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10 Best Stocks to Buy According to Billionaire Mason Hawkins

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Ma’k Almario
·16 min read
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In this article, we presented the 10 best stocks to buy according to billionaire Mason Hawkins. You can skip our detailed analysis of Mason Hawkins' investment strategy and his history to read 5 Best Stocks to Buy According to Billionaire Mason Hawkins.

Mason Hawkins is an American Billionaire who founded Southeastern Asset Management Inc in 1975. The Tennessee-based hedge fund manages over $12.71 billion discretionary assets under management and over $4.47 billion in managed 13F securities. At the end of the fourth quarter, stocks in the communications market accounted for 26.23% of the value investor's 13F portfolio. The number of holdings was 25, with the fund dropping positions in Univar Solutions Inc (NYSE: UNVR) and adding bets in Douglas Emmett, Inc. (NYSE: DEI). The biggest three positions are Lumen Technologies Inc (NYSE: LUMN), CNX Resources Corp (NYSE: CNX), and General Electric Company (NYSE: GE).

Southeastern Asset Management also serves as the investment advisor for Longleaf Partners Fund, a set of mutual funds and Undertakings for Collective Investment in Transferable Securities (UCITS), established in 1987. In 2020, the fund returned 10.53% versus 18.40% for S&P 500 index. The fund is also generating more than 9% annualized returns since its inception through 1987.

Mason Hawkins' Background

Mason Hawkins graduated from the University of Florida with a bachelor's degree in finance in 1970. The billionaire then continued his education and obtained a master degree in finance from the University of Georgia in 1971. Hawkins started his career at Atlantic National Bank as Director of Research, where he worked until 1973. He later served at First Tennessee Investment Management as the Director of Research until 1975. After obtaining experience, Mason and three other partners formed Southeastern Asset Management in 1975. The 73-year old billionaire also served as co-portfolio manager of Longleaf Partners Small-Cap Fund since 1989, named after Mason's parents' longleaf pine tree, which they developed for the family's lumber business.

Mason Hawkins' Investment Strategy

Billionaire Mason Hawkins is known for focusing his investments on a small number of undervalued businesses with solid balance sheets and capable management teams to achieve long-term capital growth. The investor believes in investing in stocks priced at 60% or less of their intrinsic value and selling them when the stock price rises above that level. Mason Hawkins thinks that having a portfolio that is focused solely on the best investment ideas is important. In most cases, each of his managed portfolios contains less than 25 stocks.

In 2020, Southeastern Asset Management hit gold with its huge stake in Eastman Kodak Company (NYSE: KODK). Southeastern's stock soared in value from around $96 million to approximately $1.1 billion, mainly due to the announcement that camera firm Kodak will engage in drug production primarily of active pharmaceutical ingredients after it secured a $765 million loan from the US government.

As the travel industry starts to recover and hold steady gains, Southeastern Asset Management increased its interest in MGM Resorts International (NYSE: MGM) by 42.11% or 2.09 million shares. The stock gained 187.19% in the last twelve months. MGM had a three-year sales growth rate of 13.9% and a three-year EBITDA growth rate of 24.7% before the Covid-19 pandemic started in 2020.

Last year Hawkins talked about several important factors to keep in mind before investing during the pandemic in an interview with Value Investor Insight. Here's what he said about their assessment of intrinsic value.

"Again, it's pricing for us, not timing. What we can be certain about today is that this is a very adversarial business environment. But we do believe we will return to some degree of normalcy. If a company is priced in the market at 30 cents on the dollar against our assessment of intrinsic value, for the most part all we need to assume is that normalcy will generally return in order to find that an attractive opportunity. We'll be the first to admit that we don't know exactly when revenues and free cash flow are going to be generated in a normal way again, but when discounts are that steep we can be patient and expect to benefit not only from intrinsic values growing again, but also from Mr. Market weighing those values much more fairly when things eventually improve. As risk-averse capital allocators – and this comes from the largest investor in the Longleaf Partners' funds – what we are most concerned about is not losing permanent capital. If we are very confident in our rough appraisal of value and that it will normalize in the near future, we're willing to step up aggressively."

10 Best Stocks To Buy According To Billionaire Mason Hawkins
10 Best Stocks To Buy According To Billionaire Mason Hawkins

Mason Hawkins of Southeastern Asset Management

While the COVID-19 pandemic may have led to an economic recession, Mason Hawkins is confident that the market will normalize to pre-pandemic levels. At the same time, this is a good opportunity for an attractive opportunity to investors. Hawkins is an exception in a struggling industry. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Let's start our list of 10 best stocks to buy according to billionaire Mason Hawkins.

10 Baidu, Inc. (NASDAQ:BIDU)

Value: $197,506,000 Percent of Mason Hawkins' 13F Portfolio: 4.4% Number of Hedge Fund Holders: 51

The Chinese tech giant Baidu, Inc. ranks 10th in the list of 10 best stocks to buy, according to billionaire Mason Hawkins. Baidu, Inc. is a multinational technology company with over 700 million users. The company specializes in internet-related services and products, including their AI-powered camera that can spot early detection of eye infirmities leading to blindness, and MediaGo, a platform for Chinese advertisers seeking to attract users worldwide. The company recently came up with China's first commercial self-driving bus, Baidu Apollo. The self-driving vehicle is in full operations on the road in a municipality in China with a total length of 8.8 kilometers.

In March, Loop Capital analyst upgraded BIDU from Hold to Buy, with a price target of $290.00 up from $210.00. Mason Hawkins' investment strategy was effective in the case of Baidu because shares jumped 103% over the last twelve months. The company has a market cap of $71.8 billion and recorded a revenue of $16.4 billion for the full year of 2020. The number of bullish hedge fund bets went up by eight recently. Baidu, Inc. was in 51 hedge funds' portfolios at the end of December. Mason Hawkins' Southeastern Asset Management currently owns 913 thousand shares of BIDU, worth $197 million. BIDU occupies 4.4% of Southeastern Asset Management's overall equity.

Harding Loevner mentioned that Baidu dominated the ACWI Communications Services Index in its Q4 2020 investor letter:

"We parted ways with several companies that failed to attain our predetermined mileposts for success: Chinese search engine Baidu. Baidu, sold in despair in late April over its declining growth prospects and competitor incursions, has since trounced the ACWI Communications Services Index."

9. Lazard Ltd (NYSE:LAZ)

Value: $208,310,000 Percent of Mason Hawkins' 13F Portfolio: 4.7% Number of Hedge Fund Holders: 20

Lazard Ltd is ranked 9th in our list of best stocks to buy according to billionaire Mason Hawkins. Lazard Ltd is a worldwide financial advisory and asset management firm based in Hamilton, Bermuda. The company specializes in investment banking and financial services with institutional clients. Lazard-backed SPAC Lazard Healthcare Acquisition I recently filed with the Securities and Exchange Commission (SEC) for its initial public offering (IPO) of 25 million units at $10 under the ticker LHCAU.

On April 7, Lazard gained 1.9% after Morgan Stanley raised the stock to Overweight from Equal-weight. The upgrade was because of the positive outlook for global Mergers and Acquisitions (M&A) and improving prospects for Europe. Shares of LAZ soared 62% over the last twelve months. The company has a market cap of $4.84 billion and a full year 2020 revenue of $1.40 billion, up 3% from 2019. The stock was in 20 hedge funds' portfolios at the end of the fourth quarter, up from 19 in the third quarter. Southeastern Asset Management currently holds 4,924,564 shares of LAZ, worth $208 million. LAZ positions account for 4.7% of Mason Hawkins' overall portfolio.

Third Avenue Management mentioned that in the competitive financial consulting market, Lazard is a strong rival in its Q4 2020 investor letter:

Lazard Ltd. (“Lazard”) – During the quarter, the Fund initiated a position in Lazard, which houses two distinct businesses – financial advisory and asset management. Lazard is one of the formidable competitors in the global financial advisory industry, though Lazard is not involved in investment banking lines of business which are balance sheet-intensive or those which take on credit risk. Lazard’s advisory business is the world’s fifth largest by revenues, putting the company’s advisory business on par with those of far larger companies, such as Bank of America and Citi. Meanwhile, Lazard’s advisory revenues are meaningfully larger than the likes of Credit Suisse and UBS. While advisory revenues represent a low single-digit percentage of revenues for those peers, the figure is slightly more than 50% for Lazard. One further point of attraction for Lazard’s advisory business is its sterling reputation in restructuring advisory, which often shines in challenging environments in which insolvencies and near-insolvencies rise. The remaining portion of Lazard’s revenue is derived from the company’s asset management business, which operates completely independent of the advisory business and at last report had approximately $248 billion of assets under management. Lazard’s assets under management are focused on several niches in active management commanding management fees at the higher end of the industry, and the performance of its strategies has been sufficiently strong to have generated inflows of late, an unusual accomplishment for an active manager. The company in total is very well-capitalized and has a long history of controlling the relationship between compensation, its primary expense, and revenue. We believe that our purchase price implies a modest multiple of current operating earnings and that the operating environment can certainly improve, most likely as M&A activity continues to accelerate, but from other sources as well. External to the company however, it is clear that there are a number of companies that would almost certainly be very eager to purchase one or both of Lazard’s businesses. Consolidation is rampant in the asset management industry and several purchases of asset management companies of similar size to Lazard, though arguably of lower quality, have been announced recently. Separately, several European investment banks, including ones named earlier in this paragraph, have publicly declared a desire to grow their advisory businesses, especially in cross-border M&A capabilities, which is a core competency within Lazard. Using conservative estimates of prices we believe could be realized in the sale of Lazard’s businesses, the current share price appears to meaningfully undervalue the company.”

8. MGM Resorts International (NYSE:MGM)

Value: $222,242,000 Percent of Mason Hawkins' 13F Portfolio: 5.0% Number of Hedge Fund Holders: 44

Ranking 8th on the list of 10 best stocks to buy according to billionaire Mason Hawkins is MGM Resorts International. The Las Vegas, Nevada-based global hospitality and entertainment firm operates 29 unique hotel and destination gaming resorts in the United States and China. The company has a vast portfolio of luxury hotels and casinos, including Bellagio, MGM Grand, ARIA, and The Mirage Hotel and Casino. On April 5, Morgan Stanley analysts have given MGM Resorts International an Overweight ranking, with a price target of $45.

MGM Resorts International has a market cap of $19.92 billion. The company's revenue in 2020 came in at $5.2 billion. The stock has gained 198% over the last twelve months. Southeastern Asset Management owns 7.05 million shares of MGM, worth $222 million. MGM accounts for 5.0% of Mason Hawkins' total portfolio.

Longleaf Partners Fund mentioned that despite the global financial crisis, MGM remains one of the most profitable casinos and entertainment firms in its Q4 2020 investor letter:

"MGM Resorts (54%, 2.10%; 46%, 2.32%), the casino and online gaming company, quickly became a top contributor for the year after we initiated the position in the third quarter. 3Q EBITDA came in moderately above breakeven, a strong improvement from the COVID lockdown-impacted second quarter. MGM’s regional casinos performed very well, while flight restrictions caused its Las Vegas properties to lag. More importantly, CEO William Hornbuckle finished implementing $450 million of necessary recurring annual cost savings, which should result in a 15% increase in pretax earnings once post-vaccine leisure travel resumes and MGM revenues normalize. The stock remains cheap against this post-reopening earnings power. BetMGM, the company’s new online gaming and sports-betting app, is on track for over $150 million revenues this year and growing very quickly in a market with enormous potential. Comparable pure-play digital gaming businesses trade for extremely high multiples today, and BetMGM has a sustainably superior economic model due to its lower customer acquisition costs.”

7. FedEx Corporation (NYSE:FDX)

Value: $229,922,000 Percent of Mason Hawkins' 13F Portfolio: 5.1% Number of Hedge Fund Holders: 63

Ranking 7th on the 10 best stocks to buy according to billionaire Mason Hawkins is FedEx Corporation. Headquartered in Memphis, Tennessee, FedEx Corporation is among the biggest delivery services, maintaining customers worldwide, including the US Postal Service in a $1.5 billion-a-year contract. FedEx has been on the frontlines of the COVID-19 pandemic, fulfilling orders of essential and e-commerce parcels worldwide. This month, the company distributed around 100 million vaccine doses to administration sites throughout the United States.

On April 13, Keybanc upgraded FDX from Sector Weight to Overweight FDX because analysts believe in developing Express and Ground outlook through 2021. The company has a market cap of $76.3 billion and full-year revenue of $17.4 billion in 2020. Shares of FDX jumped 130.35% over the past twelve months. As of the end of the fourth quarter of 2020, Southeastern Asset Management owns 885 thousand shares of FDX worth $229 million. FDX accounts for 5.1% of Southeastern's total portfolio.

Longleaf Partners Fund mentioned that FDX was one of its top contributors after a notable year for the company that wasn't solely because of COVID in its Q4 2020 investor letter:

“FedEx (76%, 3.69%; 3%, 0.29%), the global logistics company, was the top contributor in 2020 after an outstanding year for the business that wasn’t simply the result of COVID, even if the company has been a strong beneficiary of the rapid societal changes driven by it. The share price returned over 85% in the last six months. Over the last quarter, Ground revenues increased 38%, while operating income grew 61%, despite another round of heavy investments weighing down margins temporarily into the single-digits. The company is indispensable for the United States’ e-commerce deliveries and is reaping the rewards of its investments in previous years to gear up for 7-day delivery. The Express segment is still benefitting from fewer passenger flights diminishing competing underbelly capacity. Despite the sharp appreciation, the stock trades at a reasonable mid-teens P/E multiple on forward earnings, and we expect the value to grow double-digits annually from here. FedEx has done its part to give back this year in the face of COVID. Since the onset of the pandemic, FedEx has delivered more than 55 kilotons of personal protective equipment, including more than two billion face masks, and more than 9,600 humanitarian aid shipments around the globe. More recently, FedEx was tapped to deliver the first wave of Pfizer-BioNTech vaccines across the US, and its infrastructure will be critical to successfully disseminating the vaccines.”

6. Comcast Corporation (NASDAQ:CMCSA)

Value: $254,276,000 Percent of Mason Hawkins' 13F Portfolio: 5.7% Number of Hedge Fund Holders: 84

Philadelphia-based telecommunications company Comcast Corporation ranks 6th on the list of the 10 best stocks to buy according to billionaire Mason Hawkins. The company offers various products such as film, internet services, cable television, and broadcasting. In 2020, CMCSA had over 2 million business customers and 30 million pay-TV subscribers. Early this week, Raymond James boosts Comcast from Market Perform to Outperform with a $61 price target.

The company has a market cap of $252.4 billion. Comcast Corporation's total revenues came in at $103.6 billion, up 4.9% from 2019. The stock has gained 44% in the last twelve months. As of the end of the fourth quarter of 2020, Southeastern Asset Management owns 4.85 million shares of CMSCA worth $254 million. CMSCA accounts for 5.7% of Mason Hawkins' total portfolio.

Cooper Investors mentioned Comcast's high-quality cable assets is a one-of-a-kind connectivity system that continues to deliver when meeting the demand for high-speed broadband in its Q4 2020 investor letter:

“During the quarter the portfolio exited its position in Comcast, a long term holding having been in the portfolio since 2013. We were attracted to Comcast’s high quality cable assets which we view as unique communication infrastructure that continues to perform well as it serves the persistent demand for high speed broadband. However the outlook for their media and content assets in NBCU and Sky has become increasingly uncertain while remaining a key area of management focus and capital allocation. This clouded view on industry trends led us to seek more attractive investment propositions elsewhere.”

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Disclosure: None. 10 Best Stocks to Buy According to Billionaire Mason Hawkins is originally published on Insider Monkey.