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In this article we presented billionaire Ricky Sandler's top 10 stock picks. You can skip our detailed discussion on Sandler's investment philosophy and read Ricky Sandler's Top 5 Stock Picks.
Ricky Sandler is an American hedge fund manager who founded Eminence Capital in 1999. The hedge fund manages about $3.6 billion in a core long/short equity strategy and roughly $4.2 billion in a long equity strategy.
Investing runs in the family of Sandler. His father Harvey Sandler was an investment manager. His brother Andrew Sandler oversees Sandler Plus hedge fund, which surged approximately 9.5% in March, thanks to Andrew’s cautious and bearish approach.
Two Brothers With a Different Investment Approach
During the initial days of the coronavirus outbreak, Ricky Sandler called into a CNBC show and urged viewers to reject any negative sentiments and pile into stocks.
“People are totally missing what is happening here. Every new headline, every new hysteria is making people more nervous and it’s actually very, very positive,” Sandler said.
Immediately after the interview, Ricky's brother Andrew Sandler posted on his social media that he disagreed with his brother. As it turns out, Andrew was right. Ricky Sandler’s Eminence Capital, which gained 21% in 2019, had to experience massive losses after the coronavirus crisis.
A graduate of the University of Wisconsin, Sandler rose to fame for his successful bet on Keurig Green Mountain. Sandler had built a $195 million position in the company and believed that the stock was worth $85 - $100. Sandler, who co-founded his first hedge Fusion Partners at the age of 25, made millions for his clients when PE firm JAB Group agreed to pay $92 per share, or close to $14 billion, for Keurig in 2015.
In March 2021, Sandler gave an interview to CNBC and talked about several important topics.
Beginning of an Economic Expansion
"We're still constructive on the markets, clearly not as bullish as we were a year ago. I tend to like to be a little more contrarian today where I think many people are more optimistic. I think that the best opportunities happen in times of a big dislocation, which we're not seeing today. But having said that since a year ago, the government has done a lot more than I even expected then, even though we expected them to do a lot. The Fed is on your side and I think from a timing standpoint, we're very much at the beginning of an economic expansion. Very much at the beginning of the economy reopening, the Fed has told you as recently as a couple of days ago that they're not going to move or even talk about moving for or maybe the whole year. So I think, one can still be optimistic about markets.
I'd say we're a lot more selective today. I don't think it's sort of buy everything, and buy anything. So there are more pockets of the markets that are interesting, and there are clearly pockets of the market that are speculative and have gotten extended and overvalued. We're seeing some early signs of behavior or maybe even not early signs but behavior that is less healthy than we'd like to see. Having said that, we are definitely still constructed.
It depends on which parts of the market and which sectors of the market so I think the reasonable amount broadly, but when you take a big picture, look at where interest rates are and the alternatives are for capital. I think business cash flows and equities are still a very reasonable place. I think the big picture risks around inflation business cash flows ought to provide good protection from that, and we think the economy ought to be exceptionally strong, the amount of savings that have been built up through the pandemic, the amount that the government has already done, the amount they're talking about doing going forward are unprecedented levels, things that nobody that has been investing in these markets have seen. So we think that the level of economic strength over the next 18 months is going to be enormous. I don't know in terms of percentage terms but certainly from a timing standpoint. It does not feel like the right time to get off the train of the market or where we've seen enough of the good news. We haven't even started to see the economy reopen, we haven't even started to see the cyclical uplift as it's just rolling through. So at a minimum, those that would sell the news, that would probably be a back half of 2021 event.
I think we had been positioned pretty optimistically, and I'd say very optimistically in what I would describe as the more cyclical and value sectors, both coming out of the downturn of the early phase of the pandemic, and then going into the vaccine, we have definitely taken some profits, and some things that are up a lot and have reduced kind of overall levels of exposure. We've been using some fixed income shorts particularly treasury shorts as a hedge and frankly as a bet given, what we think is happening to the economy, and so I'd say, we're not as an overall portfolio, dramatically more hedged but probably a little bit more, and I think would continue to use strength as opportunities to do that. I think it's about being more selective and probably about using a little bit less balance sheet overall, given kind of the individual stock volatility, and maybe we're heading to, in terms of the point of the cycle we're at."
Ricky Sandler is not alone. The entire hedge fund industry is going through difficult times. The industry that once used to post sterling gains is also 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.
Ricky Sandler of Eminence Capital
Let’s start our list of Ricky Sandler's top 10 stock picks.
10. Morgan Stanley (NYSE: MS)
Value: $195,975,000 Percent of Ricky Sandler's 13F Portfolio: 1.83% No. of Hedge Fund Holders: 66
Morgan Stanley ranks 10th in the list of Ricky Sandler’s top 10 stock picks. Eminence Capital ended the fourth quarter with 2.9 million shares of the company, worth $196 million. CFRA analyst Kenneth Leon recently upgraded the stock to Buy from Hold saying that the collapse of Archegos Capital provides an enhanced buying opportunity. The firm also said that Morgan Stanley will benefit from equity trading volumes and increasing transaction fees. The stock has gained 150% over the last 12 months.
As of the end of the fourth quarter, there were 66 hedge funds in Insider Monkey’s database that held stakes in Morgan Stanley, compared to 70 funds in the third quarter. Eagle Capital Management, with 13 million shares of MS, is the biggest stakeholder in the company.
Artisan Value Fund, in their Q4 2020 investor letter, mentioned Morgan Stanley (NYSE: MS) and emphasized their views on the company. Here is what Artisan Value Fund has to say about Morgan Stanley in their Q4 2020 investor letter:
"Top three contributor Morgan Stanley, a leading global financial services company, came into the portfolio in Q4 as a result of its purchase of E*TRADE. E*TRADE is a great fit on Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily de-risked Morgan Stanley’s business by adding less volatile fee streams and deemphasizing the risk-obtuse culture of prior management. We believe the market will come to appreciate this mix shift over time.”
9. DuPont de Nemours, Inc. (NYSE: DD)
Value: $215,216,000 Percent of Ricky Sandler's 13F Portfolio: 2.01% No. of Hedge Fund Holders: 60
Ricky Sandler’s Eminence Capital’s slashed its stake in chemicals giant Dupont De Nemours Inc. by 36% in the fourth quarter, ending the period with 3.03 million shares of the company, worth $215.23 million. The company recently reiterated its full-year adjusted EPS guidance. For 2021, the company sees its operating EBITDA between $3.83 billion - $3.93 billion. Earlier in March, the company approved new $1.5 billion share buyback program which expires on June 30, 2022.
A total of 60 hedge funds tracked by Insider Monkey were bullish DD at the end of the fourth quarter, down from 61 funds a quarter earlier.
Artisan Value Fund, in their Q4 2020 investor letter, mentioned DuPont de Nemours, Inc. (NYSE: DD). Here is what Artisan Value Fund has to say about DuPont de Nemours, Inc. in their Q4 2020 investor letter:
"DuPont de Nemours operates as a holding company engaged in the development of specialty materials, chemicals and agricultural products. It operates through the following segments: electronics and imaging; nutrition and biosciences; transportation and industrial; safety and construction and non-core. We believe DuPont de Nemours has strong fundamentals, but the margin of safety deteriorated due to the lingering effects of trade wars and separation charges related to the sale of its nutrition and bioscience division to International Flavors & Fragrances. We sold in favor of better opportunities.”
8. RealPage, Inc. (NASDAQ: RP)
Value: $248,111,000 Percent of Ricky Sandler's 13F Portfolio: 2.32% No. of Hedge Fund Holders: 48
RealPage ranks 8th in the list of Ricky Sandler’s top 10 stock picks and portfolio. The company offers a software platform for the real estate industry. Clients use the company’s platform to gain insights into asset performance, leverage data insights and monetize space to create incremental yields. In the fourth quarter, the company posted adjusted EPS of $0.50, beating the Wall Street estimates by $0.02. Revenue in the quarter jumped 17% to $298.34 million, above the Street forecasts by $3.68 million.
Stockbridge Partners is one of the 48 hedge funds tracked by Insider Monkey having stakes in RP at the end of the fourth quarter. The fund owns over 4.1 million shares of the company.
Carillon Eagle Small Cap Growth Fund, in their Q4 2020 investor letter, mentioned RealPage, Inc. (NASDAQ: RP) and emphasized their views on the company. Here is what Carillon Eagle Small Cap Growth Fund has to say about RealPage, Inc. in their Q4 2020 investor letter:
"RealPage provides software and data analytics products to the multi-family real estate industry. After previously dealing with general COVID related concerns surrounding large multifamily properties, the company entered into an agreement in the quarter to be acquired by private equity firm Thoma Bravo for a sizable premium, sending shares higher. The terms of the agreement also grant RealPage permission to seek a higher bidder within a 45-day “go-shop” period.”
7. SPDR Gold Shares (NYSE: GLD)
Value: $267,540,000 Percent of Ricky Sandler's 13F Portfolio: 2.5% No. of Hedge Fund Holders: 62
Ricky Sandler loaded up on Spdr Gold Trust in the fourth quarter of 2020, as Eminence Capital built a new CALL position in the gold ETF, buying 1.5 million SPDR GOLD Trust shares, worth $267.54 million. Among other hedge funds having CALL options in GLD include Ken Griffin’s Citadel and Josh Donfeld and David Rogers’ Castle Hook Partners.
With a $692.9 million stake in GLD, First Eagle Investment Management owns 3.9 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 62 hedge funds held stakes in GLD as of the end of the fourth quarter, versus 65 funds in the third quarter.
6. Corteva, Inc. (NYSE: CTVA)
Value: $308,464,000 Percent of Ricky Sandler's 13F Portfolio: 2.89% No. of Hedge Fund Holders: 38
Corteva Inc. was formerly a part of DowDuPont. It was spun off as an independent company in 2019. The agri-science company is currently under scrutiny from activist investor Jeff Smith’s Starboard Value who has a $558 million stake in the company. Earlier in March, the company said three new independent directors proposed by Starboard will join its board.
According to our database, the number of CTVA’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 38 hedge funds that hold a position in CTVA compared to 36 funds in the third quarter. The biggest stakeholder of the company is Jeffrey Smith's Starboard Value LP, with 14.4 million shares, worth $558.9 million.
Click to continue reading and see Ricky Sandler's Top 5 Stock Picks.
Disclosure: None. Ricky Sandler's Top 10 Stock Picks is originally published on Insider Monkey.