In this article, we present the list of Top 10 Stocks to Buy and Hold According to MIG Capital.
Richard Merage’s MIG Capital is a long/short equity hedge fund based out of Newport Beach, California. The fund has been able to generate solid alpha on both the long and short sides of its portfolio by leveraging its investment expertise and industry contacts and building a portfolio that uses risk management and limited leverage as key principles. The fund was founded by the Merage family after they sold Chef America, their frozen food business, to Nestle in 2002.
Since its inception in January 2007, the MIG Master Fund, LP has generated compound annual returns of 8.23%. The fund posted positive returns every year between 2015 and 2019, including hefty 31.45% gains in 2019. MIG Capital had $1.67 billion in assets under management as of November 2, 2021.
As of September 30, MIG Capital’s 13F portfolio, which was valued at $1.04 billion, contained just 24 holdings. Despite its small, concentrated portfolio, MIG Capital has held on to several of its positions for several years, dating as far back as 2014. In this article, we’ll take a look at the 10 stocks that MIG Capital has held on to the longest, which could serve as key cornerstones of your own portfolio.
Our Methodology
We follow hedge funds like MIG Capital because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
Now then, let’s check out the Top 10 Stocks to Buy and Hold According to MIG Capital. Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
Top 10 Stocks to Buy and Hold According to MIG Capital
10. Grupo Televisa SAB (NYSE:TV)
Grupo Televisa SAB (NYSE:TV) currently represents the third-largest stake in MIG Capital’s portfolio, though it isn’t one of the fund’s older positions. It first added Grupo Televisa SAB to its 13F portfolio in the middle of 2019 and now owns 5.37 million shares of it valued at $59 million on September 30. Grupo Televisa also ranks as one of the 10 Stocks to Buy and Hold According to Bill Gates.
In its Q2 2021 investor letter, Oakmark Funds praised Grupo Televisa SAB for the attractive valuation it received as part of the $4.8 billion sales of its content business. The fund believes that the combined assets will be a huge force in the Spanish-language streaming market and that they should prove more profitable than they were as separate entities.
Oakmark Funds, an investment management firm, published its “Oakmark International Fund” second quarter 2021 investor letter and mentioned Grupo Televisa SAB. Here is what the fund said:
“Grupo Televisa, a media company headquartered in Mexico and the world’s largest producer of Spanish-language content, was a top contributor for the second quarter. Grupo Televisa’s share price jumped when the company revealed that it would merge its content and media assets with Univision. In a call with shareholders, CEO of Televisa, Alfonso de Angoitia, and CEO of Univision, Wade Davis, provided details on the $4.8 billion agreement, which combines these leading media businesses in the two largest Spanish-speaking markets in the world. Overall, we think the deal makes strategic sense as streaming is the future in television, and the new company will very likely become the dominant Spanish-language streaming service. There will also be synergies from combining the two businesses, which should improve profitability versus when they were stand-alone businesses. In addition, over the long term, we believe consolidation in the media sector will continue, providing an opportunity for the new entity to partner with a larger company. Aside from the strategic merits, we believe Televisa received an attractive valuation for its content business as the $4.8B value was higher than our internal estimates. We commend management for this transaction.”
9. Advanced Drainage Systems Inc. (NYSE:WMS)
Advanced Drainage Systems Inc. (NYSE:WMS) has been in MIG Capital’s 13F portfolio since the first quarter of 2019. As of September 30 the fund owns 452,602 WMS shares valued at $48.96 million on September 30, making it the fund’s 12th-largest long position. The fund picked the perfect time to first buy into the stock, which sold for an average of just over $25 per share in Q1 2019.
Artisan Partners, a high value-added investment management firm, published its ‘Artisan Small Cap Fund’ first quarter 2021 investor letter and highlighted Advanced Drainage Systems Inc.. Here is what the fund said:
“Advanced Drainage Systems is a leader (60%-70% market share) in plastic-pipe drainage systems for non-residential, residential, agriculture and public infrastructure projects. The company’s products are used in the full storm-water drainage system— capturing, transporting, treating and redistributing water into the water table. Further, plastic-pipe systems are easier to install, have a longer useful life and require fewer deliveries to the project sites than traditional concrete pipe systems. Our research suggests a relatively new management team is taking the appropriate steps to enter new markets and expand its product/service offerings by providing higher-performance pipes and a more comprehensive suite of products for its infrastructure, residential and distribution center (Amazon, Walmart, etc.) projects. Furthermore, we expect a cyclical acceleration will magnify this company’s execution over the past three years, and several operational initiatives—sourcing lower-cost materials, optimizing machine utilization, automation—should improve margins over time.”
8. T-Mobile US, Inc. (NASDAQ:TMUS)
MIG Capital’s ownership of T-Mobile US, Inc. (NASDAQ:TMUS) shares dates back to the third quarter of 2018, with the fund owning 376,518 shares valued at $41.8 million as of September 30. One of the top 5 5G Stocks to Buy for 2022, T-Mobile was owned by 90 of the hedge funds tracked by Insider Monkey’s database as of the end of Q3.
On the 5G front, T-Mobile US, Inc. announced a partnership with Nokia last May that will involve work on 5G services. T-Mobile has benefited greatly from merger synergies in recent years, allowing it to expand its margins and free cash flow on top of an already solid history of growth for T-Mobile US, Inc..
ClearBridge Investments, an investment management firm, published its “Large Cap Value Strategy” first quarter 2021 investor letter and mentioned T-Mobile US, Inc.. Here is what the fund said:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where T-Mobile trailed after generating robust returns earlier in the recovery.”
7. Mastercard Incorporated (NYSE:MA)
Next up is Mastercard Incorporated (NYSE:MA), which MIG Capital has held a stake in since the middle of 2018. Mastercard Incorporated also remains one of the fund’s largest holdings, consisting of 165,489 shares worth close to $57.54 million at the end of Q3.
With its shares having appreciated greatly in recent years, 25 hedge funds closed positions in Mastercard Incorporated during Q3, more than during any other quarter in the last 8 years. Nonetheless, it still ranked as one of the 30 Most Popular Stocks Among Hedge Funds: 2021 Q3 Rankings.
L1 Capital, an investment management firm, published its ‘L1 Capital International Fund’ third quarter 2021 investor letter and mentioned Mastercard Incorporated. Here is what the fund said:
“Mastercard returned to top 10. We have held Mastercard since inception of the Fund. Over the 6 weeks to 30 September 2021, Mastercard’s share price retreated 10% and we took advantage of what we believe will be a short-term pullback in the share price to add to our investment. Recent weakness in Mastercard’s share price is most likely due to concerns about disintermediation and other pressures caused by growth in ‘Buy now, Pay later’ and other new payment offerings, as well a general market rotation away from higher growth companies in favour of more cyclical businesses.”
6. Bottomline Technologies, Inc. (NASDAQ:EPAY)
Closing out the first half of our list is Bottomline Technologies, Inc. (NASDAQ:EPAY), which MIG Capital has also owned since the middle of 2018. The fund raised its stake in the software company by 13% during Q3 2021, giving it just under 1.04 million shares valued at $40.82 million.
Hedge funds were buying into Bottomline Technologies, Inc. in the middle of 2021 after its stock price took a hit to Covid-related headwinds on Bottomline Technologies, Inc.’s subscriptions and transactions revenue. The company has also been making numerous investments that have weighed on its near-term margins but should deliver future dividends.
5. Ball Corporation (NYSE:BLL)
Ball Corporation (NYSE:BLL) leads us into the second half of our list, having been owned by MIG Capital since the middle of 2018. The fund owned 549,854 shares of the packaging company on September 30, which had a market value of $49.47 million.
There was a substantial hedge fund exodus from Ball Corporation in Q3, as 37% of Ball Corporation’s former hedge fund shareholders from within Insider Monkey’s database unloaded the stock during the period. Hedge funds apparently didn’t approve either of Ball Corporation’s plans to build a new $290 million beverage can plant in Nevada, which was announced in September, or of Ball Corporation’s $850 million offering of senior notes earlier that month, or both.
ClearBridge Investments, an investment management firm, published its “Sustainability Leaders Strategy” third quarter 2021 investor letter and highlighted Ball Corporation. Here is what the fund said:
“Ball, the largest manufacturer of recyclable aluminum beverage cans in North America, bucked headwinds for the materials sector with strong quarterly results and was supported by contracts indicative of further growth.”
4. Armstrong World Industries, Inc. (NYSE:AWI)
MIG Capital’s ownership of Armstrong World Industries, Inc. (NYSE:AWI) dates all the way back to the first quarter of 2017. As of the end of September, the fund had a $45.2 million position in the stock that contained 473,417 shares. Hedge fund ownership of AWI fell by half during the first two quarters of 2021 but rebounded by 38% in Q3.
Black Bear Value Partners discussed the stock in its Q1 2021 investor letter, where it noted that 70% of Armstrong World Industries, Inc.’s sales are to repair and remodel segments of the home industry, making it less sensitive to new home starts. The fund believes Armstrong World Industries, Inc. is an excellent stock at an attractive valuation, with the capability of generating $4-$5 in free cash flow annually.
Black Bear Value Partners, an investment management firm, published its first quarter 2021 investor letter,and mentioned Armstrong World Industries, Inc.. Here is what the fund said:
“AWI is a 129-year old designer and manufacturer of commercial and residential ceiling, wall, and suspension systems. 95% of their sales are for commercial use with the majority (70%) for repair and remodel (R&R). This translates to less sensitivity to new construction as R&R is a more stable revenue stream.
The US ceiling industry is consolidated with the top 3 companies controlling 98% of the market. AWI is the market leader with 65% market share. (Click here to see the full text)
3. Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH)
MIG Capital has owned a stake in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) since Q3 of 2016 and stuck with the stock through a disastrous period for the cruise industry. The fund owned 1.85 million Norwegian Cruise Line Holdings Ltd shares on September 30, shares which have cratered in value by more than half since the start of the pandemic.
In its Q4 2020 investor letter, Miller Value Partners liked Norwegian Cruise Line Holdings Ltd’s chances of coming out of the pandemic in decent shape and expected the travel industry to rebound far more than early expectations pegged for it. However, with omicron now becoming prevalent and some regions locking down and closing up their borders again, full recovery in travel could be years away.
2. Liberty Global Inc. (NASDAQ:LBTYK)
Liberty Global Inc. (NASDAQ:LBTYK) is one of the two oldest holdings in MIG Capital’s 13F portfolio, dating back to the third quarter of 2014. The fund held a 1.67-million share stake in the multinational telecommunications giant on September 30, a position valued at $49.26 million.
Liberty Global Inc. added just over 266,000 new broadband and mobile subscribers during Q3, while its full-year guidance for adjusted free cash flow was raised to $1.45 billion, representing 35% year-over-year growth. Thanks to its growing pile of cash, Liberty Global Inc. has begun aggressively buying back its stock, buying back $1.1 billion in shares through October and with plans to buy back a further 10% of its outstanding shares in both 2022 and 2023.
1. Cogent Communications Holdings Inc. (NASDAQ:CCOI)
As with Liberty Global, Cogent Communications Holdings Inc. (NASDAQ:CCOI) has been in MIG Capital’s 13F portfolio since Q3 of 2014. Over seven years later the fund is still extremely bullish on the internet service provider, as Cogent Communications Holdings Inc. ranks as its largest stock holding as of September 30. MIG owned 863,953 shares at that time, valued at $61.2 million.
While MIG remains extremely bullish, White Brook Capital isn’t, having recently sold out of Cogent Communications Holdings Inc.. In its Q3 2021 investment letter, the fund said that the pandemic is likely to have permanently shrunk Cogent’s customer base, as smaller businesses will increasingly opt to work remotely rather than in a small office, which is what Cogent specializes in. The fund does believe that Cogent will figure out some alternatives or look to sell itself, but wanted to deploy its capital into more promising investment opportunities.
You can also take a peek at the Top 10 High Growth Stocks To Buy in 2021 and 15 Biggest Companies That Use Shopify.
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This article is originally published at Insider Monkey.
