Top 5 Stocks To Buy According to Ken Heebner’s Capital Growth Management

2. OneMain Holdings, Inc. (NYSE:OMF)

Capital Growth Management’s Stake Value: $39,541,000

Percentage of Capital Growth Management’s 13F Portfolio: 3.56%

Number of Hedge Fund Holders: 41

OneMain Holdings, Inc. (NYSE:OMF), a top stock to buy according to Capital Growth Management, is a financial services company that offers personal loans and insurance to customers across the US. What sets OneMain Holdings, Inc. (NYSE:OMF) apart from most financial services companies is its business model that offers lending services to customers who have otherwise limited access to traditional lending corporations.

As of June this year, Capital Growth Management owns 660,000 shares in OneMain Holdings, Inc. (NYSE:OMF), worth $39.5 million, representing 3.56% of the firm’s Q2 portfolio. 

OneMain Holdings, Inc. (NYSE:OMF), on October 20, reported earnings for the third quarter. The Q3 EPS came in at $2.37, beating estimates by $0.09. OneMain Holdings, Inc. (NYSE:OMF)’s revenue for the quarter was $1.03 billion, which exceeded analysts’ estimates by $0.26 million. 

As of the second quarter, 41 hedge funds were bullish on OneMain Holdings, Inc. (NYSE:OMF), down from 43 in the preceding quarter. 

James Fotheringham, an analyst from BMO Capital, kept a Market Perform rating on OneMain Holdings, Inc. (NYSE:OMF) on October 22, lowering the price target from $65 to $60. He stated that the Q3 earnings didn’t beat estimates by a significant margin, and even though demand for loans is increasing, the loan yields are shrinking and operational expenses are rising. 

Here is what Miller Value Partners has to say about OneMain Holdings, Inc. (NYSE:OMF) in their Q4 2020 investor letter:

“OneMain Holdings (OMF) was the top contributor over the quarter, advancing 56.0% after reporting Q3 Earnings Per Share (EPS) of $2.19, well above consensus of $1.26 and the quarterly dividend, which was increased 36% to $0.45/share (3.5% annualized yield and 11.5% Trailing Twelve Month (TTM) yield). Net interest income of $836M beat estimates of $778M, implying a 24.3% asset yield and 18.7% net interest margin. Origination volumes increased 41% sequentially to $2.9Bn on continued strength in digital while end-of-period net receivables were flat at $17.8Bn. Credit quality remains excellent with net charge-offs of 5.2%, the lowest level since 3Q 2015. Management guided to year-end receivables of $18.1Bn, net charge-offs of 5.6% (from 5.8%-6.0%), and net leverage of 4.3x-4.5x.”