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Is TPI Composites (TPIC) Stock a Buy For 2021?

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Alex Smith
·4 min read
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Baron Discovery Fund recently published its fourth-quarter commentary – a copy of which can be downloaded here. During the fourth quarter of 2020, the Baron Discovery Fund returned 25.54% (institutional shares). This was 4.07% lower than the Russell 2000 Growth Index, the Fund’s primary benchmark index. You should check out Baron Discovery Fund’s top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q4 2020 Investor Letter, Baron Discovery Fund highlighted a few stocks and TPI Composites Inc (NASDAQ:TPIC) is one of them. TPI Composites Inc (NASDAQ:TPIC) designs and manufactures composite wind blades for the wind energy market. In the last three months, TPI Composites Inc (NASDAQ:TPIC) stock gained 94% and on February 1st it had a closing price of $62.63. Here is what Baron Discovery Fund said:

"TPI Composites, Inc., a manufacturer of composite blades for electricity generating wind turbines, and composite bodies for electric buses did very well in the quarter, with shares rising 82.3%. The company reported record revenue that grew 23.5% against a 50% year-over-year comparable, and double-digit cash flow margins for the first time in a year. Investors (including Baron Discovery Fund) have been waiting for this recovery since the end of 2019, when management took down 2020 numbers due to increased manufacturing line transitions (product retooling). After the guidance reduction we thought shares at $16 were a bargain, trading at 6.5 times 2020 cash flow and 4.7 times 2021 cash flow. They became more so after they fully bottomed in the mid-$9 range at the height of the pandemic in mid-March 2020 (trading at about 4 times and 3 times the same metrics). But our long-term perspective held and we added on weakness. This proved profitable, as shares ended the year at $52.78. At this price level, shares trade at about 12 times and 10 times our estimated 2021 and 2022 cash flow targets and we still see nice upside. The recovery is even more remarkable given that it’s been executed during the pandemic illustrating the strength of this management team. Management also hinted in the third quarter earnings call that it plans to increase its long-term targets based on the increasing expectations for annual wind capacity installations. We like the setup particularly given some nice macro tailwinds which include global stimulus with money earmarked for renewables, extended production tax credits, lowered wind energy production costs and the anticipation that the Biden administration will be more friendly to renewable energy. On top of the strength in the wind industry, we believe the company will continue building out its transportation business where it supplies composite parts for passenger EV and commercial trucking applications. TPI is seeing strong early traction with both production awards and pilot programs with major OEMs and we expect additional production contracts in the coming years."

Pixabay/Public Domain

In Q3 2020, the number of bullish hedge fund positions on TPI Composites Inc (NASDAQ:TPIC) stock increased by about 54% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in TPIC's growth potential. Our calculations showed that TPI Composites Inc (NASDAQ:TPIC) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:

Disclosure: None. This article is originally published at Insider Monkey.