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Top 10 Stocks to Buy According to Jeff Ubben’s ValueAct Capital

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·10 min read
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In this article, we discuss the top 10 stocks to buy according to Jeff Ubben's ValueAct Capital based on Q2 holdings of the fund. If you want to skip our detailed analysis of Ubben's history, investment philosophy, and hedge fund performance, go directly to the Top 5 Stocks to Buy According to Jeff Ubben's ValueAct Capital.

Jeffrey Ubben is an activist hedge fund manager who founded ValueAct Capital in 2000. Jeff Ubben is a graduate from Duke University. He got his MBA from the Kellogg School of Management in 1987. Ubben managed the Fidelity Fund for eight years, and from 1995 to 2000, he was the Managing Partner of Blum Capital.

Inclusive Capital Partners, another hedge fund he created after leaving ValueAct, emphasizes on sustainable energy. Bloomberg reported earlier this year that Inclusive Capital Partners, led by Jeff Ubben, was aiming to amass up to $8 billion for The Spring Fund II. The fund concentrates on impact investment, which attempts to improve the society by bringing about reforms in large corporations.

As of the second quarter of 2021, the total value of ValueAct Capital’s 13F portfolio is $9.02 billion, compared with $8.56 billion in the previous quarter. ValueAct Capital likes to diversify its portfolio. As a result, the hedge fund has stakes in companies that have both strong fundamentals and future growth potential. Some of these companies include Citigroup Inc. (NYSE: C), Fiserv, Inc. (NASDAQ: FISV), and Lumentum Holdings Inc. (NASDAQ: LITE).

Based on the latest 13F holdings for the first quarter of 2021, ValueAct Capital owns 20.75 million shares in Citigroup (NYSE: C), worth $1.47 billion. On July 6, Keefe Bruyette analyst David Konrad initiated coverage of Citigroup (NYSE: C) with an "Outperform" rating and an $85 price target.

Another notable stock in ValueAct Capital’s portfolio is Fiserv, Inc. (NASDAQ: FISV). ValueAct owns a $658.46 million stake in the company. On August 17, JPMorgan analyst Tien-Tsin Huang raised his price target of Fiserv to $145 from $142 and kept an “Overweight” rating on the shares.

Jeff Ubben VALUEACT CAPITAL
Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben of ValueAct Capital

Why it is important to pay attention to hedge funds’ stock picks? 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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). 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.

With this context in mind, here is our list of the top 10 stocks to buy according to Jeff Ubben's ValueAct Capital. We used ValueAct Capital's 13F portfolio for the second quarter for this analysis.

Top 10 Stocks to Buy According to Jeff Ubben's ValueAct Capital

10. Insight Enterprises, Inc. (NASDAQ: NSIT)

ValueAct's Stake Value: $284,397,000

Percentage of ValueAct's 13F Portfolio: 3.15%

Number of Hedge Fund Holders: 19

Insight Enterprises, Inc. (NASDAQ: NSIT) is a company that specializes in information technology hardware, software, and services. The company was founded in 1988 and is placed tenth on the list of top 10 stocks to buy according to Jeff Ubben's ValueAct Capital.

On August 6, Barrington analyst Vincent Colicchio raised his price target on Insight Enterprises, Inc. (NASDAQ: NSIT) to $116 from $110 and kept an “Outperform” rating on the shares.

ValueAct Capital increased its hold in Insight Enterprises, Inc. (NASDAQ: NSIT) by 159% in the second quarter of 2021, with 2.84 million shares of the company, worth $284.40 million. Overall, hedge funds are loading up on Insight Enterprises, Inc. (NASDAQ: NSIT), as 19 out of 873 funds tracked by Insider Monkey held stakes in the company in the second quarter of 2021, compared to 17 funds a quarter earlier.

In addition to Citigroup (NYSE: C), Fiserv, Inc. (NASDAQ: FISV), and Lumentum Holdings Inc. (NASDAQ: LITE), analysts are paying attention to Insight Enterprises, Inc. (NASDAQ: NSIT) amid the company's long-term growth potential.

L1 Capital, in its second-quarter 2021 investor letter, mentioned Insight Enterprises, Inc. (NASDAQ: NSIT). Here is what the fund said:

Insight Enterprises, a previous top-ten holding, was divested in full during the quarter. In conjunction with inline Q1 2021 results, Insight announced the intention for CEO, Ken Lamneck to retire by the end of this year. A new CEO has not yet been announced. Ken Lamneck has been CEO of Insight for over 11 years and is currently 65 years old, so his retirement was not a shock. However, we do consider Lamneck to have been central to shareholder value creation, including through successful acquisitions. A period of uncertainty while leadership is transitioned to an unknown new CEO, as well as share price appreciation led us to conclude more attractive risk adjusted opportunities lay elsewhere in our Portfolio and Bench of potential investments.”

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

ValueAct's Stake Value: $403,507,000

Percentage of ValueAct's 13F Portfolio: 4.47%

Number of Hedge Fund Holders: 20

Trinity Industries, Inc. (NYSE: TRN) provides rail transportation products and services. It was incorporated in 1933 and stands ninth on the list of top 10 stocks to buy according to Jeff Ubben's ValueAct Capital.

On July 26, Susquehanna analyst Bascome Majors upgraded Trinity Industries to “Positive” from "Neutral" with a price target of $36, up from $32. On July 22, Trinity Industries, Inc. (NYSE: TRN) announced earnings for the second quarter of 2021. It posted earnings per share of $0.15, beating the estimates by $0.06.

The hedge fund managed by Jeff Ubben owns 15.01 million shares in Trinity Industries, Inc. (NYSE: TRN), worth over $403.51 million, representing 4.47% of their portfolio. ValueAct Capital has trimmed its stake in the firm by 36% in the second quarter of 2021. Trinity Industries, Inc. (NYSE: TRN) saw a decrease in hedge fund sentiment recently. The number of long hedge fund positions declined to 20 in the second quarter of 2021, compared to 28 positions in the previous quarter.

8. SLM Corporation (NASDAQ: SLM)

ValueAct's Stake Value: $430,930,000

Percentage of ValueAct's 13F Portfolio: 4.77%

Number of Hedge Fund Holders: 27

SLM Corporation (NASDAQ: SLM) originates and services private education loans to students and their families to help them pay for their education in the United States. It was founded in 1972 and is placed eighth on the list of top 10 stocks to buy according to ValueAct Capital.

On July 29, SLM Corporation (NASDAQ: SLM) declared a quarterly dividend of $0.03 per share, in line with the previous.

ValueAct Capital owns 20.58 million shares in SLM Corporation (NASDAQ: SLM) worth over $430.93 million, representing 4.77% of their portfolio. ValueAct Capital has trimmed its stake in the firm by 22% in the second quarter of 2021. ValueAct Capital is the biggest stakeholder in SLM Corporation (NASDAQ: SLM).

7. Bausch Health Companies Inc. (NYSE: BHC)

ValueAct's Stake Value: $526,048,000

Percentage of ValueAct's 13F Portfolio: 5.82%

Number of Hedge Fund Holders: 45

Bausch Health Companies Inc. (NYSE: BHC) is a pharmaceutical, medical device, and over-the-counter (OTC) company that develops, manufactures, and markets various products. It was incorporated in 1959 and ranks seventh on the list of top 10 stocks to buy according to Jeff Ubben's ValueAct Capital. Bausch Health Companies Inc. (NYSE: BHC) shares have returned 80.05% to investors during the course of the past 12 months.

On August 4, Health Canada approved ARAZLO (tazarotene) lotion for the topical treatment of acne vulgaris (common acne) in individuals 10 years of age and older, according to Bausch Health Companies Inc. (NYSE: BHC). On August 4, Barclays analyst Balaji Prasad lowered his price target of Bausch Health Companies Inc. (NYSE: BHC) to $31 from $35 and kept an "Overweight" rating on the shares. In a research note, Prasad tells investors that the company's second-quarter earnings were in line, with the surprise coming from the news of a potential initial public offering of the company's Solta Medical subsidiary.

The hedge fund holds close to 17.94 million shares in Bausch Health Companies Inc. (NYSE: BHC) worth $526.05 million. The company is also getting the attention of the smart money, as 45 hedge funds tracked by Insider Monkey reported owning stakes in Bausch Health Companies Inc. (NYSE: BHC) in the second quarter of 2021, up from 42 funds a quarter earlier.

In addition to Citigroup (NYSE: C), Fiserv, Inc. (NASDAQ: FISV), and Lumentum Holdings Inc. (NASDAQ: LITE), analysts are paying attention to Bausch Health Companies Inc. (NYSE: BHC) amid the company's long-term growth potential.

Miller Value Partners, in its first-quarter 2021 investor letter, highlighted a few stocks, and Bausch Health Companies Inc. (NYSE: BHC) is one of them. Here is what the fund said about Bausch Health Companies:

“Bausch Health Companies (BHC) climbed 55% during the period. Glenview (6% owner) sent a letter to the company in early February arguing the company has not acted to unlock shareholder value and urging the company to sell its eye care business. Shortly after, activist investor Carl Icahn disclosing a 7.83% stake in the company. The company responded to the filing saying that they remain committed to splitting the business into two parts, but are open to pursuing all opportunities. The company reported strong 4Q results with better-than-expected 2021 guidance. 4Q revenue came in at $2,213M slightly ahead of consensus of $2,165M and EPS of $1.34 beat consensus of $1.12. The company guided for 2021 revenue of $8.6-8.8B coming in ahead of expectations of $8.55B with EBITDA of $3.4-3.55B ahead of $3.46B estimated. The company announced the transition of Paul Herendeen to an advisory role to be succeeded by Sam Eldessouky, previously senior vice president, controller and chief accounting officer. Finally, the company announced the sale of Amoun Pharmaceutical for $740M, which was relatively in line with estimates and should help support debt reduction targets ahead of the planned spin-off of Bausch + Lomb eye care business.”

6. Fiserv, Inc. (NASDAQ: FISV)

ValueAct's Stake Value: $658,464,000

Percentage of ValueAct's 13F Portfolio: 7.29%

Number of Hedge Fund Holders: 72

Fiserv, Inc. (NASDAQ: FISV) and its subsidiaries are a global provider of payment and financial services technology. It was founded in 1984 and is placed sixth on the list of top 10 stocks to buy according to Jeff Ubben's ValueAct Capital.

ValueAct Capital increased its hold in Fiserv, Inc. (NASDAQ: FISV) by 617% in the second quarter of 2021. The fund owns 6.16 million shares of Fiserv, Inc. (NASDAQ: FISV), worth $658.46 million. Natixis Global Asset Management’s Harris Associates is Fiserv, Inc. (NASDAQ: FISV) most significant stakeholder, with 12.10 million shares worth $1.29 billion.

In addition to Citigroup (NYSE: C) and Lumentum Holdings Inc. (NASDAQ: LITE) analysts are paying attention to Fiserv, Inc. (NASDAQ: FISV).

Madison Funds, in its first-quarter 2021 investor letter, mentioned Fiserv, Inc. (NASDAQ: FISV). Here is what the fund said:

“This quarter we researched several new stock ideas, but because of high prices, acted on only one. Thus, a new portfolio name is Fiserv, with corporate headquarters in Brookfield, WI, just down I-94 from us. Fiserv is a technology company serving financial institutions (“FIs”) and retail merchants. It has two main business lines. In the first, it’s a market leader in outsourced IT solutions for banks and credit unions, online and mobile banking technology, digital money movement solutions, and card issuing services. Fiserv’s second core business is merchant acquiring and processing, where it’s a leader in providing a variety of solutions to help all types of merchants accept digital payments. They entered this business through the acquisition of First Data in 2019.…” (Click here to see the full text)

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Disclosure: None. Top 10 Stocks to Buy According to Jeff Ubben's ValueAct Capital is originally published on Insider Monkey.