Top Stocks to Invest in According to John Smith Clark’s Southpoint Capital Advisors

In this article, we discuss the top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors. If you want to skip our detailed analysis of these stocks, go directly to the Top 5 Stocks to Invest in According to John Smith Clark’s Southpoint Capital Advisors.

New York-based Southpoint Capital Advisors was founded in 2004 by Rob Butts and John Smith Clark. The two partners formerly worked with David Einhorn’s Greenlight Capital.

Some of the top stocks in the investment portfolio of Southpoint Capital Advisors at the end of the second quarter of 2021 were Uber Technologies, Inc. (NYSE: UBER), Alibaba Group Holding Limited (NYSE: BABA), and PayPal Holdings, Inc. (NASDAQ: PYPL), among others discussed in detail below.

Our Methodology

With this context in mind, here is our list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors.

Why do we care about hedge fund activity? 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 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.

Top Stocks to Invest in According to John Smith Clark’s Southpoint Capital Advisors

11. The AES Corporation (NYSE:AES)

Southpoint Capital Advisors’ Stake Value: $191 million

Percentage of Southpoint Capital Advisors’ 13F Portfolio: 3.16%

Number of Hedge Fund Holders: 39

The AES Corporation (NYSE: AES) formed its Arlington-based utilities and power generation operations in 1981. In Q2 2021, Southpoint Capital Advisors owned 7 million shares in The AES Corporation (NYSE: AES) worth $191 million, which made up 3.16% of the 13F portfolio following the 17% boost in investment by the hedge fund.

On August 6, Wolfe Research upgraded The AES Corporation (NYSE: AES) to Outperform and set a price target of $29.

During Q2 2021, 39 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $1.4 billion, down from the 51 hedge funds staking $1.54 billion in Q1 2021.

Like Uber Technologies, Inc. (NYSE: UBER), Alibaba Group Holding Limited (NYSE: BABA), and PayPal Holdings, Inc. (NASDAQ: PYPL), The AES Corporation (NYSE: AES) is one of the prominent stocks gaining hedge funds’ attention in the current financial year.

10. Facebook, Inc. (NASDAQ: FB)

Southpoint Capital Advisors’ Stake Value: $191 million

Percentage of Southpoint Capital Advisors’ 13F Portfolio: 3.31%

Number of Hedge Fund Holders: 266

With a market capitalization of $1 trillion, the Californian company reigns as the 6th biggest in the world.

By 2021’s second quarter, 266 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $42 billion.

Here is what First Eagle Investment Management has to say about Facebook, Inc. in its Q2 2021 investor letter:

“Leading contributors in the First Eagle Global Fund this quarter included Facebook, Inc. Class A. Facebook has continued to post impressive results for both revenue and active users of its traditional platforms. In the meantime, the social media giant continues to make progress on new initiatives—like Facebook Horizon (virtual reality) and Facebook Shops (e-commerce)—and maintains attractive monetization optionality around services like Messenger and WhatsApp.”

9. LPL Financial Holdings Inc. (NASDAQ:LPLA)

Southpoint Capital Advisors’ Stake Value: $202 million

Percentage of Southpoint Capital Advisors’ 13F Portfolio: 3.5%

Number of Hedge Fund Holders: 48

Formed in 1989 and headquartered in San Diego, California, LPL Financial Holdings Inc. (NASDAQ: LPLA) rests at the 9th spot on our list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors.

During the second financial quarter, 48 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $1.5 billion.

Here is what Carillon Tower Advisers has to say about LPL Financial Holdings Inc. in its Q2 2021 investor letter:

“LPL Financial is an independent broker-dealer offering technology, brokerage, and investment advisory services to financial advisors and financial institutions. The firm’s shares underperformed in the quarter due in part to the somewhat lofty valuation the stock was trading at after its outperformance in the first quarter.”

8. Ferguson PLC (NYSE:FERG)

Southpoint Capital Advisors’ Stake Value: $209 million

Percentage of Southpoint Capital Advisors’ 13F Portfolio: 3.62%

Number of Hedge Fund Holders: 11

Formed in 1887 and based in Wokingham, United Kingdom, Ferguson PLC (NYSE:FERG) focuses on plumbing and heating products.

On August 12, Deutsche Bank increased Ferguson PLC (NYSE:FERG)’s price target to $16,104.26 (GBP 11,800), with a Buy rating.

7. The Charles Schwab Corporation (NYSE:SCHW)

Southpoint Capital Advisors’ Stake Value: $218 million

Percentage of Southpoint Capital Advisors’ 13F Portfolio: 3.78%

Number of Hedge Fund Holders: 72

Ranking 7th on our list of top stocks to invest in according to John Smith Clark’s Southpoint Capital Advisors, The Charles Schwab Corporation (NYSE: SCHW) specializes in wealth and asset management.

The company’s second quarter’s EPS was $0.7, compared to the $0.72 estimate. The Charles Schwab Corporation (NYSE: SCHW)’s target price was amplified from $90 to $92 by Deutsche Bank, which reiterated its Buy rating as of July 23.

As of the second quarter of 2021, 72 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in the company worth $4.85 billion.

Here is what Lakehouse Capital has to say about The Charles Schwab Corporation in its Q2 2021 investor letter:

Charles Schwab is not a household name in Australia but it is in the US where it is the largest discount broker with more than 32 million brokerage accounts, 2 million corporate retirement plans, and total client assets of US$7.4 trillion. Schwab’s shares performed extremely well during the year thanks to a confluence of factors including a strong stock market with the S&P 500 up 39% year-on-year, the company’s recent merger with industry heavyweight TD Ameritrade, and expectations that interest rate income would grow as the US economy gained steam.

Two other important contributors to Schwab’s year, which were a mix of cyclical and structural, were an increase in net new accounts and increased trading activity. We view these as cyclical in the sense that markets are performing very well and that retail investors have been bored and emboldened during the American lockdowns, however, also structural because Schwab’s shift to $0 commissions on equity trades has permanently reduced a barrier to trading for investors with smaller accounts. We also note that, while brokerage activity is cyclical, the average brokerage account itself is very sticky — we estimate normalised annual retention rates for accounts of better than 93% — and that the average client assets per account grow over time thanks to asset growth and clients collectively being net savers.

Schwab makes for an excellent natural hedge for the Fund as Schwab tends to perform well when interest rates increase, which is generally negative for the rest of the portfolio. And the position did its job for us by increasing during a rising interest rate environment, enabling us to harvest much of our gains from Schwab and redeploy them to shares of other growth companies that had gotten cheaper in response to higher rates. We’re mindful of the run in the shares and the cyclical nature of the business but comfortable keeping a small position for now given Schwab’s natural hedging dynamics, extremely loyal customers, and an industry-leading position in a growing market.”

6. Amazon.com, Inc. (NASDAQ:AMZN)

Southpoint Capital Advisors’ Stake Value: $241 million

Percentage of Southpoint Capital Advisors’ 13F Portfolio: 4.17%

Number of Hedge Fund Holders: 271

Coming 6th is the fifth-largest company in the world with a $1.75 trillion market capitalization value. Amazon.com, Inc. (NASDAQ: AMZN) started its Seattle-based retail business in 1994.

Here is what L1 Capital said about Amazon.com, Inc. (NASDAQ: AMZN) in its second-quarter 2021 investor letter:

“Amazon flipped from being the largest detractor from portfolio performance in the March 2021 quarter, to one of the leading contributors in the June 2021 quarter. We took advantage of negative near-term sentiment in the March 2021 quarter to add to our Amazon investment. We continue to view Amazon as one of the best positioned businesses globally, with its share price still not reflecting fair value.”

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Disclosure: None. Top Stocks to Invest in According to John Smith Clark’s Southpoint Capital Advisors is originally published on Insider Monkey.