In this article, we discuss the top 5 stock picks of Thomas Bancroft’s Makaira Partners. If you want our detailed analysis of Bancroft’s history, investment philosophy, and hedge fund performance, go directly to the Top 10 Stock Picks of Thomas Bancroft’s Makaira Partners.
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 (NASDAQ:CDW) 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 (NASDAQ:CDW) 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 (NASDAQ:CDW) 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 (NASDAQ:ZBRA) 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 (NASDAQ:ZBRA) 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 (NASDAQ:ZBRA) 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. (NYSE:KMX) has 225 locations across the United States with 27,000 full-time employees.
Compared to the previous year CarMax, Inc.’s (NYSE:KMX) 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 (NYSE:KMX) 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. (NYSE:KMX) 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. (NYSE:BBWI) 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. (NYSE:BBWI) 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. (NYSE:BBWI) 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 (NASDAQ:LBRDA) 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 (NASDAQ:LBRDA) 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.
