Billionaire Louis Bacon’s 10 Stock Picks with Huge Upside Potential
In this article, we discuss billionaire Louis Bacon's 10 stock picks with huge upside potential. To skip the details about Mr. Bacon’s life, portfolio performance, and investment strategy, go directly to Billionaire Louis Bacon's 5 Stock Picks with Huge Upside Potential.
Louis Bacon is a macro-trading legend on Wall Street. Macro traders capitalize on financial markets through examination of economic indicators like GDP growth, inflation rates, and unemployment data to make strategic investment decisions. Mr. Bacon founded his investment management firm Moore Capital Management in 1989 with $25,000, and before closing his hedge fund in 2019, the firm had average annualized returns of 17.6% since its inception.
While Louis Bacon is one of the most respected investors, he has had his fair share of failures at the beginning of his investing career and learned from them. He received his Bachelor of Arts degree in American literature in 1979 from Middlebury College in Vermont and worked as a clerk at Walter N. Frank & Co. while he was completing his MBA from Columbia Business School. Bacon’s initial investments involved trading commodities, and he lost on sugar, cotton, and gold contracts three times in a row. He had to ask his father for help and started seeing success after his fourth attempt.
Some of Louis Bacon’s most successful trades include predicting the 1987 market crash, shorting the S&P futures, and later, taking long positions when the market hit its bottom. In 1989, shortly after establishing his hedge fund, he shorted the Japanese Nikkei index and returned 86% due to the Japanese market crash. Finally, he also predicted Iraq’s invasion of Kuwait and made big money on oil. By 2019, his flagship, Remington funds, made a cumulative return of over 21,000%.
He closed his fund to outside investors in 2019 mentioning poor performance in the prior couple of years. He said in a letter:
“Dear Investor, As Moore Capital Management (MCM) approaches its 30th year at the end of this decade, the time is propitious to take a step I have eyed for some time and “privatize” our three multi manager flagship funds-- that is to say returning client assets and funding the multi-manager program with private capital from the principals at MCM. These three funds –MGI (Moore Global Investments), RIS (Remington Investment Strategies) and MMM (Moore Macro Advisors)--will (post the return of investor funds) be consolidated into one proprietary fund which will continue to trade and invest with the same line-up of Portfolio Managers, but with less participation from me. Although this has not been an easy decision given the loyalty of Moore’s macro investors over the decades to whom I am forever grateful, it will allow me the space to step away for significant periods of time when my other interests abound without the ongoing weight and responsibility of looking after public investors’ capital on a continual basis. Disappointing results of these funds of the last few years obviously inform this decision but our long term record is one we remain proud of having delivered a net annualized return of 17.6% and a cumulative return of over 21,000% since inception for our original flagship Remington funds; annualized return of 15% for MGI and a cumulative return of 61 times original investors capital. MMM has returned 11% over its shorter lifespan. All three of the funds have returned low single digits year to date in 2019. Intense competition for trading talent coupled with client pressure on fees has led to a challenging business model for multi manager funds such as ours.”
Louis Bacon’s Q3 Bets
Despite stepping down as a hedge fund manager, Louis Bacon still has an investment portfolio. His top picks with huge upside potential include NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META), and CRH plc (NYSE:CRH). The legendary investor is also involved in options trading and has leveraged Call options on iShares 7-10 Year Treasury Bond ETF and Materials Select Sector SPDR Fund. Additionally, Mr. Bacon seems to be keeping a bearish sentiment on the market and has placed Put options against SPDR S&P 500 ETF Trust. He also placed nearly $27 million worth of bets against Tesla, Inc. (NASDAQ:TSLA) in Q3.
In the third quarter, Louis Bacon’s 13F portfolio was worth $5.36 billion, compared to $5.81 billion in the previous quarter. Bacon made several changes to his portfolio over the quarter, including making over 170 new purchases and closing out of 193 stocks. Some of his notable purchases include Thermo Fisher Scientific Inc. (NYSE:TMO), The Procter & Gamble Company (NYSE:PG), and American Tower Corporation (NYSE:AMT). Bacon’s top three stocks in the third quarter were NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOGL). He increased his holdings in Class A shares of Alphabet Inc. (NASDAQ:GOOGL) by 4,105% and initiated a position in Class C shares of Alphabet Inc. (NASDAQ:GOOG).
To check out the stocks with huge upside potential in other billionaire portfolios, you can go to Billionaire Lee Cooperman’s 10 Stock Picks with Huge Upside Potential and Billionaire Gabelli’s 10 Stock Picks with Huge Upside Potential.
Our Methodology
For this article, we checked the average analyst price target and upside of the top 50 holdings (excluding ETFs and options) in Louis Bacon’s Q3 2023 13F portfolio. We selected the 10 stocks with the highest average analyst price target upside as of December 4 and listed the stocks in ascending order of Bacon’s stake value.
We took the average analyst price target of each stock from TipRanks.
Billionaire Louis Bacon's 10 Stock Picks with Huge Upside Potential
10. Biogen Inc. (NASDAQ:BIIB)
Louis Bacon's Stake Value: $384.312 million
Average analyst price target: $316.29
Average analyst price target upside: 35.83%
Biogen Inc. (NASDAQ:BIIB) is a Massachusetts-based biotech company that works on treatments for numerous neurological and neurodegenerative diseases from discovery to distribution.
On November 9, BMO Capital decreased the price target on Biogen Inc. (NASDAQ:BIIB)’s stock to $295 from $314 while keeping an Outperform rating. The analyst mentioned Leqembi’s potential over the long term and approval of Skyclaris in the E.U. as potential tailwinds.
On November 8, Biogen Inc. (NASDAQ:BIIB) reported its Q3 earnings result with a non-GAAP EPS of $4.36, topping the analysts’ estimates by $0.37. The revenue grew 0.8% year-over-year (YoY) to $2.53 billion, which beat the estimates by $130 million.
Biogen Inc. (NASDAQ:BIIB) is one of Louis Bacon's top stock picks with huge upside potential, along with NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META), and CRH plc (NYSE:CRH).
9. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)
Louis Bacon's Stake Value: $17.27 million
Average analyst price target: $110.15
Average analyst price target upside: 16.68%
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is a California-based biotechnology company that discovers and commercializes medicines in clinical and preclinical stages for rare genetic disorders.
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)’s stock has been covered by 23 Wall Street analysts over the last three months, and 15 keep a Buy rating on the shares. The average price target shows an upside of 16.68% as of December 4.
On November 15, Wells Fargo started coverage of BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)’s stock with a price target of $100 and an Overweight rating. The firm expects significant growth for the company in the next four to five years.
Aristotle Atlantic Partners, LLC mentioned BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) in its first quarter 2023 investor letter. Here is what it said:
“BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) develops drugs with a focus on rare disease treatments. Its portfolio consists of several commercial products and multiple clinical and preclinical product candidates for the treatment of various diseases. The company’s Vimizim, Naglazyme and Aldurazyme drugs treat versions of the life-threatening genetic condition mucopolysaccharidosis (MPS), caused by a rare enzyme deficiency that prevents patients from metabolizing certain complex carbohydrates. Another drug, Kuvan, is approved to treat enzyme deficiency phenylketonuria (PKU). Additional medicines include Brineura and Palynziq.
We see BioMarin, anchored by their durable enzyme-based therapies, poised to grow from new indications, primarily Voxzogo, the first-approved treatment for Achondroplasia, and Roctavian, a drug awaiting FDA approval for the treatment of Severe Hemophilia A, with gene therapy and the ability to address a large chronically managed patient population. Additionally, the company has an early pipeline outside of these major indications in rare diseases within the usculoskeletal/metabolic, hematology, cardiovascular and CNS therapeutic focus areas.”
8. Amazon.com, Inc. (NASDAQ:AMZN)
Louis Bacon's Stake Value: $19.3 million
Average analyst price target: $176.50
Average analyst price target upside: 21.86%
Amazon.com, Inc. (NASDAQ:AMZN) is a leading tech company that offers services and products focused on AI, cloud computing, e-commerce, online advertising, and digital streaming.
According to Insider Monkey’s database that tracks 910 elite hedge funds, 286 funds held a stake in Amazon.com, Inc. (NASDAQ:AMZN)’s stock in Q3, up from 278 in the previous quarter. With 41.353 million shares worth nearly $5.257 billion, Ken Fisher’s Fisher Asset Management was the most prominent stakeholder in the company.
On December 1, Amazon.com, Inc. (NASDAQ:AMZN) announced that it is partnering with SpaceX for the deployment of its Project Kuiper internet satellites. The deployment will be carried out over three launches on SpaceX's Falcon 9 rocket and is expected to be held in mid-2025.
Polen Capital commented on Amazon.com, Inc. (NASDAQ:AMZN) in its third quarter 2023 investor letter. Here is what it said:
“Amazon continues to showcase it’s place as one of the most competitively advantaged companies in the world. The company has made significant progress in managing costs and better leveraging existing capacity, driving a strong recovery in its profitability. We think there’s additional room for improvement.
AWS growth seems to be stabilizing even while management continues to work with clients to optimize their infrastructure spend. Roughly 90% of global IT spending remains on premise. We believe this will eventually flip, with most IT spending ultimately moving to the cloud over time. We think AWS will be a significant beneficiary of this transition.
Further, our investment case on company profitability driven by AWS and advertising continues to unfold, delivering nearly $8 billion in free cash flow over the trailing twelve months and a net margin of 5%. We expect both to move higher with the mix shift of more profitable businesses growing fastest continuing to take effect.
At Amazon’s current price, we believe the company is well positioned to deliver a mid-teens or higher total shareholder return for our clients over the next five plus years without a Herculean effort from the business. It simply needs to continue executing on current businesses and growing into the capacity it built during and immediately after the pandemic.”
7. Alight, Inc. (NYSE:ALIT)
Louis Bacon's Stake Value: $27.1 million
Average analyst price target: $12.00
Average analyst price target upside: 52.09%
Alight, Inc. (NYSE:ALIT) is a cloud-based company that offers integrated digital human capital and business solutions to its 4,300 clients in more than 100 countries.
On November 1, Alight, Inc. (NYSE:ALIT) posted its Q3 non-GAAP EPS of $0.14, surpassing the estimates by $0.01. While the revenue of $813 million did not manage to beat the estimates, it grew 8.4% YoY.
Over the last three months, 5 Wall Street analysts covered Alight, Inc. (NYSE:ALIT)’s stock, and all of them maintained a Buy rating on the shares. The average price target of $12 represents an upside of 52.09% as of December 4.
Alight, Inc. (NYSE:ALIT) was mentioned in Polen Capital’s third-quarter 2023 investor letter. Here is what it said:
“Alight is a leading cloud-based provider of employee engagement tools and solutions for workplace benefits, payroll, administration, and wealth services. The stock negatively reacted to lower-than-expected bookings guidance for its small but growing business-process-as-a-Service (“BPaaS”) segment. Due to the nature of Alight’s business model, the market is putting too much emphasis on BPaaS bookings, in our opinion, which is a flawed metric. We believe business remains healthy, and our long-term expectations for high-single-digit revenue growth with expanding margins remain unchanged.”
6. MetLife, Inc. (NYSE:MET)
Louis Bacon's Stake Value: $31.41 million
Average analyst price target: $76.78
Average analyst price target upside: 18.95%
MetLife, Inc. (NYSE:MET) is a leading provider of insurance, annuities, and employee benefit programs globally. The company offers its services in around 40 global markets and works with numerous Fortune 500 companies.
On November 15, MetLife, Inc. (NYSE:MET) announced its preferred stock dividends to be payable by December 15 to the shareholders of record on November 30. The dividends include a quarterly dividend of $0.42157266 per share for the floating rate non-cumulative preferred stock, Series A, with a $25 liquidation preference (NYSE:MET PRA). Moreover, it declared a quarterly dividend of $351.5625 per share for the 5.625% non-cumulative preferred stock, Series E, featuring a $25,000 liquidation preference per share, represented by depositary shares, where each share represents a 1/1,000th interest and holders will receive $0.3515625 per depositary share (NYSE:MET PRE).
Finally, MetLife, Inc. (NYSE:MET) declared a quarterly dividend of $296.875 per share for the 4.75% non-cumulative preferred stock, Series F, with a $25,000 liquidation preference per share, also represented by depositary shares, with each share representing a 1/1,000th interest, and holders will receive $0.296875 per depositary share (NYSE: MET PRF).
NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META), and CRH plc (NYSE:CRH) are some of Louis Bacon’s stock picks with huge upside potential along with MetLife, Inc. (NYSE:MET).
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Disclosure. None. Billionaire Louis Bacon's 10 Stock Picks with Huge Upside Potential is originally published on Insider Monke
