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15 Stocks to Invest in According to Kenneth Squire’s 13D Management

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·12 min read
In this article:
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  • LKQ
  • ELAN
  • HHC
  • HWM-P
  • GDOT
  • LNG
  • TRN
  • MD
  • MMSI
  • EVA

In this article, we discuss the 15 stocks to invest in according to Kenneth Squire's 13D Management based on Q3 holdings of the fund. If you want to skip our detailed analysis of Squire's history, investment philosophy, and hedge fund performance, go directly to the 5 Stocks to Invest in According to Kenneth Squire's 13D Management.

Ken Squire is the founder of 13D Management and the 13D Activist Fund. He is also the founder and CEO of 13D Monitor, a business specializing in 13D filings and shareholder activism, and the author of Barron's The Activist Spotlight column. He worked as a corporate and securities associate at Weil, Gotshal & Manges LLP, and a principal at LSC Investors and Crown Capital Group. In the last two quarters, Ken Squire's hedge fund had profited from his strategy of shifting away from large-cap growth equities and into small- and mid-cap value firms.

In the third quarter of 2021, some notable stock picks of Kenneth Squire's 13D Management portfolio include Cheniere Energy, Inc. (NYSE:LNG) and LKQ Corporation (NASDAQ:LKQ). The hedge fund also has a $12.21 million stake in Elanco Animal Health Incorporated (NYSE:ELAN).

Image by Sergei Tokmakov, Esq. from Pixabay

In Cheniere Energy, Inc. (NYSE:LNG), Kenneth Squire owns 382,710 shares. The investment covers an impressive 4.54% of the fund's portfolio. The company's third-quarter earnings report showed an EPS of $0.69 and revenue of $2.32 billion, both missing the analysts' expectations by $0.43 and $1.43 billion, respectively.

Another notable stock in Kenneth Squire's portfolio in LKQ Corporation (NASDAQ:LKQ). The investor owns a $10.88 million stake in the company. LKQ Corporation, in its third-quarter earnings report, had an EPS of $1.02, beating the estimates by $0.16. In addition, their revenue was $3.30 billion, beating the previous quarter's revenue of $30.45 million.

Based on the latest 13F holdings for the third quarter of 2021, 13D Management owns 382,710 shares in Elanco Animal Health Incorporated (NYSE:ELAN) worth $12.21 million. On November 18, Morgan Stanley analyst Erin Wright initiated coverage of Elanco Animal Health, rating the stock as "Overweight," and gave a price target of $40.

With this background in mind, let’s start our list of 15 stocks to invest in according to Kenneth Squire's 13D Management. We used Squire's 13F portfolio for Q3 2021 for this analysis.

Stocks to Invest in According to Kenneth Squire's 13D Management

15. The Howard Hughes Corporation (NYSE:HHC)

13D Management Stake Value: $8,669,000

Percentage of 13D Management’s 13F Portfolio: 3.22%

Number of Hedge Fund Holders: 25

The Howard Hughes Corporation (NYSE:HHC) is a real estate company, which owns hotels, housing properties, golf courses, and entertainment facilities. The company reported an EPS of $0.07 in the third quarter of 2021, surpassing Wall Street projections by $0.32.

In September, The Howard Hughes Corp. sold three hotels in The Woodlands, roughly 30 miles north of Houston, to a joint venture run by Los Angeles-based investment group Lowe for $252 million.

In the third quarter of 2021, 13D Management owned 98,723 shares of The Howard Hughes Corporation worth $8.67 million. However, the latest data reveals that the hedge fund's stake in the company’s stock decreased by 25% in the third quarter. Bill Ackman's Pershing Square is the most significant stakeholder in The Howard Hughes Corporation, with 13.62 million shares worth $1.20 billion.

Just like Cheniere Energy, Inc. (NYSE:LNG), LKQ Corporation (NASDAQ:LKQ) and Elanco Animal Health Incorporated (NYSE:ELAN), The Howard Hughes Corporation (NYSE:HHC) is one of the stocks to invest in, according to Kenneth Squire's 13D Management 13F portfolio in Q3.

In its fourth-quarter 2020 investor letter, Pershing Square Holdings Ltd mentioned The Howard Hughes Corporation (NYSE:HHC). Here is what the fund said:

"In 2019, HHC's Board of Directors announced a strategic transformation plan to streamline the company's organizational structure, sell $2 billion of non-core assets, and accelerate growth in its core master-planned community ("MPC") business. In 2020, David O'Reilly, formerly HHC's CFO and President, became the company's new CEO, and Jay Cross, formerly President of Hudson Yards, became the new President. This transformation into a leaner and more focused organization allowed the company to successfully navigate the impact of COVID-19.

When the pandemic began, it was clear that it would have a draconian effect on the company’s assets. Management acted quickly and decisively to stabilize the business by raising $600 million of equity in March 2020 to strengthen the company’s balance sheet. The Pershing Square funds invested $500 million in that offering. Additionally, HHC’s transition to a decentralized operating model significantly reduced overhead expenses and enabled each MPC to more nimbly react to challenging local market conditions….(Click to see the full text).

14. Enviva Partners, LP (NYSE:EVA)

13D Management Stake Value: $8,730,000

Percentage of 13D Management’s 13F Portfolio: 3.24%

Number of Hedge Fund Holders: 9

Enviva Partners, LP (NYSE:EVA) manufactures and sells utility-grade wood pellets. The company is a great income stock. In November, the firm declared a quarterly dividend of $0.84 per share, an increase of 3.1% from the previous dividend of $0.81.

The company’s shares have returned more than 59.01% to investors over the past twelve months. Citi analyst Ryan Levine boosted Enviva's price objective to $70 from $55 on November 17 and maintained a “Neutral” rating on the stock.

The money managers were feeling upbeat. The number of bullish hedge fund holdings recently increased by two. In the second quarter of 2021, Enviva Partners, LP was in the portfolios of 9 hedge funds.

13. Trinity Industries, Inc. (NYSE:TRN)

13D Management Stake Value: $8,761,000

Percentage of 13D Management’s 13F Portfolio: 3.26%

Number of Hedge Fund Holders: 20

Trinity Industries, Inc. (NYSE:TRN) based in North America, offers rail transportation goods and services via three divisions: Railcar Products Group, Railcar Leasing, and Management Services Group. In September, the company announced a quarterly dividend of $0.21 per share, unchanged from the prior dividend.

Trinity Industries announced in November that it sold its roadway goods business to Monomoy Capital Partners, an operationally oriented middle-market private equity firm, for $375 million in cash.

In the second quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $636.59 million in Trinity Industries, Inc., which is a decrease from 28 hedge funds in the preceding quarter holding stakes worth $987.88 million.

12. MEDNAX, Inc. (NYSE:MD)

13D Management Stake Value: $9,034,000

Percentage of 13D Management’s 13F Portfolio: 3.36%

Number of Hedge Fund Holders: 19

MEDNAX, Inc. (NYSE:MD) and its subsidiaries provide specialist medical services in neonatal, maternal-fetal, and pediatric medicine in all 50 states and Puerto Rico. Of the funds tracked by Insider Monkey, Starboard Value LP, managed by Jeffrey Smith, holds the most prominent position in the company. Starboard Value LP has a $168.16 million position in the stock, comprising 3.07% of its 13F portfolio.

After the company's Q3 earnings, BMO Capital analyst Matt Borsch trimmed his price objective on Mednax to $31 from $37 and maintained a “Market Perform” rating on the stock. Borsch believes that Mednax management has recovered effectively from the pandemic's negative consequences, but his reduced pricing estimate is based on a recalculated value model across provider names.

Mednax Inc. was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. There were 11 hedge funds in our database with MD holdings at the end of the previous quarter.

11. Green Dot Corporation (NYSE:GDOT)

13D Management Stake Value: $9,200,000

Percentage of 13D Management’s 13F Portfolio: 3.42%

Number of Hedge Fund Holders: 22

Green Dot Corporation (NYSE:GDOT) is a financial technology and bank holding corporation. The company's stock has dropped by 29.77% in the last twelve months.

Green Dot Corporation’s third-quarter earnings report showed an EPS of $0.43 and revenue of $328.9 million, up 17.7% year over year. Kenneth Squire's hedge fund owns 182,784 shares of the company, worth over $9.20 million.

According to our database, the number of Green Dot Corporation’s long hedge funds positions increased in the second quarter of 2021. There were 22 hedge funds that hold a position in the company compared to 26 funds in the preceding quarter. The company's most significant stakeholder is Starboard Value LP, with 5.29 million shares worth $266.45 million.

In addition to Cheniere Energy, Inc. (NYSE:LNG), LKQ Corporation (NASDAQ:LKQ) and Elanco Animal Health Incorporated (NYSE:ELAN), Green Dot Corporation (NYSE:GDOT) is one of the stocks to buy, according to Kenneth Squire's 13D Management.

10. Merit Medical Systems, Inc. (NASDAQ:MMSI)

13D Management Stake Value: $9,768,000

Percentage of 13D Management’s 13F Portfolio: 3.63%

Number of Hedge Fund Holders: 22

Merit Medical Systems, Inc. (NASDAQ:MMSI), established in Utah, manufactures medical equipment used in cardiology, radiology, cancer, critical care, and endoscopic treatments. 13D Management owns 136,045 shares of the company, worth $9.77 million.

The company reported sales of $267.0 million for the quarter ended September 30, 2021, up 9.4% from the previous year's period. For the third quarter, the company's EPS came in at $0.52, beating the market predictions by $0.08.

The company is also getting the attention of the smart money, as 22 hedge funds tracked by Insider Monkey reported owning stakes in Merit Medical Systems, Inc. at the end of the second quarter, up from 18 funds a quarter earlier.

9. GCP Applied Technologies Inc. (NYSE:GCP)

13D Management Stake Value: $9,849,000

Percentage of 13D Management’s 13F Portfolio: 3.66%

Number of Hedge Fund Holders: 15

Kenneth Squire’s 13D Management currently has a $9.85 million stake in GCP Applied Technologies Inc. (NYSE:GCP). The company manufactures and distributes specialty construction chemicals and supplies them across the world.

The company's earnings history shows that in the third quarter, it had an EPS of $0.19, missing estimates by $0.02. At the same time, its revenue was $249.6 million, below the market predictions by $5.2 million.

There were 15 hedge funds in our database that held stakes in GCP Applied Technologies Inc. at the end of the second quarter, compared to 13 funds in the preceding quarter. Starboard Value LP is the company’s most significant stakeholder, with 6.54 million shares worth $143.36 million.

8. LKQ Corporation (NASDAQ:LKQ)

13D Management Stake Value: $10,878,000

Percentage of 13D Management’s 13F Portfolio: 4.04%

Number of Hedge Fund Holders: 35

LKQ Corporation (NASDAQ:LKQ) produces alternative and specialty parts for automobiles and other vehicles.

The hedge fund chaired by Kenneth Squire owns 216,169 shares in the company worth over $10.88 million, representing 4.04% of their investment portfolio. In October, the company declared its first quarterly dividend of $0.25 per share.

Out of the hedge funds being tracked by Insider Monkey, ValueAct Capital is a leading shareholder in LKQ Corporation with 21.55 million shares worth more than $1.08 billion, corresponding to 12.56% of its total 13F portfolio.

Bonsai Partners, in its first-quarter 2021 investor letter, mentioned LKQ Corporation (NASDAQ:LKQ). Here is what the fund said:

“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 20.1% during the quarter.

During the quarter, LKQ shared its fourth-quarter results: showing a slight revenue decline and a nearly 30% increase in quarterly profit Vs. the same period last year. COVID has proved a surprising catalyst for my investment thesis which revolves around optimizing their recent large acquisitions that were never efficiently integrated.

Admittedly, in addition to LKQ’s quarterly performance, thematically, there has been broad enthusiasm for “re-opening” trades, of which, LKQ has been a beneficiary. Most importantly, the prior overhang related to LKQ’s debt burden is now all but behind us. Their net debt to EBITDA ratio now sits below 2x, a stark change from the near 3x leverage ratio before the pandemic. At that time, LKQ’s leverage had the potential to spiral upward to nearly 4-5x if the business experienced a prolonged shutdown. It’s good to be past this issue.”

7. Howmet Aerospace Inc. (NYSE:HWM)

13D Management Stake Value: $12,143,000

Percentage of 13D Management’s 13F Portfolio: 4.51%

Number of Hedge Fund Holders: 47

Howmet Aerospace Inc. (NYSE:HWM) provides engineering solutions to the aerospace and transportation industries. In the third quarter of 2021, 13D Management held 389,209 shares of the company worth $12.14 billion and 4.51% of the firm’s portfolio value.

Wolfe Research analyst Timna Tanners commenced coverage of Howmet Aerospace on November 16 with an “Outperform” rating and gave a price target of $38. The company shares have offered 26.01% in returns to investors over the past twelve months.

At the end of the second quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $3.89 billion in Howmet Aerospace Inc., down from 51 in the preceding quarter worth $ 3.96 billion.

Cheniere Energy, Inc. (NYSE:LNG), LKQ Corporation (NASDAQ:LKQ), and Elanco Animal Health Incorporated (NYSE:ELAN) are some of the stocks to buy according to Kenneth Squire's 13D Management, along with Howmet Aerospace Inc. (NYSE:HWM).

FPA Crescent Fund, an investment management firm, mentioned Howmet Aerospace Inc. (NYSE:HWM) in its fourth-quarter 2020 investor letter. Here is what they said:

“Howmet saw its stock price decline by around two-thirds from their Q1 2020 highs. Howmet’s price increased about three times from its low and ended the year at its all-time high. The value of its necessary and large market share business did not fluctuate as much as its stock price.”

6. Elanco Animal Health Incorporated (NYSE:ELAN)

13D Management Stake Value: $12,205,000

Percentage of 13D Management’s 13F Portfolio: 4.54%

Number of Hedge Fund Holders: 42

Elanco Animal Health Incorporated (NYSE:ELAN), headquartered in Indiana, USA, is a product and solution firm that improves animal health. In the third quarter of 2021, the company reported a 27% year-over-year increase in revenue to $1.13 billion.

Shares of ELAN rallied 9.14% over the last twelve months. 13D Management started building its position in ELAN in the fourth quarter of 2020 and currently holds 382,710 shares in the company, valued at $12.21 million.

Scott Ferguson’s Sachem Head Capital owns 27.84 million shares of Elanco Animal Health Incorporated, worth over $887.67 million, topping the list of over 873 hedge funds tracked by Insider Monkey.

Click to continue reading and see 5 Stocks to Invest in According to Kenneth Squire's 13D Management.

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Disclosure: None. 15 Stocks to Invest in According to Kenneth Squire's 13D Management is originally published on Insider Monkey.