its industry average in every way. Its last 12-month return on equity has been recorded at 17.6% compared to the industry average of 5.6%. The net premium written average growth for the industry has been around 4% in the last decade, while The Progressive Corporation’s net premium written grew 11%. Lastly, the earnings of the company for 2022 have been estimated at $4.73 per share which is a 32.6% increase from a year ago.
According to the third-quarter 2021 13F filings, Makaira Partners own 75,600 shares of The Progressive Corporation worth $6.83 million, representing 1.44% of the fund’s portfolio. The company was added to the fund’s portfolio in the same quarter.
Here is what the investment management firm, Ariel Investments, had to say about Progressive Corporation in their third-quarter 2021 investor letter:
“Conversely, after being the top contributor last year, personal auto insurer, Progressive Corporation (PGR) was the greatest detractor to performance over the trailing one-year period. While PGR continues to drive solid policy growth, the reopening economy has fueled an uptick in accident frequency and supply chain disruptions, which have increased repair costs. Looking ahead, we expect policy rate increases to offset these headwinds and believe PGR will continue to benefit from its digital presence, bundling strategy, and commercial insurance expansion.”
7. Victoria’s Secret & Co. (NYSE:VSCO)
Makaira Partners’ Stake Value: $18.77 million
Percentage of Makaira Partners’ 13F Portfolio: 3.96%
Number of Hedge Fund Holders: 37
Victoria’s Secret & Co. is an American apparel retailer company and has been the largest retailer of lingerie in the United States since the late 1990s. The company was a subsidiary of Bath & Body Works, Inc. till August 2021. Since then, it has become a separate independent publicly traded business.
On November 30, Jefferies analyst Corey Tarlow assumed coverage of Victoria’s Secret & Co. at a $75 price target with a Buy rating on its shares.
Out of 867 hedge funds tracked by Insider Monkey, 37 of them held stakes worth $1.96 billion in Victoria’s Secret & Co. at the end of the third quarter of 2021. The largest stake was held by Stephen Mandel’s Lone Pine Capital with 8.6 million shares worth $475.76 million, followed by Windacre Partnership with $341.977 million worth of shares.
6. Qurate Retail, Inc. (NASDAQ:QRTEA)
Makaira Partners’ Stake Value: $30.37 million
Percentage of Makaira Partners’ 13F Portfolio: 6.41%
Number of Hedge Fund Holders: 34
Qurate Retail, Inc. (NASDAQ:QRTEA) is an American media holding company founded in 1991. The company operates in Europe, North America, and Asia. Apart from being a media institute the company also operates as an online retailer for apparel, accessories, and beauty products.
According to the third-quarter 13F filings, Makaira Partners owned 2.98 million shares of Qurate Retail, Inc. worth $30.37 million, comprising 6.41% of the fund’s portfolio.
The investment management firm Weitz Investment Management mentioned Qurate Retail, Inc. in its “Partners III Opportunity Fund” third-quarter investor letter. Here is what the firm said in the letter:
“Another quarterly detractor, Qurate Retail, was a “stay-at-home” winner through much of the pandemic thanks to its video and eCommerce shopping model. As economies reopen, competition from brick-and-mortar stores will increase, but we continue to like Qurate’s unique retail model and unassuming valuation.”
5. CDW Corporation (NASDAQ:CDW)
Makaira Partners’ Stake Value: $52.6 million
Percentage of Makaira Partners’ 13F Portfolio: 11.11%
Number of Hedge Fund Holders: 37
CDW Corporation (NASDAQ:CDW) provides IT products and services to businesses, schools, and governments across the United States. It is headquartered in Lincolnshire, Illinois, and houses more than 11,000 employees.
On December 14, CDW Corporation’s coverage was reinstated by Evercore ISI analyst Amit Daryanani with a $225 price target and an Outperform rating on the company’s shares. The analyst expects the company to preserve high-single-digit revenue and double-digit growth in the future as well.
In the third quarter of 2021, the hedge fund sentiment increased for CDW Corporation compared to the previous quarter. In the second quarter, 27 hedge funds were bullish towards the company compared to 37 in the third quarter, including Makaira Partners.
Here is what Wedgewood Partners had to say about CDW Corporation in its second-quarter 2021 investor letter:
“We have owned CDW stock for nearly two years now, and we have been quite pleased to see our thesis playing out as expected – even with the completely unexpected trauma of the pandemic fireworks during our holding period. These are the key components of our investment thesis, in simplistic form: First, the IT distribution and consulting industry is an attractive place to invest, with secular growth above that of the broad economy. Second, we expect the Company to continue to take share within the IT distribution and consulting industry, growing faster than the industry while continuing to improve margins and returns. The pandemic emerged shortly after our purchase, but even that did not alter the favorable dynamics underlying our thesis, as you can see below.
So, even in a negative year for total economic growth, IT spending in the U.S. came in better than the broad economy. The Company outperformed the industry and with improved profitability – which always be stills our hearts. Additionally, consulting the chart below, you can see that the gap between its growth and the industry’s growth continues to widen over time, and that spread continued to expand during the abnormal conditions in 2020 as well. All of this gives us even greater comfort in our initial thesis…” (Click here to see the full text)
4. Zebra Technologies Corporation (NASDAQ:ZBRA)
Makaira Partners’ Stake Value: $55.6 million
Percentage of Makaira Partners’ 13F Portfolio: 11.75%
Number of Hedge Fund Holders: 39
Zebra Technologies Corporation is a global mobile computing company headquartered in Illinois. The company produces solutions to sense information from enterprise assets in the automatic identification and data capture solutions industry.
For the third quarter of 2021, Zebra Technologies Corporation beat its EPS estimates by 3.89% and missed its revenue estimates by 0.44%.
On December 13, 2000, common class A shares of Zebra Technologies Corporation were sold by one of its directors Frank Blaise Modruson for $605.44.
3. CarMax, Inc. (NYSE:KMX)
Makaira Partners’ Stake Value: $55.967 million
Percentage of Makaira Partners’ 13F Portfolio: 11.82%
Number of Hedge Fund Holders: 36
CarMax, Inc. (NYSE:KMX) is a Virginia-based used vehicle retailer and also provides auto finance operations. The company started a new car operation in 1996 but sold its last new car franchise in 2021. CarMax, Inc. has 225 locations across the United States with 27,000 full-time employees.
Compared to the previous year CarMax, Inc.’s revenue increased by 65% year-over-year in 2021 and sales rose up to 77% in the last two years.
On December 23, CarMax, Inc.’s price target was raised from $156 to $157 by RBC Capital analyst Steven Shemesh. The analyst kept an Outperform rating on the company’s shares and noted that the company had “impressive” third-quarter results and beat expectations across all metrics”
CarMax, Inc. was mentioned by Giverny Capital in their second-quarter 2021 investor letter. Here are the contents of the letter:
“We’re quite optimistic about Carmax, our second largest position. For several years, investors have gravitated to a thesis that a handful of start-ups that sell used cars in an online-only format will end up with a lower cost structure than Carmax. This even though Carmax appears today to have lower costs to buy used cars for its inventory, recondition them for resale and transport them to stores – all problems that are not solved by a good web site. Carmax also amortizes its national advertising over a much larger sales base than competitors, giving it lower marketing expense per vehicle.
Nevertheless, Carmax was slow to respond to the emerging market for online car shopping. The good news is that it ultimately responded with vigor. Over the past few years it has seen operating margins contract as it invested in an omnichannel capability that lets customers buy fully online or do a portion of the transaction online and a portion in the store. Importantly, the customer chooses exactly which parts of the transaction to complete online or in store…” (Click here to see the full text)
2. Bath & Body Works, Inc. (NYSE:BBWI)
Makaira Partners’ Stake Value: $85 million
Percentage of Makaira Partners’ 13F Portfolio: 17.96%
Number of Hedge Fund Holders: 56
Bath & Body Works, Inc. is an American multinational specialty retail company. Its main products include body care, home fragrance products, soaps, and sanitizers. The company has 3,050 different locations including 1,750 company-operated locations and 300 international franchises.
After beating the third-quarter 2021 estimates of $0.61 by $0.31 Bath & Body Works, Inc. has maintained a 12% EPS growth per year over the last three years. In addition to that, the company’s revenue grew by 54% over the last year to $13 billion.
According to the third-quarter 2021 13F filings, Bath & Body Works, Inc. makes up 17.96% of Makaira Partners’ portfolio with roughly 1.35 million shares worth $85 million.
1. Liberty Broadband Corporation (NASDAQ:LBRDA)
Makaira Partners’ Stake Value: $158.8 million
Percentage of Makaira Partners’ 13F Portfolio: 33.56%
Number of Hedge Fund Holders: 24
Liberty Broadband Corporation (NASDAQ:LBRDA) is a communication services company headquartered in Englewood, Colorado. Representing 33.56% of Makaira Partners’ portfolio, it is the largest holding of the fund.
On December 15, Pivotal Research analyst Jeffrey Wlodarczak lowered Liberty Broadband Corporation’s from $267 to $212 and kept a Buy rating on the company’s shares.
Here is what Alphyn Capital Management has to say about Liberty Broadband Corporation in its first-quarter 2021 investor letter.
“Liberty Broadband completed its merger with GCI, thereby collapsing one layer of the double discount to Charter Communications, presenting a good opportunity to trim that position as well.”
You can also take a peek at Top 10 Stock Picks of Barry Rosenstein’s JANA Partners and Top Stock Picks of Michael Burry.
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This article is originally published at Insider Monkey.
