In this article, we discuss 10 new stock picks of billionaire David Harding. If you want to see more stocks in this selection, click 5 New Stock Picks of Billionaire David Harding.
David Harding, the billionaire chief of the London-based Winton Capital Management, disclosed in February this year that his quantitative funds were up 8.8%, as they raked in trading profits from the soaring commodity prices in wake of the Russian invasion of Ukraine. Winton Capital’s flagship fund gained 7.6% in February and was profitable for 12 out of the last 14 months, the longest income generating feat of consistency displayed since 1998.
The hedge fund’s assets were valued at about $8 billion after dropping from their $26 billion peak in the last two years, driven by the COVID-19 pandemic and panicked market selloff. Although David Harding acknowledged the severe downturn in Winton Capital’s performance, he remains quietly confident in his long-term outlook and investment strategy.
Winton Capital Management’s $1.90 billion Q1 2022 portfolio is concentrated with investments in the information technology, industrials, healthcare, finance, consumer staples, communications, and consumer discretionary sectors. The most notable securities in David Harding’s portfolio included Johnson & Johnson (NYSE:JNJ), Exxon Mobil Corporation (NYSE:XOM), and Alphabet Inc. (NASDAQ:GOOG).
We used the Q1 2022 portfolio of billionaire David Harding for this analysis, selecting the most prominent new stock picks of his hedge fund during the quarter.
David Harding of Winton Capital Management
New Stock Picks of Billionaire David Harding
10. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 80
Activision Blizzard, Inc. (NASDAQ:ATVI) is an interactive entertainment company that provides online gaming services, digital content, social connectivity, and user-generated content. David Harding added 198,150 shares of Activision Blizzard, Inc. (NASDAQ:ATVI) to his Q1 2022 portfolio, worth $15.8 million.
On April 25, Activision Blizzard, Inc. (NASDAQ:ATVI) announced “disappointing” Q1 financial results, which declined year-over-year. The analyst was not surprised about the weakness in Call of Duty as the last product release disappointed, but said the Blizzard growth drop “was somewhat shocking”. However, the Microsoft acquisition has created a “valuation floor” for Activision Blizzard, Inc. (NASDAQ:ATVI), contended the analyst, keeping a Buy rating on the shares with a $100 price target.
According to Insider Monkey’s Q1 data, 80 hedge funds were bullish on Activision Blizzard, Inc. (NASDAQ:ATVI), up from 70 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the biggest shareholder of the company, with 64.3 million shares worth $5.15 billion. Billionaire Warren Buffett boosted his Activision stake by 339% in Q1 2022.
In addition to Johnson & Johnson (NYSE:JNJ), Exxon Mobil Corporation (NYSE:XOM), and Alphabet Inc. (NASDAQ:GOOG), elite funds are pouring into Activision Blizzard, Inc. (NASDAQ:ATVI).
Here is what Baron Partners Fund has to say about Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q4 2021 investor letter:
“The Fund’s Core Growth investments were negatively impacted by the market rotation to value-oriented businesses. Fundamentals for most of our Core Growth holdings remain strong. We exited two positions in this space, which included Activision Blizzard, Inc. We believe ESG concerns at Activision could be a negative for the company in the coming years.
Shares of Activision Blizzard, Inc., a leading video game publisher, detracted from performance. The company reported solid earnings results and maintained guidance for fiscal year 2021. However, the stock fell primarily due to a combination of increased concern around an employee lawsuit alleging sexual harassment and timing delays for two key Blizzard games (Diablo IV and Overwatch 2). We sold our position.”
9. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 68
Twitter, Inc. (NYSE:TWTR) offers a social media platform for micro-blogging, self-expression, and real-time conversation. Twitter, Inc. (NYSE:TWTR) posted earnings for Q1 on April 28, reporting an EPS of $0.90, above consensus by $0.87. Securities filings for Q1 2022 reveal that David Harding’s Winton Capital Management acquired 363,614 shares of Twitter, Inc. (NYSE:TWTR), worth $14 million, representing 0.73% of the total 13F holdings.
On April 25, 2022, Twitter, Inc. (NYSE:TWTR) board of directors agreed to a $44 billion takeover by Elon Musk, the CEO of SpaceX and Tesla. However, on May 17, Musk said that the deal cannot go forward until Twitter CEO clears up the confusion about the fake accounts on the platform. Musk observed that 20% of the Twitter accounts were fake or spam, which is 4-times or higher than what the company reported. Elon Musk tweeted that his offer was based on Twitter, Inc. (NYSE:TWTR)’s SEC filings being accurate.
Citi analyst Ronald Josey noted that Elon Musk’s review of spam/false accounts on Twitter, Inc. (NYSE:TWTR) will likely delay the proposed buyout. However, he doubts there will be any significant changes to the deal structure as a result of Musk’s review. The analyst maintained a Neutral rating on Twitter, Inc. (NYSE:TWTR) with a $54.20 price target on May 16.
According to Insider Monkey’s first quarter database, 68 hedge funds were bullish on Twitter, Inc. (NYSE:TWTR), down from 83 funds in the preceding quarter. Paul Singer’s Elliott Management held the leading position in the company, with 10 million shares worth about $387 million.
Here is what RGA Investment Advisors has to say about Twitter, Inc. (NYSE:TWTR) in its Q4 2021 investor letter:
“Twitter had an eventful quarter. The company started the year seemingly ready to fly for the first time as a public company. Consensus estimates for 2023 revenue started the year at barely north of $5b and by the end of the year were just shy of $7.5b, a target the company offered at their first investor day in years. Unfortunately, it was a second target offered at that same investor day that did them in: 330 million mDAUs by the end of 2023. Typically stocks follow revenues, but mDAUs became the noose around the stock, and perhaps even Jack Dorsey’s tenure as CEO. With each quarter reported following the investor day, the mDAU target became increasingly harder to achieve as the user base grew below the run-rate required to get there in straight-line fashion. Although the company stated this would happen, investors were left wondering how an already lofty target could be achieved with a higher hurdle. Importantly, however, the revenue target continued to look increasingly achievable with each passing quarter. Taking a step back, people came into the year convinced Twitter had a monetization problem, but exited the year focused on their user base growth.
As always, the Street is incredibly myopic about the company, but we are far more sanguine. The user base will exit the year growing at what we thought was a more appropriate quarterly run-rate (6-7 million quarterly new users), consistent with the acceleration that began before the COVID induced bump in Q1-Q2 of 2020. As it stands today, Twitter is trading near its lowest multiples as a public company (on both EV/S at ~4.5x forward and EV/EBITDA at ~18x), at a time when it will report its fastest growth rate as a public company and over the next two years is expected to report two of its next three fastest growing years. Altogether, the years 2021-2023 should be the company’s fastest three-year CAGR period by a lot, meanwhile the last time Twitter traded at multiples this low was in 2017 when revenue actually contracted 3.41% during the year. There is little that can actually justify such a disconnect where the company’s growth is as swift as ever, but its multiple is consistent with negative growth periods. Twitter remains drastically under monetized, has a long runway of opportunity ahead on both the user growth side and monetization, and has optionality in pursuing subscription, data and/or service extensions of the core offering.”
8. MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Holders: 59
MGM Resorts International (NYSE:MGM) is a Nevada-based company that owns and operates casinos, hotels, and entertainment resorts in the United States and Macau. David Harding added MGM Resorts International (NYSE:MGM) to his portfolio by acquiring 286,679 shares during Q1 2022, worth $12 million, representing 0.63% of the total 13F portfolio.
On May 2, MGM Resorts International (NYSE:MGM) reported its Q1 financial results, announcing earnings per share of $0.01, ahead of consensus estimates by $0.06. The revenue of $2.85 billion grew 73.22% year-over-year, outperforming analysts’ predictions by $45.50 million.
Deutsche Bank analyst Carlo Santarelli on May 26 reiterated a Buy rating on MGM Resorts International (NYSE:MGM) but lowered the price target on the shares to $48 from $52. The analyst attributed the target multiple drop to the company’s BetMGM stake and assumed 2024 as the base year for his valuation.
According to Insider Monkey’s database, MGM Resorts International (NYSE:MGM) was part of 59 hedge fund portfolios at the end of March 2022, compared to 55 funds in the earlier quarter. William B. Gray’s Orbis Investment Management held the biggest position in the company, comprising almost 7 million shares worth $293.4 million.
Here is what Baron Real Estate Fund has to say about MGM Resorts International (NYSE:MGM) in its Q1 2022 investor letter:
“At this stage, we believe several public real estate companies offer compelling long-term return prospects that, in some cases, may include a trifecta combination of growth, dividends, and an improvement in valuation. Examples of public real estate companies that are attractively valued includes: MGM Resorts International. Leading global casino and entertainment company. At its recent price of $40 per share, we believe the company is valued at a significant discount to our reasonable $60 per share estimate of the sum-of-the-parts value of its business.”
7. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Altria Group, Inc. (NYSE:MO) was founded in 1822 and is headquartered in Richmond, Virginia. The company manufactures and sells smokeable and oral tobacco products in the United States. David Harding acquired 214,946 shares of Altria Group, Inc. (NYSE:MO) in Q1 2022, worth $11.2 million, representing 0.58% of the total 13F holdings.
On May 19, Altria Group, Inc. (NYSE:MO) declared a $0.90 per share quarterly dividend, in line with previous. The dividend is payable on July 11, to shareholders of record on June 15. Altria Group, Inc. (NYSE:MO) delivers a dividend yield of 6.61% as of May 31.
The company reported earnings for Q1 on April 28, posting an EPS of $1.12, beating market estimates by $0.03. Deutsche Bank analyst Steve Powers raised the firm’s price target on Altria Group, Inc. (NYSE:MO) on April 29 to $60 from $54 and maintained a Buy rating on the shares following the Q1 results.
According to Insider Monkey’s first quarter database, Altria Group, Inc. (NYSE:MO) was part of 47 public hedge fund portfolios, up from 39 funds in the earlier quarter. Rajiv Jain’s GQG Partners is the largest shareholder of the company, with 18.30 million shares worth $956.2 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
6. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Philip Morris International Inc. (NYSE:PM) was incorporated in 1987 and is headquartered in New York, providing cigarettes and smoke-free products. The company sells its products under the Marlboro, Parliament, Bond Street, Chesterfield, L&M, Lark, and Philip Morris brands. Philip Morris International Inc. (NYSE:PM) is a new arrival in David Harding’s Q1 portfolio, with his hedge fund buying 90,171 shares worth $8.4 million.
On April 21, Philip Morris International Inc. (NYSE:PM) reported earnings for the first quarter of 2022. The company posted an EPS of $1.56, beating analysts’ estimates by $0.07. The revenue of $7.75 billion outperformed Street forecasts by $315.53 million.
BofA analyst Lisa Lewandowski on April 24 raised the price target on Philip Morris International Inc. (NYSE:PM) to $117 from $107 and kept a Buy rating on the shares. Despite challenges in 2022, the analyst expects Philip Morris International Inc. (NYSE:PM) to shift to other high potential markets and navigate the temporary cost pressures of exiting production in Russia. The analyst also believes investors are primarily looking at the underlying business, which she sees as robust and with upside potential.
According to Insider Monkey’s Q1 database, 55 hedge funds were bullish on Philip Morris International Inc. (NYSE:PM), up from 47 funds in the earlier quarter. Terry Smith’s Fundsmith LLP is a significant shareholder of the company, with 16.45 million shares worth $1.5 billion.
Like Johnson & Johnson (NYSE:JNJ), Exxon Mobil Corporation (NYSE:XOM), and Alphabet Inc. (NASDAQ:GOOG), institutional investors are closely monitoring Philip Morris International Inc. (NYSE:PM).
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm had to say:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
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