In this piece, we will take a look at the ten best stocks to buy according to Ed Bosek's BeaconLight Capital. If you want to skip our introduction to the hedge fund and find out about more stocks, then take a look at 5 Best Stocks to Buy According to Ed Bosek's BeaconLight Capital.
BeaconLight Capital is an American hedge fund that is based out of New York, New York. It is one of the younger hedge funds out there, as it was set up by Mr. Ed Bosek in 2010.
The investor set up his hedge fund when he was 29, and like his peers in the hedge fund industry, he also spent time working in the industry before launching his own fund. Prior to setting up BeaconLight Capital, Mr. Bosek worked at the famed investment bank Deutsche Bank and at the European hedge fund Atticus. He grew up in New York's Staten Island and attended the Regis High School in Manhattan.
When he was younger, the executive did not want to enter the financial world, and instead, he was more attracted to the medical profession. He enrolled in the illustrious University of Pennsylvania to become a doctor, and it was during this time at the university that he interacted with students from the Wharton School of Business. This led to a growing interest in finance and economics developing for Mr. Bosek, and he would go on to abandon his medical dreams and instead pursue a Master of Business Administration from Wharton as part of his undergraduate courses.
After graduation, the executive moved to Europe for an internship with Deutsche Bank, and after initially accepting a full time offer, he decided to leave the investment bank and join the hedge fund world. During his search for the perfect fund, he would come to like the approach of Atticus Capital's founder Mr. Tim Barakett, and go on to join the fund's European team. Atticus' differences from traditional investment banks and larger hedge funds would attract Mr. Bosek, and he would go on to become the fourth member of the team.
During his time at Atticus, the now hedge fund executive would see the fund's portfolio grow from $1 billion to $22 billion in 2007. He left Atticus in 2009, stating that it was becoming harder to generate strong returns for large portfolio sizes. A year later, Mr. Bosek set up BeaconLight Capital with just $50 million in funds. His new hedge fund would focus intensely on research and develop an investment approach that is described as FMD. Short for "fundamental, meaningful, and different", 'fundamental' analyzes a business's underlying drivers, 'meaningful' estimates the sheer impact that a company can make through outperforming expectations, and 'different' emphasizes the fund's ability to take positions that others in the industry would balk at.
This approach does seem to be yielding dividends, as, by the end of the second quarter of this year, BeaconLight Capital had a portfolio that was worth $215 million. The top picks in this portfolio are General Motors Company (NYSE:GM), Crown Holdings, Inc. (NYSE:CCK), and Cheniere Energy, Inc. (NYSE:LNG).
We studied BeaconLight Capital's Q2 filings with the Securities and Exchange Commission to sift out its top investment picks. The companies were then briefly analyzed through their financials, market performance, and hedge fund sentiment generated through Insider Monkey's 895 fund survey for this year's first quarter.
10 Best Stocks to Buy According to Ed Bosek's BeaconLight Capital
10. Vicor Corporation (NASDAQ:VICR)
BeaconLight Capital's Stake Value: $7.6 million
Percentage of BeaconLight Capital's 13F Portfolio: 3.52%
Number of Hedge Fund Holders: 15
Vicor Corporation (NASDAQ:VICR) is a power systems manufacturing company that is headquartered in Andover, Massachusetts, the United States. The firm sells components that convert voltages for DC to DC current, alongside telecommunications equipment and other power devices.
Vicor Corporation (NASDAQ:VICR) is central to the growing data center market, with its customers being some of the largest players in the industry such as NVIDIA Corporation, Intel Corporation, and International Business Machines. The firm has a whopping backlog of $410 million and its new manufacturing facility is expected to add another whopping $500 million of production capacity - to bring the overall figure to a cool $1 billion.
BeaconLight Capital owned 138,998 Vicor Corporation (NASDAQ:VICR) shares as part of its Q2 2022 investments. These let it own a $7.6 million stake in the company. For the same time period, 15 out of the 895 hedge funds polled by Insider Monkey had also held the company's shares.
Out of these, Cliff Asness's AQR Capital Management is Vicor Corporation (NASDAQ:VICR)'s largest investor through a $10 million stake that comes via 193,613 shares.
Cheniere Energy, Inc. (NYSE:LNG), General Motors Company (NYSE:GM), and Crown Holdings, Inc. (NYSE:CCK) are met by Vicor Corporation (NASDAQ:VICR) in the list of Ed Bosek's favorite stocks.
9. Quanta Services, Inc. (NYSE:PWR)
BeaconLight Capital's Stake Value: $8.4 million
Percentage of BeaconLight Capital's 13F Portfolio: 3.89%
Number of Hedge Fund Holders: 34
Quanta Services, Inc. (NYSE:PWR) is an American contracting services provider. The firm provides a host of services such as the maintenance, upgrades, procurement, and construction of electrical power distribution services. It is headquartered in Houston, Texas.
Mr. Bosek's hedge fund owned an $8.4 million stake in Quanta Services, Inc. (NYSE:PWR) as part of its portfolio for the second quarter of this year. The stake came through the fund owning 67,025 shares of the company, and it represented 3.89% of its investment portfolio. Insider Monkey's Q2 2022 895 hedge fund survey outlined that 34 funds had invested in the firm.
Quanta Services, Inc. (NYSE:PWR) is one of the strongest performing energy companies in the industry, both in terms of overall revenue and renewable energy. The firm's revenue for this year's first half grew by 44% annually, and by the end of last year, the share of renewables in its revenue pie had risen to 22% from an earlier 13%.
Quanta Services, Inc. (NYSE:PWR)'s largest investor is William Harnisch's Peconic Partners LLC which owns 5.4 million shares that are worth $685 million.
8. Cenovus Energy Inc. (NYSE:CVE)
BeaconLight Capital's Stake Value: $9.5 million
Percentage of BeaconLight Capital's 13F Portfolio: 4.4%
Number of Hedge Fund Holders: 42
Cenovus Energy Inc. (NYSE:CVE) is a Canadian company that develops, produces, and sells crude oil, natural gas, and derivates in Canada and the United States. Its products include bitumen, heavy oil, synthetic crude oil, diesel, asphalt, and other products. The firm is headquartered in Calgary, Canada.
Cenovus Energy Inc. (NYSE:CVE) is building a new refinery in Superior, Wisconsin with a planned capacity of 49 MMbls per day with the facility expected to start production in the first quarter of next year. As of the second quarter of this year, the firm had $2 billion in excess free funds flow, out of which it spent $1 billion on share repurchases.
For this year's second quarter, BeaconLight Capital held a $9.5 million stake in Cenovus Energy Inc. (NYSE:CVE) which came in the form of 500,315 shares and represented 4.4% of the firm's portfolio. During the same time period, 42 of the 895 hedge funds part of Insider Monkey had invested in the company.
Eric W. Mandelblatt's Soroban Capital Partners is Cenovus Energy Inc. (NYSE:CVE)'s largest investor. It owns 50 million shares that are worth $956 million.
L1 Capital mentioned the firm in its Q2 2022 investor letter, outlining that:
“MEG Energy and Cenovus Energy Inc. (NYSE:CVE): We continue to remain positive on the outlook for Energy. While a potential U.S. recession would result in softer oil demand, we believe this would be more than outweighed by China re-opening over the coming year (which would see a major lift in car and air traffic). Oil supply continues to remain constrained with sustained declines in global inventories and OPEC+ remains unable to grow production significantly. With the sell-off in energy stocks, MEG and Cenovus are currently generating more than 20% of their market cap in cash flow with large dividends and share buybacks to come.
Cenovus Energy (Long +14%) shares rallied driven by continued strong free cash flow generation, as well as being positioned to benefit from strong refining margins and downstream operations. The company recently announced a significant increase in dividends, which gives us greater confidence on the potential for a 100% return of free cash flow generation via dividends and buybacks from early CY23. Given the long-life nature of its oil sand assets and its low cost of production, we estimate the company is free cash flow break-even at an oil price of ~US$40/bbl. At present, oil prices are more than double this break-even point, implying considerable upside to consensus cash flow estimates (if prices remain near current levels). There are also additional value realisation catalysts with the company continuing to progress the de-gearing of its balance sheet via organic cash generation and asset sales.”
7. Resideo Technologies, Inc. (NYSE:REZI)
BeaconLight Capital's Stake Value: $10.5 million
Percentage of BeaconLight Capital's 13F Portfolio: 4.9%
Number of Hedge Fund Holders: 21
Resideo Technologies, Inc. (NYSE:REZI) is a home systems solutions provider whose products cover thermal management, comfort, and security. The firm sells products such as security panels, video cameras, temperature and water control systems, and other peripherals. It is based in Scottsdale, Arizona, the United States.
Mr. Bosek's investment firm owned a $10.5 million stake in Resideo Technologies, Inc. (NYSE:REZI) as part of its Q2 2022 investment portfolio. This came in the form of 545,694 shares and it represented 4.9% of the fund's portfolio. During the same time period, 21 out of the 895 hedge funds polled by Insider Monkey had also bought Resideo Technologies, Inc. (NYSE:REZI)'s shares.
Resideo Technologies, Inc. (NYSE:REZI) earned $1.69 billion during its second fiscal quarter, beating analyst estimates by $30 million. The firm aims to bring in $1.67 billion during its third quarter alongside posting a 27% operating profit margin.
Resideo Technologies, Inc. (NYSE:REZI)'s largest investor is John W. Rogers's Ariel Investments which owns 12 million shares that are worth $247 million.
“During the quarter, Ariel Fund added shares of leading supplier of residential thermal, comfort, and security solutions, Resideo Technologies, Inc. (REZI). While the company has struggled to find its footing since being spun-out of Honeywell in 2018, we see early evidence that the new management’s long-term strategic vision is both achievable and not yet being embraced by investors. We view this as an opportunity to own a niche business, well positioned to benefit from the ongoing housing recovery and a secular preference for more connected smart home solutions.”
6. Albemarle Corporation (NYSE:ALB)
BeaconLight Capital's Stake Value: $11 million
Percentage of BeaconLight Capital's 13F Portfolio: 5.15%
Number of Hedge Fund Holders: 39
Albemarle Corporation (NYSE:ALB) is a chemicals manufacturer that is one of the oldest companies in the world that was set up in 1887 and is headquartered in Charlotte, North Carolina. The firm makes and sells a variety of chemicals such as lithium and derivates for use in electric vehicle batteries.
Albemarle Corporation (NYSE:ALB) is witnessing strong growth as is evidenced by the firm's revenue guidance for this year. BofA raised the company's share price target to $332 from $262 in October 2022, stating that the firm's valuation models merit a revisit given the cyclical nature of its business.
BeaconLight Capital owned 53,254 Albemarle Corporation (NYSE:ALB) shares as part of its Q2 2022 investments for an $11 million stake which represented 5.15% of the firm's portfolio. Insider Monkey surveyed 895 hedge fund portfolios covering the same time period and discovered that 39 had also invested in the company.
Out of these, Paul Marshall and Ian Wace's Marshall Wace LLP is Albemarle Corporation (NYSE:ALB)'s largest investor. It owns 739,388 shares that are worth $154 million.
Albemarle Corporation (NYSE:ALB) joins General Motors Company (NYSE:GM), Crown Holdings, Inc. (NYSE:CCK), and Cheniere Energy, Inc. (NYSE:LNG) in the list of BeaconLight Capital's top investments in Q2 2022.
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Disclosure: None. 10 Best Stocks to Buy According to Ed Bosek's BeaconLight Capital is originally published on Insider Monkey.