Billionaire Mason Hawkins’ 11 Stock Picks with Huge Upside Potential
In this article, we will take a detailed look at the Billionaire Mason Hawkins' 11 Stock Picks with Huge Upside Potential. For a quick overview of such stocks, read our article Billionaire Mason Hawkins' 5 Stock Picks with Huge Upside Potential.
Otis "Mason" Hawkins is a famous value investor who founded Southeastern Asset Management in 1975. Hawkins is estimated to be worth around $1.8 billion and his hedge fund had about $5.5 billion in assets under management as of March 2023. Southeastern Asset Management hunts for bottom-up opportunities around the globe, with the fund's core value and investing philosophy finding its roots in Benjamin Graham's value investing approach. Hawkins is among the traditional class of value investors who staunchly stick to age-old, tried and tested value investing principles. Back in 2008, Hawkins was asked during an interview how he examines intrinsic value of companies. The billionaire said he focuses on free cash flow as he and his team tries to project FCF for the next seven years, "put a low or no growth terminal multiple on the business past 7 years, and discount back at a conservative discount rate."
"The second method calculates net asset value by adjusting book values of assets and liabilities to current liquidation values. (For example, real estate is rarely worth the original cost carried on the books, particularly if it’s been held for a long period.) Third, we check our longhand math against a data base of comparable transactions over the last 30 years, taking into account the interest rate environment at the time of the transactions. We mark our appraisal to the lower of the two values when comparable sales and our longhand math differ," Hawkins added.
Longleaf Partners Fund, where Hawkins is a co-portfolio manager, is also a notable fund backed by Southeastern and regularly posts its performance and commentary on its website. The fund said in its Q4'2023 letter that it more than doubled the Russell 1000 Value Index, "almost equalled the tech-led S&P 500 Index and approximately doubled" its absolute return goal of inflation plus 10%. The fund said when everyone was busy worrying about recession, its team was finding contrarian opportunities:
"Our research team was busy in 2023. At the start of the year when everyone was still predicting an imminent recession, we saw opportunity as contrarians and improved our portfolio with weighting changes and compelling new investments, many of which have already contributed to the portfolio. In the fourth quarter, we have seen a growing consensus about a soft landing. This consensus view concerns us for the same reasons we were excited to be buying earlier in the year when everyone was fearful. However, we are confident in our ability to keep delivering double-digit returns with our portfolio of competitively advantaged, financially strong businesses with management teams that can take self-help measures in any environment. 2023 showed us that our investment approach can add meaningful value, even in a challenging period for bottom-up active equity managers."
Methodology
For this article we scanned billionaire Mason Hawkins' Q3'2023 portfolio and picked 11 stocks with the highest upside potential from their current prices based on average analyst price estimates. Unlike many other hedge funds, Hawkins' top positions are not in stocks like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA) as the value investor is looking at undervalued companies that are still under the radar. We ranked this list in ascending order of upside potential of these stocks. We also mentioned the number of hedge fund investors for these stocks. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
11. Fiserv Inc (NYSE:FI)
Number of Hedge Fund Investors: 70
Average Analyst Price Estimate: $149
Upside Potential: 6.43%
Billionaire Mason Hawkins owns a $47 million stake in financial services company Fiserv Inc (NYSE:FI) as of the end of the third quarter of 2023. Yahoo Finance data shows that Wall Street analysts have set a $149 price target on the stock for the next 12 months, while the stock was trading at around $137.
As of the end of the third quarter of 2023, 70 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Fiserv Inc (NYSE:FI).
Earlier this month, Oppenheimer upgraded the stock to Outperform from Perform. Oppenheimer's analyst Dominick Gabriele said in his note that Fiserv Inc's (NYSE:FI) "penetration expectation" through 2026 is impressive and adds an "upward upward bias for sustaining high total company margin expansion."
Giverny Capital Asset Management made the following comment about Fiserv, Inc. (NYSE:FI) in its Q3 2023 investor letter:
“Turning to our new positions, we have been following Fiserv, Inc. (NYSE:FI) for a couple of years now and finally bought a position during the third quarter. Fiserv has two businesses that reinforce each other: it is a key technology provider to several thousand global banks and credit unions. Mid-sized financial institutions need to offer a full complement of digital banking services to compete with larger national banks, but they can’t afford to build out an internal tech capacity. It’s more cost effective to outsource to Fiserv.
Fiserv’s other business is, broadly, payment processing: when you tap and pay at your favorite restaurant or retailer, you may be using a Fiserv device. That device, in turn, may connect directly to the business owner’s bank – and Fiserv built out the bank’s tech stack. The synergy here is important. Fiserv can sell terminals to the restaurant itself, but banks may also sell Fiserv products as part of their customer relationships. There is terrific distribution synergy
For the next few years, Fiserv’s growth should be led by Clover, a payments acceptance system that offers merchants faster transaction times, better fraud protection and stronger operational controls than many existing acceptance networks. While Clover is a clear leader in acceptance, it has a small market share today and could grow at double digit rates for some years. In turn, that should drive solid earnings growth for Fiserv. I believe the stock trades for a low-teens multiple of likely 2024 earnings, an attractive price for a steady compounder.”
10. XPO Inc (NYSE:XPO)
Number of Hedge Fund Investors: 33
Average Analyst Price Estimate: $96
Upside Potential: 10.34%
American transportation company XPO Inc (NYSE:XPO) ranks 10th in our list of the stocks in billionaire Mason Hawkins' portfolio with upside potential. According to Yahoo Finance, the stock's one-year average price estimate is $96. In October XPO Inc (NYSE:XPO) posted third quarter results. Adjusted EPS in the period came in at $0.88, beating estimates by $0.24. Revenue in the quarter jumped 1.7% year over year to $1.98 billion, surpassing estimates by $50 million.
As of the end of the third quarter of 2023, Hawkins owns a $1.2 million stake in XPO Inc (NYSE:XPO).
ClearBridge Mid Cap Growth Strategy made the following comment about XPO, Inc. (NYSE:XPO) in its Q3 2023 investor letter:
“Our holdings in the industrials sector also contributed during the quarter. XPO, Inc. (NYSE:XPO), which provides freight transportation services internationally, rallied on the news that industry competitor Yellow had filed for bankruptcy, resulting in market share gains for XPO.”
9. Lazard Inc (NYSE:LAZ)
Number of Hedge Fund Investors: 13
Average Analyst Price Estimate: $45.50
Upside Potential: 15.14%
Asset management company Lazard Inc (NYSE:LAZ) ranks ninth in our list of the top Mason Hawkins stocks with upside potential. The stock was trading at around $38.47 as of January 17 while its average price target set by analysts for the next 12 months is $45.50.
As of the end of the third quarter of 2023, 13 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Lazard Inc (NYSE:LAZ). The biggest stakeholder of Lazard Inc (NYSE:LAZ) during this period was John W. Rogers' Ariel Investments which owns a $222 million stake in Lazard Inc (NYSE:LAZ).
8. Affiliated Managers Group Inc (NYSE:AMG)
Number of Hedge Fund Investors: 28
Average Analyst Price Estimate: $176
Upside Potential: 16.85%
Billionaire Mason Hawkins owns a $118 million stake in investment management company Affiliated Managers Group Inc (NYSE:AMG). The stock was trading at around $147.
As of the end of the third quarter of 2023, 28 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Affiliated Managers Group Inc (NYSE:AMG). The biggest hedge fund stakeholder of Affiliated Managers Group Inc (NYSE:AMG) was John W. Rogers' Ariel Investments which owns a $155 million stake.
Ariel Small Cap Value Strategy made the following comment about Affiliated Managers Group, Inc. (NYSE:AMG) in its Q3 2023 investor letter:
“Also in the quarter, we initiated a new position in boutique asset manager, Affiliated Managers Group, Inc. (NYSE:AMG). AMG has a unique business model in which it purchases meaningful equity interests in boutique asset management firms and in return receives a fixed percentage of revenues. The Company’s partnership approach allows for its affiliates’ management teams to own significant equity while maintaining operational independence. We believe AMG’s size and scale allow the company to be the leading destination for growing boutique firms addressing succession issues and/or seeking assistance in marketing, distribution and product development. In our view, investors currently underappreciate the company’s active and alternative-asset affiliate business model.”
7. FedEx Corp (NYSE:FDX)
Number of Hedge Fund Investors: 67
Average Analyst Price Estimate: $297
Upside Potential: 17.39%
FedEx Corp (NYSE:FDX) ranks seventh in our list of the best Mason Hawkins' stocks to buy with upside potential. Hawkins' fund owns a $158.1 million stake in FedEx Corp (NYSE:FDX).
In December FedEx Corp (NYSE:FDX) said it plans to buy back $1 billion worth of shares.
As of the end of the third quarter of 2023, 67 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in FedEx Corp (NYSE:FDX).
In addition to FedEx, hedge funds also like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA).
6. Live Nation Entertainment Inc (NYSE:LYV)
Number of Hedge Fund Investors: 40
Average Analyst Price Estimate: $112
Upside Potential: 25.84%
Entertainment company Live Nation Entertainment Inc (NYSE:LYV) shares have gained about 19% over the past one year. They were trading at around $90.60 as of January 17. According to Yahoo Finance data, the stock's average analyst price estimate is $112.
As of the end of the third quarter of 2023, 40 hedge funds tracked by Insider Monkey had stakes in Live Nation Entertainment Inc (NYSE:LYV). The biggest hedge fund stakeholder of Live Nation Entertainment Inc (NYSE:LYV) during this period was Robert Joseph Caruso's Select Equity Group which owns a $924 million stake in Live Nation Entertainment Inc (NYSE:LYV).
Roth MKM recently upgraded the stock to Buy from Neutral and upped its price target to $114 from $92.
The analyst said demand of live events over the next few years will be above-average.
Like Live Nation, hedge funds also like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA).
Baron Discovery Fund made the following comment about Live Nation Entertainment, Inc. (NYSE:LYV) in its Q3 2023 investor letter:
“Liberty Media Corporation-Liberty Live is a tracking stock created on 8/4/2023 representing Liberty Media Corporation’s holdings in Live Nation Entertainment, Inc. (NYSE:LYV) shares. Those holdings were previously attributed to Liberty SiriusXM and reattributed to a the newly created Liberty Live Group vehicle to reduce the complexity of the Liberty SiriusXM structure and make way for its potential combination with the underlying SiriusXM business. We believe the separation created some selling pressure on Liberty Live, creating an attractive discount of over 40% to the underlying value of its Live Nation holdings, and we took advantage of that discount to build a position. The Liberty Live Group is a small-cap vehicle through which we can own the underlying Live Nation business, which we have tracked and liked for years. Live Nation has significant competitive advantages in the live entertainment industry due to its unique combination of concert promotion, ticketing, venue management, and sponsorship businesses, which create a market share flywheel and margin structure that is difficult for competitors in any one of these underlying sub-segments to replicate independently. In addition to the upside we see in Live Nation, we think Liberty Live Group could eventually transition from a tracking stock to an asset-backed vehicle, which would pave the way for a structure consolidation with Live Nation and allow us to capture the current wide NAV discount.”
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Disclosure. None. Billionaire Mason Hawkins' 11 Stock Picks with Huge Upside Potential was initially published on Insider Monkey.
