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Top 10 Stocks To Buy According to Ken Heebner’s Capital Growth Management

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  • VALE
  • BBY
  • DKS
  • PRU
  • PM

In this article, we discuss the top 10 stocks to buy according to Ken Heebner's Capital Growth Management. If you want to skip our detailed analysis of Ken Heebner's history, investment philosophy, and hedge fund performance, go directly to the Top 5 Stocks To Buy According to Ken Heebner's Capital Growth Management.

Ken Heebner founded Capital Growth Management in 1990. An asset and investment management firm based out of Boston, Capital Growth Management has $1.10 billion in managed securities and $1.12 billion in assets under management, as per the 13F filings for the second quarter.

Ken Heebner is a sound strategist when it comes to investing, and he never invests in sectors and business ideas that he cannot fully comprehend. This approach to investment and tactful risk management served him well when the dot-com bubble created financial distress for several hedge funds and individual investors, since Heebner, like Warren Buffett, never invested in a scheme that he couldn’t completely understand.

As of the latest 13F filings, Heebner’s stock portfolio is concentrated in the real estate, materials, healthcare, finance, energy, and consumer discretionary sectors, with a top ten holdings concentration of 32.96%. The largest holding in Heebner’s Q2 portfolio is The Buckle, Inc. (NYSE:BKE), with Capital Growth Management owning 950,000 shares of the American fashion retailer.

The most notable stocks in Heebner’s Q2 portfolio include Best Buy Co., Inc. (NYSE:BBY), Bank of America Corporation (NYSE:BAC), Philip Morris International Inc. (NYSE:PM), and JPMorgan Chase & Co. (NYSE:JPM), among others discussed in detail below.

Top 10 Stocks To Buy According to Ken Heebner's Capital Growth Management
Top 10 Stocks To Buy According to Ken Heebner's Capital Growth Management

Ken Heebner of Capital Growth Management

Why should we pay attention to Ken Heebner’s 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.

Our Methodology

With this context in mind, let’s take a look at the top 10 stocks to buy according to Ken Heebner’s Capital Growth Management. The stocks are ranked according to the value of each holding in Heebner’s investment portfolio for the second quarter.

Top Stocks To Buy According to Ken Heebner's Capital Growth Management

10. Vale S.A. (NYSE:VALE)

Capital Growth Management’s Stake Value: $31,250,000

Percentage of Capital Growth Management’s 13F Portfolio: 2.81%

Number of Hedge Fund Holders: 27

A metals and mining corporation from Rio de Janeiro, Vale S.A. (NYSE:VALE) is the largest global producer of iron ore and nickel. Vale S.A. (NYSE:VALE) is a multinational operating hydroelectric power plants, a network of railroads, ships, and ports, in addition to mining precious metals. Heebner’s Capital Growth Management owns 1.37 million shares in Vale S.A. (NYSE:VALE), worth $31.25 million, making up 2.81% of the firm’s investment portfolio as of June this year.

Tyler Broda from RBC Capital, on October 21, downgraded Vale S.A. (NYSE:VALE) from Outperform to Underperform, slashing the price target from $17 to $12.50. He explains that the Chinese property sector isn’t ideal right now, due to an economic shift away from spending on fixed-asset investments. This will impact Vale S.A. (NYSE:VALE)’s iron ore business significantly. The analyst lowered his 2022 EBITDA estimate by 34%, in addition to lowering the EPS estimates for 2021 and 2022 for Vale S.A. (NYSE:VALE).

Vale S.A. (NYSE:VALE) announced on October 28 earnings for the third quarter. The EPS for the quarter came in at $1.26, beating estimates by $0.19. The revenue did not meet analysts’ expectations, missing estimates by -$1.19 billion, coming in at $12.68 billion.

As of the second quarter of 2021, 27 hedge funds tracked by Insider Monkey were long Vale S.A. (NYSE:VALE), down from 31 in the preceding quarter.

In addition to Best Buy Co., Inc. (NYSE:BBY), Bank of America Corporation (NYSE:BAC), Philip Morris International Inc. (NYSE:PM), and JPMorgan Chase & Co. (NYSE:JPM), Vale S.A. (NYSE:VALE) is a top stock in Heebner’s Q2 portfolio.

9. Best Buy Co., Inc. (NYSE:BBY)

Capital Growth Management’s Stake Value: $32,769,000

Percentage of Capital Growth Management’s 13F Portfolio: 2.95%

Number of Hedge Fund Holders: 27

Best Buy Co., Inc. (NYSE:BBY), a top stock to buy according to Ken Heebner, is an American multinational retailer dealing in consumer electronics. Best Buy Co., Inc. (NYSE:BBY) operates in Canada and the United States, with multiple subsidiaries and house brands to cater to different segments of customers, offering a range of products from home appliances, video games, software, and personal computers to mobile phones and digital cameras. Capital Growth Management owns 285,000 shares in Best Buy Co., Inc. (NYSE:BBY), valued at $32.76 million, representing 2.95% of Heebner’s 13F portfolio as of the end of June.

Piper Sandler analyst Peter Keith, on October 26, kept an Overweight rating on Best Buy Co., Inc. (NYSE:BBY), raising the price target from $150 to $155. Keith suggested that member discounts are attractive and will help maintain returning customers.

At the end of the second quarter, 27 hedge funds in the database of Insider Monkey were bullish on Best Buy Co., Inc. (NYSE:BBY), down from 33 in the previous quarter.

8. Bank of America Corporation (NYSE:BAC)

Capital Growth Management’s Stake Value: $32,984,000

Percentage of Capital Growth Management’s 13F Portfolio: 2.97%

Number of Hedge Fund Holders: 87

The next stock on our list of top stocks to buy according to Ken Heebner is Bank of America Corporation (NYSE:BAC), the second largest bank in the US and a leading financial services corporation. The main services offered by Bank of America Corporation (NYSE:BAC) include wealth management, commercial banking, and investment banking. Capital Growth Management owns 800,000 shares in Bank of America Corporation (NYSE:BAC), valued at $32.98 million, representing 2.97% of the firm’s portfolio at the end of the second quarter.

Bank of America Corporation (NYSE:BAC) announced Q3 earnings on October 14. The EPS came in at $0.85, beating analysts’ estimates by $0.15. Revenue for the quarter also beat estimates by $1.16 billion, coming in at $22.77 billion.

On November 1, Baird analyst David George downgraded Bank of America Corporation (NYSE:BAC) from Neutral to Underperform, with a $42 price target. He believes that the risk/reward is unattractive, especially since competitors are offering better interest rates, capital return potential, and better market expectations.

At the end of the second quarter, 87 hedge funds monitored by Insider Monkey’s database of elite funds reported owning stakes in Bank of America Corporation (NYSE:BAC), down from 97 in the previous quarter.

Here is what Oakmark Funds has to say about Bank of America Corporation (NYSE:BAC) in its Q3 2021 investor letter:

“Earlier this year, one of our holdings, Bank of America, announced that it was raising its minimum hourly wage from $15 to $20 and would increase it to $25 by 2025. The company received great press for placing the well-being of its employees above profits. But was it really either/or? Bank of America’s chief human resources officer spoke to the bigger picture: “A core tenet of responsible growth is our commitment to being a great place to work…that includes providing strong pay and competitive benefits to help them and their families, so that we continue to attract and retain the best talent.” Bank of America understood that engaged, high-caliber employees are more productive, less prone to turnover and, therefore, less expensive in the long run. Increasing the pay for employees wasn’t elevating employees above shareholders; it was the right thing to do for employees and for shareholders.

If an increase to $20 was good, why stop there? Why not $50 per hour? Because the benefits the business receives at $50 don’t justify the expense. The bank would no longer be able to price its products competitively and would lose business. The employees would “win” in the short term, but eventually the lost business would lead to job cuts, meaning both employees and shareholders would lose. The negative effects of stakeholder overreach are no different than when CEOs overreach to inflate short-term profits. Both hurt shareholders and stakeholders.”

7. Prudential Financial, Inc. (NYSE:PRU)

Capital Growth Management’s Stake Value: $35,352,000

Percentage of Capital Growth Management’s 13F Portfolio: 3.18%

Number of Hedge Fund Holders: 28

Prudential Financial, Inc. (NYSE:PRU) is an American company serving retail and institutional clients, offering insurance, investment management, and other financial services. Prudential Financial, Inc. (NYSE:PRU) is the largest insurance company in the United States, serving customers across 40 countries. Ken Heebner, via Capital Growth Management, owns stakes worth $35.35 million in Prudential Financial, Inc. (NYSE:PRU), representing 3.18% of the firm’s investment portfolio as of June 2021.

Prudential Financial, Inc. (NYSE:PRU) reported on November 2 that EPS for the third quarter came in at $3.78, beating estimates by $1.05. The revenue for Prudential Financial, Inc. (NYSE:PRU) missed estimates by -$486.41 million, coming in at $12.87 billion.

As of the second quarter, 28 hedge funds were long Prudential Financial, Inc. (NYSE:PRU), down from 37 in the preceding quarter.

Like Best Buy Co., Inc. (NYSE:BBY), Bank of America Corporation (NYSE:BAC), Philip Morris International Inc. (NYSE:PM), and JPMorgan Chase & Co. (NYSE:JPM), Prudential Financial, Inc. (NYSE:PRU) is a top stock according to Ken Heebner’s investment portfolio.

6. DICK'S Sporting Goods, Inc. (NYSE:DKS)

Capital Growth Management’s Stake Value: $36,068,000

Percentage of Capital Growth Management’s 13F Portfolio: 3.25%

Number of Hedge Fund Holders: 36

Another top stock according to Ken Heebner is DICK'S Sporting Goods, Inc. (NYSE:DKS), which is the largest American sporting goods retailer, offering a variety of sports and gym equipment via its chain of more than 850 stores across the United States. Capital Growth Management owns 360,000 shares in DICK'S Sporting Goods, Inc. (NYSE:DKS), worth over $36 million, accounting for 3.25% of the firm’s 13F portfolio as of June.

DICK'S Sporting Goods, Inc. (NYSE:DKS) announced a partnership with NIKE, Inc. (NYSE:NKE) on November 3, where NIKE, Inc. (NYSE:NKE)’s footwear and apparel would be displayed on the mobile application of DICK'S Sporting Goods, Inc. (NYSE:DKS). The customers can connect their membership accounts for both DICK'S Sporting Goods, Inc. (NYSE:DKS) and NIKE, Inc. (NYSE:NKE) on the mobile application, easily accessing both lines of products. This partnership will enhance customer engagement for both brands, and offer a seamless and uncomplicated online experience for buyers.

As of the second quarter, 36 hedge funds tracked by Insider Monkey were bullish on DICK'S Sporting Goods, Inc. (NYSE:DKS), up from 31 in the first quarter.

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Disclosure: None. Top 10 Stocks To Buy According to Ken Heebner's Capital Growth Management is originally published on Insider Monkey.