The legendary investors of the market built their name and fortune on success, the paths they followed were as varied and interesting as any human endeavor. And one of the best stories of market success is that of Israel Englander.
England is one of the true geniuses working in the stock markets today. In 1988, with $35 million in seed money, Englander started Millennium Management. In the decades since, Englander had grown his business to a $50 billion behemoth. In short, when Englander talks – or trades – in the markets, investors pay attention.
Taking that into account, we wanted to get all the details on three stocks that the billionaires fund recently picked up. When we ran the tickers through Investing Insightswe found that each name has a 'Perfect 10' smart score scores. Let's take a closer look.
ATAI Life Sciences (ATAI)
The first of Englander's new positions is ATAI Life Sciences (NASDAQ:), a clinical-stage biopharmaceutical company with a focus on mental health – a key area of ??pharmacology with many unmet medical needs for a research firm to address. explore. ATAI was founded in 2018 and went public through an IPO last June.
The company's IPO was initially announced with 14,286 million shares in the market priced between $13 and $15 each. The actual event was upgraded to 15 million shares, and priced at $15, the top of the range. The company realized more than $258 million in gross proceeds from the sale.
ATAI has an active research pipeline, with 11 separate tracks under investigation. While 6 are still in preclinical stages, the company has 4 ongoing clinical trials and a 'strategic investment' in a fifth study with fellow pharmaceutical company Compass. The company's clinical trials look at new drugs for a range of conditions, including generalized anxiety disorder, treatment-resistant depression, opioid use and schizophrenia-related cognitive impairment.
The most advanced product is RL-007, an orally dosed compound in clinical trials for schizophrenic thinking disorders. The drug has begun testing in a Phase 2a clinical trial for safety and tolerability; tolerability is a major hurdle in the development of effective drugs for the treatment of schizophrenia. The topline results of the trial are expected by the end of this year.
The second advanced pipeline project is Compass' strategic investment in the development of COMP360. This drug candidate is a synthetic psilocybin formulation intended as a 5=HT2A-R agonist with oral indication as a rapid-acting antidepressant for treatment-resistant depression. The Phase 2b clinical trial completed dosing patients in June this year and topline results are expected by the end of 2021. The study enrolled 233 patients, making it the largest clinical trial of psilocybin ever.
Israel Englander and Millennium have sung ATAI's praises. In the second quarter, the hedge fund bought 519,486 shares of ATAI as a sign of confidence. Englander's stake in the company is currently worth $8.73 million.
5-star analyst Charles Duncan, of Cantor, also likes what he sees. Duncan states that the broad pipeline gives ATAI multiple "shots on target".
Duncan supports his position, writing: "ATAI had a productive 1H21, in our view, in which it closed its cash balance and bolstered its cash balance with validation from both institutional investors and strategic collaborators, to support itself and its subsidiaries through 2022, according to our model Remember that a common de-risking denominator of the company's pipeline is that each compound has some evidence of efficacy in human use, whether based on documents from the 1960s or use in other geographic areas. In 2H21, we look forward to the company's first data readouts in which we will observe for the first time the efficacy of its compounds in randomized, placebo-controlled trials."
To this end, Duncan estimates ATAI at Overweight (i.e. Buy), along with a price target of $45. Meeting Duncan's goal could yield a return of 166%.
Overall, the 11 recent reviews of this stock include 10 buys and only 1 hold, making the consensus a strong buy. The stock has an average price target of $28, which indicates there is room for an increase of about 66% from the current trading price of $16.90. (See ATAI stock analysis)
Ovintiv (OVV)
Next we have Ovintiv (NYSE:), a major major oil producer in the North American energy sector. The company's core assets are located in the Permian Basin of Texas, the nearby Anadarko Basin of Oklahoma, and the Montney Stage on the border between British Columbia and Alberta in the Canadian Rockies. Ovintiv has secondary assets in the Bakken Fields of North Dakota and in the Uinta Basin in Utah, aligned with a strategic stance to support key pieces with quality secondary holdings.
The quality of Ovintiv's holdings can be judged by the company's recent performance; since the second quarter of 2020, Ovintiv has posted four consecutive quarterly profits. The most recent quarterly report, for 2Q21, showed revenue of $2.49 billion, the highest in more than two years. EPS came in at a sharp loss, at 79 cents per common share.
Despite the loss of earnings per share, management is confident. The company reported free cash flow of $350 million for the quarter and $890 million to date, stating it had reduced net debt by $1.2 billion in the quarter, leaving $5.2 billion on its books. . The company expects to reach a net debt target of $4.5 billion by the end of the year.
England is one of those impressed by OVV. As a result of a new position for the fund, Englander's Millennium bought 892,475 shares in the second quarter. The value of this property? It lands at $25.3 million at its current valuation.
The billionaire is not the only OVV fan. Analyst Gabe Daoud, writing for Cowen, rates OVV as an outperform (i.e. buy), and his price target of $39 implies a one-year upside potential of ~38%.
"E&P shares continue to be FCF-driven stories, and OVV stands out with best-in-class returns and rate of change potential on RoC… The numbers are too convincing in our opinion to ignore, as again we think OVV offers robust yield and will likely communicate an incremental RoC in the coming months… OVV is now a top choice," opined Daoud.
This oil and gas player has no less than 15 recent stock reviews on file – and they split 13 to 2 in favor of the Buys over the Holds for a Strong Buy consensus. The shares are priced at $28.26 and their average target of $40.75 indicates there is room for ~44% gains in the coming year. (See OVV stock analysis)
Graham Corporation (GHM)
The last English pick we look at is Graham Corporation (NYSE:), a maker of critical, high-tech equipment — including custom ejectors, vacuum suction systems, surface condensers, and various turbomachinery solutions for transferring energy between fluids and rotors. The company takes care of the manufacturing process from design through the factory floor to delivery, serving the aerospace, chemical and petrochemical, defense, energy and medical markets.
Graham's fiscal year runs from April to March, putting the company well into fiscal 2022. In full fiscal year 2021, which coincided with the worst of the COVID crisis, Graham reported total revenue of $97.48 million, up 7.5% from the $90.6 million reported in 2017. fiscal 2019, before the crisis started. Last month, the company reported results for fiscal 1Q22, with $20.2 million at the top. This was almost 21% year-on-year. Graham reported a $20.9 million order increase along with a $235.9 million work order backlog; of that backlog, 80% would lie with the US defense industry.
During the quarter ended June 30, Graham made a major acquisition of Barber-Nichols, a competitive supplier of engineering equipment to the defense and aerospace industries. The transaction is valued at approximately $70 million, paid out 87% in cash and the remaining 13% in inventory.
During the month of August, Graham reported that it had received more than $20 million in new work orders for the quarterly do date. The new orders came primarily from the defense and aerospace, energy field, and chemical and petrochemical industries, but also included new work in advanced energy applications and HVAC.
In all of this, the company paid its last dividend, in August, at 11 cents per common share. This was the ninth quarter in a row with the dividend at this level; the annual payment of 44 cents gives a return of 3.6%. Graham has a 12-year history of maintaining and delaying dividend payments.
This background paints Graham as a growth-oriented mover in the high-end manufacturing field – and Englander clearly saw enough to love when his company raised 157,512 shares for its opening position in GHM. This bet is currently worth $1.9 million.
Graham will see a change in leadership in the near term as CEO Jim Lines has retired and is replaced as president and CEO by Daniel Thoren. Colliers analyst Richard Ryan does not see this as a problem, however, and writes that the switch is unlikely to affect the company's operations.
“Management remains confident in its expectations for the full year. It will be a year with a lot of back end, especially 4Q22 (March). FY22 is a transition year with Barber-Nichols contributing just 10 months. In the longer term, there are options around two platforms: Defence/Space and Energy/Petrochemistry. The first provides insight into future naval programs (carriers and submarines) and new space programs. The latter sees opportunities in China and India, with domestic refining considered stable and petrochemical applications emerging,” Ryan wrote.
These comments support the analyst's buy assessment, and his $20 price target suggests room for ~67% share growth over the next 12 months.
Graham has stayed somewhat under the radar, picking up only 3 recent stock reviews. However, these all agree that the stock is a buy proposal, making Strong Buy's consensus rating unanimous. GHM is priced at $12, and its average price target of $21.33 indicates it has 75% upside potential this year. (See GHM stock analysis)
For more stock trading ideas at attractive valuations, visit Investing Insights.
