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10 Stocks to Buy According to William Von Mueffling’s Cantillon Capital Management

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·12 min read
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In this article, we discuss 10 stocks to buy according to William Von Mueffling's Cantillon Capital Management. If you want to skip our detailed analysis of Mueffling's investment philosophy and performance, go directly to 5 Stocks to Buy According to William Von Mueffling's Cantillon Capital Management.

Cantillon Capital Management is situated in New York. William Alexander Von Mueffling founded the hedge fund in 2003 and is the CEO and CIO. He began working for Deutsche Bank in Germany and France after receiving his MBA from Columbia in 1995. Before starting Cantillon Capital Management, Mueffling oversaw the hedge fund division at Lazard Asset Management, where he is credited with generating profits on average of over 30% per year by shorting technology stocks from 1998 to 2003.

When Mueffling founded Cantillon Capital Management, he employed a conventional long/short strategy. However, the hedge fund announced in June 2009 that it was ending its long/short strategy. Even though Mueffling outperformed many other hedge funds, his gains were still modest when measured in terms of absolute returns. Through May 2009, they had a decline of 7-8%. By June, he decided to refund cash to investors from the Cantillon World and Cantillon Europe divisions.

Cantillon Capital Management's strategy, according to a 2010 Wall Street Journal article, is to hunt for companies that offer above-average returns on shareholder equity but are valued fairly relative to their revenue streams. In an interview in Graham & Doddsville, the Columbia Business School newsletter, Von Mueffling said:

“One can broadly divide value investing into two camps. The first camp is the Graham & Dodd style which is buying assets at a discount or cash at a discount. The second camp is the Buffett style, which I characterize as buying financial productivity at a discount. We fall into the second camp. We believe that there are many different types of moats to be found, and that a moat around a business should allow it to produce outsized margins and wonderful returns on capital. The trick is being able to buy this stream of cash flows at a discount. Unlike Graham & Dodd investing where you might look at low price-to-book value companies or net-net companies, we are trying to buy high financial productivity at a discount to its intrinsic value.”

Cantillon Capital Management's 13F portfolio value decreased in the first quarter from $15.14 billion to $14.01 billion, with a top 10 holdings concentration of 41.82%. It allocated the most significant portion of its portfolio, comprising about 25.36%, to the information technology sector in the first quarter of 2022. The hedge fund also invested in the finance, healthcare, communications, consumer discretionary, industrials, real estate, and materials industries. Some of the fund’s well-known investments included Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOG).

10 Stocks to Buy According to William von Mueffling's Cantillon Capital Management
10 Stocks to Buy According to William von Mueffling's Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

Our Methodology

In this article, we discuss 10 stocks to buy according to William von Mueffling's Cantillon Capital Management. We used the hedge fund's Q1 2022 portfolio to assess its top 10 holdings.

Stocks to Buy According to William von Mueffling's Cantillon Capital Management

10. Applied Materials, Inc. (NASDAQ:AMAT)

Cantillon Capital Management’s Stake Value: $462,859,000

 

Percentage of Cantillon Capital Management’s Portfolio: 3.3%

 

Number of Hedge Fund Holders: 74

Applied Materials, Inc. (NASDAQ:AMAT) supplies production equipment, services, and software to the semiconductor, display, and related industries. William von Mueffling's Cantillon Capital Management has kept a stake in Applied Materials, Inc. (NASDAQ:AMAT) since Q1 2020. The hedge fund's $462.86 million investment equals 3.3% of the total portfolio.

On July 18, analyst Sidney Ho from Deutsche Bank retained a Buy recommendation on Applied Materials, Inc. (NASDAQ:AMAT), decreasing his price objective from $135 to $110. Ho advised investors in a research note that the extent of the wafer fab equipment decrease is the primary cause of dispute among investors and that there are further signs that the market for WFE will fade in 2023.

Investors were recently seen selling Applied Materials, Inc. (NASDAQ:AMAT) shares. At the close of the first quarter, 74 hedge funds were bullish on the company shares, compared to 78 in the previous quarter. The combined worth of Q1 hedge fund holdings stood at $4.30 billion. David Blood and Al Gore’s Generation Investment Management owned a $560.98 million stake in Applied Materials, Inc. (NASDAQ:AMAT) at the end of the first quarter, making it the company’s largest shareholder.

In addition to Applied Materials, Inc. (NASDAQ:AMAT), Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOG.C) are some other major holdings of William von Mueffling's Cantillon Capital Management.

In its Q4 2021 investor letter, Vulcan Value Partners mentioned Applied Materials, Inc. (NASDAQ:AMAT). Here is what the firm had to say:

“Applied Materials, another material contributor for the quarter, provides materials engineering solutions for semiconductor fabrication equipment and manufacturing tools for advanced displays. Similar to Lam Research, Applied Materials is executing well and continuing to experience the tailwinds from consolidation and growth within the industry.”

9. American Tower Corporation (NYSE:AMT)

Cantillon Capital Management’s Stake Value: $465,397,000

 

Percentage of Cantillon Capital Management’s Portfolio: 3.32%

 

Number of Hedge Fund Holders: 50

With a portfolio of almost 219,000 properties, American Tower Corporation (NYSE:AMT), one of the most significant worldwide REITs, is a premier independent owner, operator, and developer of multi-tenant communications real estate.

In light of the Q2 results, Citi analyst Michael Rollins reiterated a Buy rating on the shares of American Tower Corporation (NYSE:AMT) but cut his price objective from $300 to $290 on July 17. The analyst predicted that the company's organic growth would remain positive and viewed the decision to raise less money as a positive indication of its underlying organic financial performance.

According to the 13F filings for the first quarter of 2022, Cantillon Capital Management held over 1.85 million shares of American Tower Corporation (NYSE:AMT), amounting to more than $465.40 million  and representing 3.32% of the fund’s portfolio value.

50 hedge funds reported bullish bets on American Tower Corporation (NYSE:AMT) at the end of the first quarter, with combined stakes worth $4.10 billion. With about 7 million shares valued at $1.76 billion, Akre Capital Management is the biggest shareholder of American Tower Corporation (NYSE:AMT).

In its second-quarter 2022 investor letter, Richie Capital Group mentioned American Tower Corporation (NYSE:AMT) and explained its insights for the company. Here is what the fund said:

“The portfolio positions that increased during the quarter likely did so because of the sectors in which they are categorized as opposed to any company specific news. American Tower (NYSE:AMT) is one of the largest global REITs. The company owns and operates multi-tenant cell towers globally. Our long tenured investment is based on their impenetrable business model and the long tail of the current 5G investment cycle that will extend over the next decade. Carriers are in the early stages of upgrading their cell sites with new equipment to provide contiguous 5G coverage globally. Additionally, since 5G technology requires increased cell site density, cellular carriers will need to invest extensively to ensure strong performance across their networks.”

8. Equifax Inc. (NYSE:EFX)

Cantillon Capital Management’s Stake Value: $483,185,000

 

Percentage of Cantillon Capital Management’s Portfolio: 3.44%

 

Number of Hedge Fund Holders: 43

Equifax Inc. (NYSE:EFX) provides information solutions and business process outsourcing for organizations, governments, and customers. After Equifax Inc. (NYSE:EFX)'s Q2 earnings beat and revised FY22 forecast, Truist analyst Andrew Jeffrey dropped his price objective on Equifax Inc. (NYSE:EFX) from $250 to $230 on July 22. However, he reiterated a Buy rating on the shares.

On July 20, Equifax Inc. (NYSE:EFX) published earnings for the second quarter, announcing earnings per share of $2.09, beating estimates by $0.07. In addition, the $1.32 billion revenue for the period was up 7.3% year-over-year, in line with the forecast. With 4.41 million shares valued at $1.05 billion, Generation Investment Management is the top shareholder of Equifax Inc. (NYSE:EFX).

Cantillon Capital Management bought 57,617 shares of Equifax Inc. (NYSE:EFX) in the first quarter, increasing its stake by about 3%. At the end of the quarter, the hedge fund held 2.04 million shares of Equifax Inc. (NYSE:EFX), worth about $483.19 million. As of the end of the first quarter, 43 hedge funds owned stakes in Equifax Inc. (NYSE:EFX), with a combined value of $3.10 billion. This is in contrast to 41 hedge funds a quarter ago.

Baron Funds mentioned Equifax Inc. (NYSE:EFX) in its Q1 2022 investor letter. Here is what the fund said:

“We initiated a position in Equifax Inc., a leading consumer credit bureau and information services company. It collects and manages large databases of consumer data, such as credit, employment, and income records. Equifax uses these assets to provide data and analytics services to businesses and governments to make credit and marketing decisions. Credit bureaus have numerous competitive advantages, including economies of scale, regulatory barriers, and high switching costs as customers rely on their mission-critical solutions. Following a data breach in 2017, the senior management team was replaced and over $1.5 billion was spent on modernizing Equifax’s technology infrastructure and migrating it to the cloud. In addition to strengthening the company’s cyber defenses, we believe this technology transformation will enable a faster pace of product innovation and drive higher organic growth.

Unique to Equifax is its Workforce Solutions business, which maintains a database of employment and income records sourced from employers and payroll processors. Equifax has over 136 million active records representing over 60% of U.S. non-farm payrolls. Businesses and government agencies use this data for employment and income verification, which is needed when someone applies for a mortgage, requests government benefits, or changes jobs. We believe Equifax has by far the largest repository of this valuable data and continues to add new records at a faster pace than competitors. With durable growth coming from new product innovation and its Workforce Solutions business, we believe that Equifax is a high-quality business that is well positioned to grow earnings per share at a mid-teens rate over a multi-year period.”

7. Thermo Fisher Scientific Inc. (NYSE:TMO)

Cantillon Capital Management’s Stake Value: $509,673,000

 

Percentage of Cantillon Capital Management’s Portfolio: 3.63%

 

Number of Hedge Fund Holders: 101

Cantillon Capital Management also strengthened its position in Thermo Fisher Scientific Inc. (NYSE:TMO) by buying 24,611 additional shares. This made its stake in Thermo Fisher Scientific Inc. (NYSE:TMO) total 862,901 shares worth $509.67 million.

Thermo Fisher Scientific Inc. (NYSE:TMO) provides laboratory goods and services, analytical tools, specialized diagnostics, and life sciences solutions globally. Thermo Fisher Scientific Inc. (NYSE:TMO) is a good option for income investors as the firm has been paying dividends consistently since 2012. On May 19, Thermo Fisher Scientific Inc. (NYSE:TMO) issued a quarterly dividend of $0.30 per share, in line with the previous.

On July 13, Barclays analyst Luke Sergott reaffirmed an Overweight rating on Thermo Fisher Scientific Inc. (NYSE:TMO) while lowering his price objective from $675 to $630. Although Sergott told investors in a research report that instrument firms are well equipped for recessionary and inflationary pressures, should they persist, the life science sector is nonetheless suffering from macro pessimism.

Investors were seen loading up on Thermo Fisher Scientific Inc. (NYSE:TMO) shares at the end of the first quarter, where 101 hedge funds were bullish on the company shares, in contrast to 95 hedge funds a quarter earlier. Fisher Asset Management is the most prominent shareholder of Thermo Fisher Scientific Inc. (NYSE:TMO), with 2.26 million shares valued at $1.33 billion.

ClearBridge Investments mentioned Thermo Fisher Scientific Inc. (NYSE:TMO) in its Q1 2022 investor letter. Here is what the firm said:

“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of Thermo Fisher Scientific, a leading health care tools company, a leading provider of fertility benefit management services to self-insured employers that offers a rare win-win-win for employers, employees, health systems, and doctors, with clear savings and quality improvements.”

6. Visa Inc. (NYSE:V)

Cantillon Capital Management’s Stake Value: $512,837,000

 

Percentage of Cantillon Capital Management’s Portfolio: 3.66%

 

Number of Hedge Fund Holders: 159

Visa Inc. (NYSE:V) is a leading supplier of payment systems worldwide. The company facilitates electronic payments between consumers, merchants, banks, businesses, alliance partners, and government agencies. 159 hedge funds held stakes in Visa Inc. (NYSE:V) at the close of the first quarter, up from 142 hedge funds a quarter earlier. Overall, the total value of hedge fund investments in Q1 was $28.08 billion.

TCI Fund Management is the leading shareholder of Visa Inc. (NYSE:V), with 19.92 million shares of Visa Inc. (NYSE:V), worth over $4.42 billion. Next on the list is Fisher Asset Management, which owned 13.28 million shares of Visa Inc. (NYSE:V), worth over $2.94 billion.

On July 20, Wolfe Research analyst Darrin Peller revised his forecasts, ratings, and price targets ahead of the Q2 earnings season. He dropped his price objective on Visa Inc. (NYSE:V) from $285 to $260 while maintaining an Outperform rating on the stock. For the Payments, Manufacturers, and IT Services sector, Peller's base case modelling estimate changed to a moderate recession in 2023.

In the first quarter, Cantillon Capital Management increased its stake in Visa Inc. (NYSE:V) by 3%, and its position is now worth about $512.84 million. Visa Inc. (NYSE:V) has featured on Cantillon Capital Management’s portfolio since the fourth quarter of 2015.

Just like Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOG.C), Visa Inc. (NYSE:V) is one of the stocks to buy according to William von Mueffling's Cantillon Capital Management.

Baron Funds mentioned Visa Inc. (NYSE:V) in its Q1 2022 investor letter. Here is what the firm has to say:

“Shares of global payment network Visa, Inc. (NYSE:V) were up 2.5% on strong quarterly results with 24% revenue growth and 27% EPS growth. Payment volume grew 20% with notable strength in cross-border volumes as travel activity rebounded from depressed levels. Management raised full-year guidance to reflect high-teens revenue growth. Shares also likely benefited from a “flight to safety” during a volatile quarter for equities. We continue to own the stock due to Visa’s long runway for growth underpinned by the continued migration from cash transactions to card/digital and strong competitive advantages, operating in a duopoly with Mastercard.”

   

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Disclosure: None. 10 Stocks to Buy According to William von Mueffling's Cantillon Capital Management is originally published on Insider Monkey.