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In this article, we take a look at billionaire Michael Price's top 10 stock picks. You can skip our detailed discussion of Price’s history, his hedge fund’s performance and go to Billionaire Michael Price's Top 5 Stock Picks.
The value investor Michael Price, 68, runs New York-based hedge fund MFP Investors, with assets over $1 billion. Seth Klarman’s mentor started his career as a research assistant at a hedge fund run by famous self-made value investor Max Heine after graduating from the University of Oklahoma in 1973. Michael Price likes to buy beaten-down stocks that are trading at a significant discount compared to their actual value. The value investor has extended his strategy in the latest quarter by buying several underperforming stocks from the financial sector, increasing the financial sector weightage to 31% of the overall portfolio.
Instead of holding large funds in a few stocks, Price has diversified his investments across the financial sector by holding a stake in more than 45 stocks, according to the latest quarter filings. His strategy appears to be working because the financial sector is ranked second-best performing S&P 500 sector in 2021.
Michael Price only buys stocks with strong inherent value, and he likes to conduct significant research before picking any stock for his portfolio. He bought 9 new stocks in the latest quarter and 5 of them belong to the financial sector.
“If you really [want] to find value, you [must] do original work, digging through stuff no one else [wants] to look at. …The really important thing is to eliminate the Wall Street consensus, the Wall Street research. You need to understand where the company is in the world and what the competition is for the products, whether the products are any good, and whether or not the company has any pricing power or barriers to entry. … Think about the business, think about what you see without any input from Wall Street, do [your own] primary research.” – Michael F. Price
The value investor has also been playing smartly with technology stocks. Intel Corporation (NASDAQ: INTC) is the largest stock holding of MFP Investors at present. He sold out FLIR Systems Inc (NASDAQ: FLIR) and Arista Networks Inc (NYSE: ANET) in the December quarter. Overall, he held a stake in 7 tech stocks for the first quarter of 2021. Consumer defensive and real estate stocks are also holding a huge weightage in his portfolio. The value investor is also seeking to capitalize on a strong performance of communication stocks. He added a position in Loral Space & Communications Inc (NASDAQ: LORL) during the fourth quarter and increased his stake in Twitter (NYSE: TWTR) by 200% to 2.50% of the overall portfolio.
Price's strategies also include buying stakes in companies that are struggling due to special situations like bankruptcy, merger-arbitrage trades, restructuring, and event-driven situations. His stock-picking strategy is also based on a ratio of two-thirds equities and one-third special situations. He learned these strategies from his mentor Heine who generated big profits from special situations such as restructuring and bankruptcy.
Michael Price of MFP Investors
While Michael Price’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. 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.
Let’s start reviewing Billionaire Michael Price's Top 10 Stock Picks for 2021 to see whether the value investor is in a position to outperform the market trends.
10. Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI)
Michael Price’s strategy of holding a big stake in banking services provider Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI) appears to be moving in the right direction. The shares of the regional bank grew 43% since the beginning of this year, thanks to a rebound in economic numbers and easing social distancing policies. ACBI stake accounted for 2.33% of the 13F portfolio at the end of the latest quarter. Atlantic Capital has generated 11% revenue growth in the latest quarter while its earnings per share came in at $0.48 compared to $0.32 per share in the year-ago period. Moreover, Atlantic Capital management claims the bank is well-positioned for solid growth and strong performance in 2021.
9. Twitter Inc (NYSE: TWTR)
The value investor’s strategy of increasing position by 200% in the social media giant Twitter (NYSE: TWTR) moved in favor of his hedge fund. This is because shares of social media company grew 23% so far in 2021, extending the twelve-month gains to 90%. Twitter ranks 9th among billionaire Michael Price's top 10 stock picks.
Carillon Eagle Mid Cap Growth Fund stated in a third-quarter investor letter that Twitter has been seeing strong user growth over the past couple of quarters. Here is what Carillon Eagle Mid Cap Growth Fund said:
“Twitter’s user count continues to accelerate due to the global stay-at-home situation as well as the numerous positive changes the company has introduced on the platform in order to keep users engaged. The addition of various topics and lists along with the expansion of video have led to more users joining the platform and kept existing users more engaged. We believe the next positive development on the horizon could come from the company’s ability to increase the monetization of these users.”
8. Popular, Inc. (NASDAQ: BPOP)
The shares of regional bank Popular, Inc. (NASDAQ: BPOP) rallied 22% year to date, extending the twelve-month gains to 48%. In addition to share price gains, the company also offers a dividend yield of more than 2.3%. MFP Investors position in Popular accounted for 2.7% of the overall portfolio at the end of the latest quarter and ranked eighth largest stock holding of the 13F portfolio.
Popular stock price gains are backed by robust financial numbers. The company has generated $176 million in net income for the fourth quarter compared to $168.4 million in Q3 and $166.8 million in the year-ago quarter. Moreover, the bank reported a profit for the full year despite significant provision losses.
7. Anterix Inc. (NASDAQ: ATEX)
Shares of communication services company Anterix Inc. (NASDAQ: ATEX) also outperformed the broader market index since the beginning of this year. It is ranked seventh among the billionaire Michael Price’s top 10 stock picks for 2021. ATEX stock price is up 14% so far in 2021.
Roubaix Capital LLC, which generated a net return of 26.63% for the Q4 of 2020, highlighted some stocks including Anterix in their Q4 investor letter. Here is what Roubaix Capital stated:
“We also maintain many long positions in companies that are not specifically tethered to the current backdrop. Instead, either the merits of the business, the development of the thesis or the strength of a trend control the expected outcome. One such position, which we have discussed in the past and remains a large position for the Composite, is Anterix (ATEX). The company owns spectrum approved for dedicated enterprise networks for critical infrastructure industries, among others. This spectrum will allow users to build fully private high speed data networks to capture the value of the internet of things, while at the same time having a higher level of secure communication and infrastructure. In May 2020, company’s plan for its 900 MHz spectrum was approved by the FCC. More recently in December 2020, the company announced its first commercial contract with Ameren (AEE) for a 30 year spectrum lease for a private LTE network with a further 10 year renewal option. This sets the precedent for future contracts. As the company scales with more contracts in 2021, the high margin business model will come into focus and should drive the shares. We also see the potential for the new administration to increase infrastructure spending and emphasize grid security as ways to drive employment and in reaction to a recent high profile government hack, respectively.”
6. Banc of California, Inc. (NYSE: BANC)
Michael Price’s strategy also worked in the case of Banc of California, Inc. (NYSE: BANC). After a sluggish performance in 2020, shares of the regional bank grew 32% year to date, extending the twelve-months gains to 39%. It is the sixth-largest stock holding of Price's portfolio. The bank also offers a dividend of just over 1% to shareholders.
The latest share price rally is supported by stronger than expected results for the December quarter. Its Q4 revenue of $68 million topped the Wall Street consensus estimate by $6.6 million while earnings per share have beaten expectations by $0.17.
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Disclosure: None. Billionaire Michael Price's Top 10 Stock Picks is originally published on Insider Monkey.