Top 5 Stocks to Buy According to Jeff Ubben’s ValueAct Capital

4. LKQ Corporation (NASDAQ: LKQ)

ValueAct’s Stake Value: $1,060,711,000
Percentage of ValueAct’s 13F Portfolio: 11.75%
Number of Hedge Fund Holders: 35

LKQ Corporation (NASDAQ: LKQ) is a manufacturer of alternative and specialty parts for automobiles and other vehicles in the United States. It was founded in 1998 and is placed fourth on the list of top 10 stocks to buy according to Jeff Ubben’s ValueAct Capital. Shares of LKQ Corporation (NASDAQ: LKQ) are up 59.87% in the past 12 months.

On August 2, Truist analyst Stephanie Benjamin raised her price target on LKQ Corporation (NASDAQ: LKQ) to $63 from $58 and maintained a “Buy” rating on the shares. On July 29, LKQ Corporation (NASDAQ: LKQ) posted earnings for the second quarter of 2021. It declared earnings per share of $1.13, beating the estimates by $0.38. Revenue over the period was $3.43 billion, up 30.4% year over year.

Out of the hedge funds being tracked by Insider Monkey, ValueAct Capital is a leading shareholder in LKQ Corporation (NASDAQ: LKQ), with 21.55 million shares worth more than $1.06 billion. This represents 11.75% of their portfolio. The hedge fund’s stake in LKQ Corporation (NASDAQ: LKQ) stock increased by 1% in the second quarter of 2021, latest data reveals.

In its first-quarter 2021 Investor Letter, Bonsai Partners highlighted a few stocks and LKQ Corporation (NASDAQ: LKQ) is one of them. Here is what the fund said:

“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 20.1% during the quarter.

During the quarter, LKQ shared its fourth-quarter results: showing a slight revenue decline and a nearly 30% increase in quarterly profit Vs. the same period last year. COVID has proved a surprising catalyst for my investment thesis which revolves around optimizing their recent large acquisitions that were never efficiently integrated.

Admittedly, in addition to LKQ’s quarterly performance, thematically, there has been broad enthusiasm for “re-opening” trades, of which, LKQ has been a beneficiary. Most importantly, the prior overhang related to LKQ’s debt burden is now all but behind us. Their net debt to EBITDA ratio now sits below 2x, a stark change from the near 3x leverage ratio before the pandemic. At that time, LKQ’s leverage had the potential to spiral upward to nearly 4-5x if the business experienced a prolonged shutdown. It’s good to be past this issue.”