How Heard Capital Has Been Trading Its High Conviction Stock Picks

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William Heard’s Heard Capital is a Chicago-based long/short hedge fund that focuses its investments on six key sectors of expertise: tech, media, telecommunications, finance, energy, and industrial. The fund uses a bottom-up fundamental approach to analyze companies and identify opportunities where it believes equities are being mispriced by the market. Heard Capital managed $222 million in assets as of July 30, 2020.

The Heard Opportunity Fund, which has a focus on delivering superior risk-adjusted returns, has produced a compound annual return of 4.19% from its launch in 2011 through April 2020. A solid 4-year run for the fund from 2016 to 2019 was waylaid by Covid-19 in early 2020, with the fund losing 17.87% through April.

Let’s check out some of Heard Capital’s highest conviction stocks and see how they have fared throughout the rest of 2020.

Lam Research Corporation

Lam Research Corporation (NASDAQ:LRCX) is Heard Capital’s second-favorite stock in terms of 13F portfolio allocation and the fund raised its position in the company by a modest 2% during Q2. Hedge funds have been piling into LRCX since early-2019, ownership of the stock among the funds tracked by Insider Monkey having risen by nearly 50% during that time. Lam Research just announced strong Q2 results as it continues its successful shift towards NAND, for which revenue rose by 51% year-over-year.

Related: Insider Monkey’s Research Director Inan Dogan Predicts Stunning Trump Upset in November

TransDigm Group

Heard Capital lowered its stake in TransDigm Group Incorporated (NYSE:TDG) by 10% during Q2, with the stock slotting in as its third-most valuable holding. TransDigm represents one of several aerospace stocks that Heard Capital is a fan of, with the fund investing heavily in Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT) and The Boeing Company (NYSE:BA). Hedge fund ownership of TDG has steadily risen over the past ten quarters, increasing by over 50% during that period. TransDigm’s sales took a beating in Q2, sliding to $1.02 billion from $1.44 billion in Q1 and TDG shares are down by 15% this year.

Adobe

Hedge fund ownership of Adobe Inc. (NASDAQ:ADBE) declined by 10% in Q2 after climbing ever higher over the previous two years, to the point that Adobe landed itself on the list of 30 Most Popular Stocks Among Hedge Funds. Heard Capital lowered its stake in Adobe by 14% during Q2, though it remains one of its highest conviction stock picks. Adobe has been successful growing its digital subscription revenue, with Document Cloud revenue rising by 22% year-over-year and Creative Cloud revenue up by 19% during the three-month period ended August 28, 2020.

Moelis & Company

Moelis & Company (NYSE:MC) has lost over half of its hedge fund support since the first quarter of 2019 among the hedge funds tracked by Insider Monkey’s database, including from large quant funds like Cliff Asness’ AQR Capital and John Overdeck and David Siegel’s Two Sigma Advisors. Heard Capital remains a believer in the company however, boosting its Moelis holding by 45% in Q2. The investment bank announced alongside its Q3 results that it would raise its quarterly dividend by 50% to $0.3825 per share. The company’s revenue slid by 10% year-over-year in Q3 against a tough comp, though there were some bright spots, including record quarterly Restructuring-related business activity.

Aspen Technology

Hedge funds bailed on Aspen Technology, Inc. (NASDAQ:AZPN) during the first quarter of this year, with nearly half of its former shareholders selling off their positions. That was likely due in small part to Aspen’s mixed quarterly results announced in January, but much more to the Covid-19 pandemic forcing many hedge funds to liquidate holdings in Q1. Ownership of AZPN did bounce back somewhat in the second quarter, rising by 40%, while Heard Capital hiked the size of its existing position in the stock by 39%. The business solutions software provider’s fiscal Q4 results came in ahead of expectations, widely beating revenue and EPS estimates.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 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

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At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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 to get excerpts of these letters in your inbox:

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