In this article, we discuss the top 10 stock picks of Robert Bishop's Impala Asset Management as of the end of the third quarter of 2021 and assess their performance over the past 12 months. If you want to skip our detailed analysis of the hedge fund, its investment philosophy, and hedge fund performance, go directly to Was Robert Bishop's Impala Asset Management Right About These 5 Stocks?
We prepared the actual contents of this article in November last year, when we analyzed the Q3 portfolio of Robert Bishop's Impala Asset Management to discuss some of the notable stocks in the hedge fund portfolio at that time. We are publishing this article today because it’s always interesting for the readers to analyze how good the so-called “smart money” is when it comes to stock picking. When we look at the stock picks/sells of hedge funds in hindsight, we can better analyze their performance and see whether they were right or wrong.
In this article you will see the notable stock picks of Robert Bishop's Impala Asset Management as of the third quarter of last year.
To assess the performance of these stocks, we have mentioned their performance over the past 12 months through November 27.
At the time of writing we had mentioned analyst ratings for these stocks from famous Wall Street analysts. It’d be interesting for our readers to see how right or wrong were these analysts’ price targets and calls.
However, we should keep the 2022 market crash in mind when reading this article. You will notice that most of the stocks in this list lost value over the past 12 months. That doesn’t, however, mean that the hedge fund was entirely wrong. The fund believes in holding stocks for longer periods of time. These holdings might end up creating profits for the hedge fund in the months and years to come as analysts believe the market could rebound strongly in 2023 and beyond.
It's also important to note that the hedge fund sold or reduced its stakes in some of these stocks in the subsequent quarters of 2021 and 2022.
Now, let's start the article by first reading the introduction to the hedge fund we wrote back in November 2021.
Impala Asset Management is a Florida-based investment management firm that invests in global cyclical equities. The firm was founded in 2004 by industry veteran Robert Bishop, who serves as the Chief Investment Officer and Managing Principal of the firm, managing the Impala, Waterbuck, Alpha Funds, and other accounts. He holds an M.B.A. in Finance from the Wharton School of the University of Pennsylvania and a B.A. in Political Science from Northwestern University. Prior to starting Impala Asset Management, Robert Bishop worked as a Chief Investment Officer at Soros Fund Management, overseeing the Quantum Endowment Fund. As a Principal at Maverick Capital from 1998-2002, he oversaw investments in basic industries including manufacturing, commodities, transportation, and energy, among other cyclical industries. Robert Bishop was also a Portfolio Manager at Kingdon Capital from 1995-1998 where he specialized in cyclical stocks and commodities, and from 1992-1995, he was Managing Director of Julian Robertson's Tiger Management. Prior to that, he was an equity analyst at Salomon Brothers.
Managing more than $1.4 billion in its investment portfolio, Impala Asset Management focuses on a long/short investment strategy, combining deep, bottom-up research with extensive sector expertise supplemented by a macro perspective. The fund manages a portfolio concentrated around basic industries such as automotive, capital goods, basic materials, and energy.
Some of the top stocks in Robert Bishop's portfolio as of the third quarter of 2021 include Harley-Davidson, Inc. (NYSE:HOG), Devon Energy Corporation (NYSE:DVN), and Alcoa Corporation (NYSE:AA), among others discussed in detail below.
10. Alcoa Corporation (NYSE:AA)
Impala Asset Management's Stake Value: $52.75M
Stock performance over the past 12 months through November 27: -2.5%
The world's eighth-largest producer of aluminum, Alcoa Corporation (NYSE:AA) is a Pennsylvania-based industrial corporation that engages in the production of bauxite, alumina, and aluminum products, with operations of over 10 countries.
At the end of the third quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $1.74 billion in Alcoa Corporation (NYSE:AA). The number of hedge funds that held stakes in the company remained the same for the second and third quarters of 2021.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alcoa Corporation (NYSE:AA) with 6.43 million shares worth more than $315 million at the end of the September quarter.
On November 16, Wolfe Research analyst Timna Tanners initiated coverage of Alcoa Corporation (NYSE:AA) with an Outperform rating and a $63 price target. The analyst cites a positive view on aluminum fundamentals and forecasts prices to remain elevated "at least" through 2023.
9. Rio Tinto Group (NYSE:RIO)
Impala Asset Management's Stake Value: $67M
Stock performance over the past 12 months through November 27: +4.4%
The world's second-largest metals and mining corporation, Rio Tinto Group (NYSE:RIO) is an Anglo-Australian multinational company that engages in mining raw materials including copper, aluminum, iron ore, lithium, and diamonds.
On December 9, Morgan Stanley analyst Alain Gabriel upgraded Rio Tinto Group (NYSE:RIO) to Overweight from Equal Weight with a price target of $79.19, up from $72.38.
According to third-quarter securities filings, Impala Asset Management holds over 1 million shares of Rio Tinto Group (NYSE:RIO), worth more than $67.18 million, accounting for 4.77% of the fund's investment portfolio. At the end of September, 20 funds out of the 867 tracked by Insider Monkey had stakes in the company, compared to 21 in the previous quarter.
Among the hedge funds being tracked by Insider Monkey, Fisher Asset Management is a leading shareholder in Rio Tinto Group (NYSE:RIO) with 13.35 million shares worth more than $892.6 million at the end of the September quarter.
8. Teck Resources Ltd (NYSE:TECK)
Impala Asset Management's Stake Value: $54.9M
Stock performance over the past 12 months through November 27: +27%
One of Canada's leading mining companies, Teck Resources Ltd (NYSE:TECK) is a diversified natural resources company that is involved in mining and mineral development, including coal for the steelmaking industry, copper, zinc, and energy.
On November 16, Wolfe Research analyst Timna Tanners initiated coverage of Teck Resources Ltd (NYSE:TECK) with an Outperform rating and $36.14 price target, citing a "constructive view" on the company's growth options.
Based on the 13F filings for the third quarter of 2021, Impala Asset Management holds over 2.2 million shares of Teck Resources Ltd (NYSE:TECK), worth more than $54.9 million, accounting for 3.9% of the fund's total investment portfolio.
Jacob Mitchell of Antipodes Partners is one of the biggest stakeholders of Teck Resources Ltd (NYSE:TECK) as of the end of the third quarter, according to the data tracked by Insider Monkey. Overall, 41 funds were bullish on the company by the end of the September quarter, compared to 40 in the previous quarter.
7. Louisiana-Pacific Corporation (NYSE:LPX)
Impala Asset Management's Stake Value: $57M
Stock performance over the past 12 months through November 27: -7%
Louisiana-Pacific Corporation (NYSE:LPX), commonly known as "LP", is a Tennessee-based building materials manufacturer. It operates as a provider of building solutions that meet the demands of builders, remodelers, and homeowners across multiple countries.
Robert Bishop's hedge fund reported holding 942,393 shares of Louisiana-Pacific Corporation (NYSE:LPX). These shares are valued at more than $57.8 million and represent 4.1% of his investment firm's portfolio. Of the 867 elite funds tracked by Insider Monkey, 38 held stakes worth $670.5 million in Louisiana-Pacific Corporation (NYSE:LPX) as of Q3.
Out of the hedge funds being tracked by Insider Monkey, Australia-based investment firm Platinum Asset Management is a leading shareholder in Louisiana-Pacific Corporation (NYSE: LPX) with 4.2 million shares worth more than $237 million.
“We reinvested the proceeds from the partial sale of Eagle Materials by increasing the Fund’s position in Louisiana-Pacific Corporation. We expect the company to deliver strong earnings and cashflow over coming years, and the company remains undervalued at its current share price.”
6. NVR, Inc. (NYSE:NVR)
Impala Asset Management's Stake Value: $64M
Stock performance over the past 12 months through November 27: -14%
NVR, Inc. (NYSE:NVR) is a Virginia-based home construction company that also operates a mortgage banking and title services business. The company's homebuilding segment sells and constructs homes under the Ryan Homes, NVHomes, and Heartland Homes brands.
On October 14, JPMorgan analyst Michael Rehaut lowered his price target on NVR, Inc. (NYSE:NVR) to $5,770 from $6,300, and kept a Neutral rating on the shares of the company.
As of the third quarter of 2021, Robert Bishop's Impala Asset Management owned 13,381 shares of NVR, Inc. (NYSE:NVR), worth $64.1 million. This represented 4.55% of the fund’s investment portfolio. Of the 867 elite funds being tracked by Insider Monkey, 32 held stakes in the company by the end of the September quarter.
Out of the hedge funds being tracked by Insider Monkey, Ric Dillon's Diamond Hill Capital is a leading shareholder in NVR, Inc. (NYSE:NVR), with 118,816 shares worth more than $569.6 million.
In the Q2 2021 investor letter of Bretton Fund, the fund mentioned NVR, Inc. (NYSE:NVR) and discussed its stance on the firm. Here is what the fund had to say:
“It’s no secret that we’re in the middle of a housing boom. Interest rates are low, household balance sheets are strong, millennials are aging into the house-buying market, and perhaps most of all, a combination of the 2008 housing bust and ever-tightening zoning restrictions mean that we have a huge shortage of housing.
In 1960, there were about 180 million Americans, and about 1.2 million houses were built. There are now roughly 330 million Americans—the population has almost doubled in 61 years—and we’re making only a million new houses a year. And this was the highest pace since 2007. To take an extreme example, California had fewer than 16 million people and built 190,000 houses in 1960; it has nearly 40 million people today, and builds just 120,000 houses a year. The federal mortgage company Freddie Mac estimates the current shortage of homes is 3.8 million units, or slightly more than the entire housing stock of New Jersey.
And yet…we’re still finding relative bargains in homebuilders. We’ve owned Virginiabased NVR for three years now, and though their stock has done really well (we’re up 76%), it’s still much cheaper than the rest of the market, trading at only 14.5x its next 12 months of estimated earnings compared to 22.5x for the S&P 500 as a whole. Traditionally, homebuilders have traded at a discount to the market, in large part because of their inability to convert accounting income into sweet, cold cash. Just as the culture of oil exploration demands that even the most lucrative finds are rolled back into more drilling instead of being distributed to shareholders, builders work hard to sell houses so they can buy more land.
NVR isn’t like other homebuilders. Instead of buying raw, undeveloped land and holding it for years while it’s entitled and infrastructure is built, NVR works with land developers who do this cash-intensive work for them. NVR will front 10% of the purchase price to secure an option to buy the finished land later, and they’ll pay a somewhat higher price for it upon completion. It’s more than worth it. A typical homebuilder will convert only half of its net income into free cash flow, while NVR will convert close to all of it, effectively doubling the value of a dollar of earnings.”
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Disclosure: None. Was Robert Bishop's Impala Asset Management Right About These 10 Stocks? is originally published on Insider Monkey.