Top 5 Stocks to Buy Now According To Secretive Billionaire Quant Hedge Fund Manager

3. Lowe’s Companies (NYSE: LOW)

Despite an 11% decline in Lowe’s stake during the third quarter, the home improvement corporation Lowe’s Companies (NYSE: LOW) is the third-largest stock investment of the quant hedge fund manager. Lowes stake accounts for 1.26% of the overall portfolio valued at $440 million. It is the permanent member of the secretive billionaire quant hedge fund manager portfolio since 2015.

Lowe’s shares soared 37% in the last twelve months, enlarging five years’ gains to 118%. The company also offers dividends to investors, which makes it a good stock to hold in a portfolio.

In a previous article we shared Pershing Square’s detailed comments about LOW. Here is an excerpt from that article:

“In 2020, beyond adapting the business for surging demand and the associated operational strains imposed by Covid-19, Lowe’s continues to invest behind critical strategic initiatives, including improving omnichannel capabilities. Management completed the re-platforming of its ecommerce platform earlier this year, and will now focus on enhancing online features and functionality, thereby improving the overall user experience. Lowe’s is also accelerating investments in its supply chain initiatives, a critical element of the company’s longer-term business transformation. We believe that Lowe’s continues to make substantial progress toward achieving each of management’s high-priority initiatives, which will aid Lowe’s future competitive position.

In recent quarters, Lowe’s management has begun to acknowledge its medium-term 12% operating margin target as “not the end point,” but rather “a stop along [Lowe’s] journey,” and has further noted that they believe Lowe’s “can do better than that over time.” As Lowe’s revenue productivity and margins begin to approach its best-in-class peer Home Depot, which achieved a greater than 14% profi t margin last year, it will generate signifi cant increases in profi t, which, when coupled with the company’s likely soon-to-be-relaunched, large share repurchase program should lead to accelerated future earnings-pershare growth.

Despite Lowe’s signifi cant stock price appreciation, it currently trades at approximately 19 times our estimate of Lowe’s next-twelve-month earnings (vs. Home Depot at 25 times), a valuation which does not refl ect its potential for signifi cant future profi t improvement. As a result, we believe that Lowe’s share price has the potential to appreciate substantially as the company continues to make progress on its business transformation.”