This article discusses 8 best stocks to buy now according to an under-the-radar value investor. If you are interested in knowing only about the top four picks, you can check them here: 4 Best Stocks to Buy Now.
The under-the-radar value investor we are talking about is Mark Massey (not the jazz pianist and composer). Massey might not be one of the names you would have often heard on the Street or in financial media, but he is considered one of the best practitioners of concentrated value investing by the value investing community. Mark Massey received a Bachelor of Science in Finance from the University of Virginia in 1986 and has been active in the money management business since 1989. He founded AltaRock Partners in 2002, and between 2002 and 2015, AltaRock Partners achieved an average annual return of 12% for its investors. During the same period, the S&P 500, excluding dividends, returned close to 6% annually. Even after including dividends, AltaRock Partners outperformed the S&P 500 by over 400 basis points annually, which is not a mean feat.
AltaRock Partners functions very differently from most other hedge funds in matters related to stock selection. Most hedge funds trade the stocks in their portfolio frequently, thinking of them primarily as pieces of paper or as inventory that needs to be reshuffled periodically. However, AltaRock Partners sees its portfolio as a conglomerate and its stake in individual companies as subsidiaries of that conglomerate. The fund runs a highly concentrated portfolio focusing on companies trading at a cheap valuation with a wide moat (sustainable competitive advantage), strong free cash flows, shareholder-friendly management, and global diversification.
AltaRock Partners’ Portfolio
As we discussed above, AltaRock Partners runs a highly concentrated portfolio, so it must not be surprising that the fund had only eight stocks in its 13F portfolio at the end of June. Several of these companies have been a part of AltaRock Partners’ portfolio since 2014 and 2015. During the second quarter, the fund sold its entire holdings in 1 stock, reduced its holdings in 2 stocks and made additional purchases in 5 stocks. At the end of June, tech behemoth Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT), and one other stock (its #1 stock pick), in aggregate, accounted for over 54% of AltaRock Partners’ 13F portfolio value of $3.24 billion.
Insider Monkey tracks the portfolios of over 900 hedge funds. Our research shows that the consensus stock picks of the top-performing hedge funds beat the broader market returns by a wide margin over the long term. The stocks selected for this article were chosen from the 13F filing AltaRock Partners filed with the SEC for the quarter ending June 2022.
8 Best Stocks to Buy Now According to Mark Massey’s AltaRock Partners
8. Moody’s Corporation (NYSE:MCO)
AltaRock Partners’ Stake Value: $33,537,000
Percentage of AltaRock Partners’ 13F Portfolio: 1.03%
Number of Hedge Fund Holders: 48
Shares of rating agency Moody’s Corporation (NYSE:MCO) were among the best performers in the previous decade. However, the stock declined considerably in the first half of 2022, falling 30% by the end of June. Since then, it has recovered but is still trading down by close to 16% year-to-date. AltaRock Partners first reported a stake in Moody’s Corporation (NYSE:MCO) in the fourth quarter of 2014 through a regulatory filing.
On August 10, Deutsche Bank analyst, Faiza Alwy, released a note to clients in which she downgraded Moody’s Corporation’s (NYSE:MCO) stock to ‘Hold’ from ‘Buy’ but kept her price target on it unchanged at $324. In her note, Ms. Alwy mentioned that Moody’s Corporation’s (NYSE:MCO) stock could have limited upside to relative valuation and that after the recent rally, its valuation premium relative to the broader market has reached an all-time high. She further supported her downgrade by saying, “At the time of our initiation, the premium vs. the market was at 37% and we could see this gap vs. recent history expand.”
7. Mastercard Incorporated (NYSE:MA)
AltaRock Partners’ Stake Value: $78,381,000
Percentage of AltaRock Partners’ 13F Portfolio: 2.41%
Number of Hedge Fund Holders: 138
Mastercard Incorporated’s (NYSE:MA) stock seems to be taking a breather after making its lifetime high last year during the second quarter. Since then, the stock’s popularity among smart money investors also seems to be on the decline as the number of funds disclosing a stake in Mastercard Incorporated (NYSE:MA) among the ones tracked by Insider Monkey declined to 136 at the end of June 2022 from 160 at the end of June 2021.
On August 4, leading cryptocurrency trading platform, Binance, announced that it has launched a crypto-based prepaid card in association with Mastercard Incorporated (NYSE:MA) for its clients in Argentina. Argentina has seen record inflation in the past few years, and the ‘Binance Card’, which is in the beta phase currently, will allow citizens of the country to purchase goods and services directly with cryptocurrencies like Bitcoin USD (BTC-USD) and Binance coin (BNB-USD).
Polen Capital, an investment management firm, published its first quarter 2022 investor letter for investors of its Polen Global Growth Fund in which it had this to say about Mastercard Incorporated (NYSE:MA):
“We added to both Visa and Mastercard during the final quarters of 2021, based on the belief that both businesses were trading at attractive prices and poised to deliver, double-digit returns over the next three to five years. Cross-border transactions–a highly profitable business segment for both companies–represent roughly 10% of Visa and Mastercard’s volumes and 25% of their gross revenues, so lockdowns have severely impacted this segment due to stifled travel. While it was impossible to know when people would begin traveling again, we accepted this reality with the belief that travel would eventually return. Both companies have commented that as soon as a country or geography reopens, cross-border volumes reignite, amplifying each business’s growth and profitability. We think these near- term headwinds have created an attractive long-term investment opportunity.”
6. Charter Communications, Inc. (NASDAQ:CHTR)
AltaRock Partners’ Stake Value: $272,943,000
Percentage of AltaRock Partners’ 13F Portfolio: 8.42%
Number of Hedge Fund Holders: 70
AltaRock Partners reduced its stake in Charter Communications, Inc. (NASDAQ:CHTR) by 10% to 582,551 shares during the second quarter. Besides AltaRock Partners, billionaire Israel “Izzy” Englander’s Millennium Management reduced its stake by 53% to 142,793 shares, and billionaire Paul Tudor Jones’s Tudor Investment Corp lowered its stake by 37% to 12,845 shares in Charter Communications, Inc. (NASDAQ:CHTR) during Q2.
Charter Communications, Inc.’s (NASDAQ:CHTR) stock has been on a consistent downtrend over the past year, falling 38.5% during that time and over 25% year-to-date.
Several analysts covering the company are also not bullish about its prospects in the near term. These include analysts at Atlantic Securities, who on August 15 not only downgraded the stock to ‘Neutral’ from ‘Overweight’ but also reduced their price target on it by almost 37% to $455, representing a further downside of 5%. In his note to clients, Atlantic Securities analyst, Hamilton Faber, wrote, “In the absence of robust broadband volumes, we believe valuations will remain pressured and there will be a lack of catalysts to spark investor interest.”
5. Visa Inc. (NYSE:V)
AltaRock Partners’ Stake Value: $308,803,000
Percentage of AltaRock Partners’ 13F Portfolio: 9.52%
Number of Hedge Fund Holders: 169
Unlike its arch-rival Mastercard Incorporated (NYSE:MA), the popularity of Visa Inc. (NYSE:V) seems to be on the rise among smart money investors. From the end of last year until June 30, 2022, the number of hedge funds tracked by Insider Monkey that reported a stake in Visa Inc. (NYSE:V) rose to 168 from 146.
After receiving flak from the public after several accusations made by Pershing Square’s chief Bill Ackman, Visa Inc. (NYSE:V) finally announced that it is terminating its relationship and severing all ties with MindGeek’s advertising arm, TrafficJunky, on August 4. In a detailed blog post on the company’s website, Visa Inc.’s (NYSE:V) CEO, Alfred F. Kelly Jr., wrote:
“With respect to MindGeek specifically, we suspended sites that contained user-generated content in December 2020 and acceptance on those sites has not been reinstated. Despite what you may have read in recent days, you cannot use your Visa card on Pornhub.
Accordingly, we will suspend TrafficJunky’s Visa acceptance privileges based on the court’s decision until further notice. During this suspension, Visa cards will not be able to be used to purchase advertising on any sites including Pornhub or other MindGeek affiliated sites.”
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Disclosure: None. 8 Best Stocks to Buy According to Mark Massey’s AltaRock Partners is originally published on Insider Monkey.