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Top 10 Stocks to Invest in According to Alan Fournier’s Pennant Capital

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·11 min read
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In today's piece, we will take a look at the top 10 stocks to invest in according to Alan Fournier's Pennant Capital. If you want to skip Mr. Fournier and his firm's background and move right ahead to the top stocks in this list, then head on over to the Top 5 Stocks to Invest in According to Alan Fournier's Pennant Capital.

Alan Fournier is the chief investment officer and founder of Pennant Investors LLC, which is a firm based out of Summit, New Jersey. Pennant Investors, also known as Pennant Capital Management, has a portfolio of holdings that cover a multitude of companies located primarily in the entertainment and technology industry.

Mr. Fournier is the founder and chief investment officer of the firm that he created in 2001. Prior to beginning his journey at Pennant, the hedge fund executive worked in the financial industry for more than 12 years. He began his journey in 1988 when he started to work at Sanford C. Bernstein, a private equity firm founded in 1967. From Bernstein, Mr. Fournier moved on to Appaloosa Management. He has a bachelor's in engineering from the Wentworth Institute of Technology, and his 20 years of experience at Pennant Capital has seen its share of ups and downs.

While as of the third quarter of this year the hedge fund has a portfolio worth $352 million, a sizeable amount, Mr. Fournier has seen his portfolio grow to nearly $6 billion in the past. As early as 2017 the fund saw its holdings cross $1 billion, but since then, they have been restricted at a fraction of that amount.

Some of Mr. Fournier's hedge fund's top holdings are in entertainment provider DISH Network Corporation (NASDAQ:DISH), semiconductor firm Micron Technology, Inc. (NASDAQ:MU) and automobile manufacturer General Motors Company (NYSE:GM).

Top 10 Stocks to Invest in According to Alan Fournier's Pennant Capital
Top 10 Stocks to Invest in According to Alan Fournier's Pennant Capital

Alan Fournier of Pennant Capital Management

Our Methodology

In order to understand which stocks and companies are on Mr. Fournier's mind, we have sifted through Pennant Investor's 13F-HR filings with the Securities and Exchange Commission (SEC) for the third quarter.

Top 10 Stocks to Invest in According to Alan Fournier's Pennant Capital

10. Antero Resources Corporation (NYSE:AR)

Mr. Fournier’s Stake Value: $16.9 million

Percentage of Pennant Capital's 13F Portfolio: 4.8%

Number of Hedge Fund Holders: 33

Antero Resources Corporation (NYSE:AR) is a natural gas site developer and gas producer in the United States. It was founded in 2002 and is headquartered in Delaware, Colorado. The company owns gas pipelines, compressor stations, and land all over America.

Mr. Fournier's Pennant Capital Management held 900,000 Antero Resources Corporation (NYSE:AR) shares by the end of this year's third quarter. These were worth $16.9 million and represented 4.8% of the firm's portfolio. Antero Resources Corporation (NYSE:AR) reported $534 million in revenue and a non-GAAP EPS of $0.19 for its third fiscal quarter, missing analyst estimates on both counts.

Prior to Antero Resources Corporation (NYSE:AR)'s third-quarter earnings release, Raymond James increased the company's price target to $32, forecasting that the company's production during the quarter would be in line with analyst estimates. Out of the 873 hedge funds surveyed by Insider Monkey for the second quarter, 33 had held a stake in the company.

Antero Resources Corporation (NYSE:AR)'s largest investor is Mackenzie B. Davis and Kenneth L. Settles Jr's SailingStone Capital Partners which owns 6 million shares worth $115 million by the end of the 2021 third quarter.

Alongside Micron Technology, Inc. (NASDAQ:MU), General Motors Company (NYSE:GM), and DISH Network Corporation (NASDAQ:DISH), Antero Resources Corporation (NYSE:AR) is one of Mr. Fournier's top stock picks.

9. Peloton Interactive, Inc. (NASDAQ:PTON)

Mr. Fournier’s Stake Value: $17.3 million

Percentage of Pennant Capital's 13F Portfolio: 4.91%

Number of Hedge Fund Holders: 67

Peloton Interactive, Inc. (NASDAQ:PTON) is a fitness equipment and services provider headquartered in the United States. It provides products to its customers to enable them to exercise at home. Alongside, it also has a fitness service that streams classes to those interested.

The company earned $805 million in revenue and -$1.25 in GAAP earnings share for its first quarter fiscal 2022, missing analyst estimates on both counts. Peloton Interactive, Inc. (NASDAQ:PTON)'s price target was dramatically reduced to $70 by Roth Capital in a November 2021 analyst note which outlined that while new products at different price points can increase the company's subscribers, its demand needs to firm up for a healthier outlook.

Mr. Fournier's investment firm held 199,000 Peloton Interactive, Inc. (NASDAQ:PTON) shares that were worth $17.3 million and represented 4.9% of its portfolio by the end of the third quarter of this year. A survey of 873 hedge funds conducted by Insider Monkey in the prior quarter revealed that 67 had holdings in the company.

Peloton Interactive, Inc. (NASDAQ:PTON)'s the largest investor is Chase Coleman and Feroz Dewan's Tiger Global Management LLC, which owns 7.1 million shares worth $626 million.

Investment management firm Carillon Tower Advisers in its second-quarter 2021 investor letter mentioned Peloton Interactive, Inc. (NASDAQ:PTON) and outlined that:

Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”

8. TransDigm Group Incorporated (NYSE:TDG)

Mr. Fournier’s Stake Value: $17.5 million

Percentage of Pennant Capital's 13F Portfolio: 4.98%

Number of Hedge Fund Holders: 57

TransDigm Group Incorporated (NYSE:TDG) is an American designer and seller of components used in aircraft subsystems. The company's offerings cover a wide variety of such systems, such as the cockpit, cargo loading, airframes, and seating. It also has a non-aviation segment that serves companies in the satellite and oil and gas markets.

TransDigm Group Incorporated (NYSE:TDG)'s price target was raised to $708 by Susquehanna in a November 2021 analyst note that saw the research firm worry about supply chain constraints and uncertain demand recovery for the company. TransDigm Group Incorporated (NYSE:TDG) earned $1.28 billion in revenue and $4.25 in non-GAAP EPS for its fourth quarter of fiscal 2021, beating analyst estimates for EPS and missing them for revenue.

Mr. Fournier's Pennant Capital held 28,094 TransDigm Group Incorporated (NYSE:TDG) shares by the end of Q3 2021. These were worth $17.5 million and represented 4.98% of the firm's portfolio. By second quarter end, 57 of the 873 hedge funds polled by Insider Monkey had holdings in the company.

TransDigm Group Incorporated (NYSE:TDG)'s largest shareholder is Chase Coleman and Feroz Dewan's Tiger Global Management LLC, which owns a stake of a whopping $1 billion through 1.7 million shares.

Vulcan Value Partners, an investment firm, mentioned TransDigm Group Incorporated (NYSE:TDG) during its second-quarter 2021 investor letter which stated that:

TransDigm Group Inc., another material contributor during the quarter, is an aerospace manufacturer providing highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Its business was impacted by the global pandemic; however, the company has been able to maintain margins despite strong revenue headwinds, and it continues to generate strong free cash flow.”

TransDigm Group Incorporated (NYSE:TDG) is on the list of Mr. Fournier's pick of hot stocks, alongside DISH Network Corporation (NASDAQ:DISH), Micron Technology, Inc. (NASDAQ:MU), and General Motors Company (NYSE:GM).

7. Alphabet Inc. (NASDAQ:GOOG)

Mr. Fournier’s Stake Value: $19.7 million

Percentage of Pennant Capital's 13F Portfolio: 5.6%

Number of Hedge Fund Holders: 155

Alphabet Inc. (NASDAQ:GOOG) is known for its ownership of the world's largest search engine Google, which has become synonymous with the modern-day internet. It is an iconic American silicon valley brand that was founded during the late 1990s and is headquartered in Mountain View, California.

Mr. Fournier held 7,400 shares of Alphabet Inc. (NASDAQ:GOOG) by the end of the third quarter. These were worth more than $19 million and represented 5.6% of his firm's portfolio. Mizuho increased its price target to $3,100 in an October 2021 analyst note sharing optimism for search spending and the upcoming holiday season.

Alphabet Inc. (NASDAQ:GOOG) earned $65.12 billion in revenue and $27.99 in GAAP EPS, beating analyst estimates on both counts during its third quarter of the fiscal year 2021. During the prior quarter, 155 out of the 873 hedge funds surveyed by Insider Monkey held a stake in the company.

Alphabet Inc. (NASDAQ:GOOG)’s largest investor is Chris Hohn’s TCI Fund Management who owns a staggering 2.9 million shares worth $7.8 billion.

In its third-quarter 2021 investor letter, Madison Funds mentioned Alphabet Inc. (NASDAQ:GOOG). Here is what the fund said:

"We are also enjoying results from portfolio companies that are benefitting in the current environment. Our largest holding, Alphabet, is experiencing vigorous growth as digital advertising is very strong in the current environment. Google Search and YouTube revenues were $50 billion last quarter, up 69% year-over-year, and up 25% compounded annually over the two-year period since to 2019. We believe these results are driven by robust consumer on-line activity and strong advertising spending from retailers, brand advertisers, travel and financial service companies, and media and entertainment companies. More advertisers are also shifting their spending from traditional TV to YouTube, and this trend should continue as people spend massive hours consuming content there. Last quarter Alphabet management said YouTube has 2 billion monthly active users consuming over a billion hours of video content every day. An equally striking statistic, according to Google Senior Vice President Phillip Schindler, is that 70% of YouTube’s reach was to an audience not reached by advertisers’ traditional TV media. YouTube’s advertising business is accelerating with scale, which adds diversity to Alphabet’s advertising revenue streams.”

6. Charter Communications, Inc. (NASDAQ:CHTR)

Mr. Fournier’s Stake Value: $24.3 million

Percentage of Pennant Capital's 13F Portfolio: 6.92%

Number of Hedge Fund Holders: 75

Charter Communications, Inc. (NASDAQ:CHTR) is a broadband connectivity and cable services provider. It is headquartered in Stamford, Connecticut and was founded in 1993. The company offers internet connections and connectivity equipment.

Mr. Fournier held 33,500 Charter Communications, Inc. (NASDAQ:CHTR) shares by the end of Q3 this year. These were worth $24.3 million and represented 6.92% of Pennant Capital's portfolio. Additionally, 75 of the 873 hedge funds polled by Insider Monkey during the second quarter held a stake in Charter Communications, Inc. (NASDAQ:CHTR).

In a November 2021 analyst note, Wells Fargo lowered Charter Communications, Inc. (NASDAQ:CHTR)'s price target to $603, sharing worries about the broadband sector that carry the risk of lowering future demand. The company reported $13 billion in revenue and $6.50 in GAAP EPS for its third quarter, beating analyst estimates on both counts.

Along with DISH Network Corporation (NASDAQ:DISH), Micron Technology, Inc. (NASDAQ:MU) and General Motors Company (NYSE:GM), Charter Communications, Inc. (NASDAQ:CHTR) is one of Mr. Fournier's favorite companies.

Charter Communications, Inc. (NASDAQ:CHTR)’s largest stakeholder is Chris Hohn’s TCI Fund Management, which owns 10 million shares for a staggering stake of $7.5 billion.

In its first-quarter investor letter, ClearBridge Investments had the following to say about Charter Communications, Inc. (NASDAQ:CHTR):

“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where Charter trailed after generating robust returns earlier in the recovery.”

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Disclosure. None. Top 10 Stocks to Invest in According to Alan Fournier's Pennant Capital is originally published on Insider Monkey.