Top 8 Stock Picks of Jeff Ubben’s Inclusive Capital

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In this article, we will look at top 8 stock picks of Jeff Ubben’s Inclusive Capital. If you want to skip reading about Jeff Ubben’s investment philosophy and his hedge fund’s returns, you can go directly to Top 3 Stock Picks of Jeff Ubben’s Inclusive Capital.

Jeff Ubben pioneered the impact investing and socially responsible investing trends in the hedge fund industry when he was leading ValueAct Capital, which he co-founded in June 2000. Jeff Ubben grew ValueAct Capital into a $16 billion hedge fund. Mr. Ubben retired from his role as CEO of ValueAct Capital in June 2020 to focus on socially responsible investing. Jeff Ubben then co-founded Inclusive Capital with Lynn Forester de Rothschild in 2020. Inclusive Capital is an ESG hedge fund that is focused on making long-term investments in sustainable businesses. As of March 31, Jeff Ubben manages more than $969.11 million in 13F securities through Inclusive Capital.

Jeff Ubben’s Investment Philosophy

Jeff Ubben has received wide coverage in news and media regarding his investment strategies, which were always driven by sustainability and the long-term growth of businesses. He pioneered the “friendly activist” investing strategies by which he would collaborate with organizations on the board level and find solutions to make business models more ESG-friendly and sustainable. Back when he was managing money at ValueAct Capital, he was interviewed by CNBC in 2019 about his approach to investing. Here is an excerpt from his interview with CNBC’s Sara Eisen:

“To a certain extent, I want to try to work with public market investors to get the long term back right now. So I’ve been in the business for thirty years and there’s been this profound shift from shareholder passivity to shareholder primacy we’ve gone from one end of the continuum to the other to an extreme and whenever we hit extremes we need a rebalance, I think. So the idea that does the extreme is this accepted principle that corporate governance serves only one purpose which is that to maximize shareholder value, I think that specifically, that means that the role of corporate governance is not in the interest of the overall firm or in the interest of assisting in achieving a corporate purpose. So you get this weird dynamic where profit follows purpose or the idea that purpose you know profit leads right. That to me is just asked backwards right so in this way, I think capital markets and public companies are showing their limitations in terms of how they can play a role in societal good.”

When Jeff Ubben retired from ValueAct Capital, he was interviewed by the Financial Times. In the interview, Mr. Ubben reportedly said that activist hedge funds should shift their focus toward impact investing as it is the next rational thing for them to do. Mr. Ubben said that he plans to employ his investment strategies and stay true to the ESG approach that he developed over his career. Mr. Ubben spoke about how investors that govern companies today are more concerned about near-term returns and buybacks than they are concerned about society and nature. He said that he has to make sure that his peers recognize the significance of long-term returns “because otherwise… you’re not really changing anything”.

Mr. Ubben said:

“Finance is, like, done. Everybody’s bought everybody else with low-cost debt. Everybody’s maximised their margin. They’ve bought all their shares back . . . There’s nothing there. Every industry has about three players. Elizabeth Warren is right.”

Mr. Ubben further spoke about how he believes that maximizing shareholder value cannot “peacefully coexist” with socially responsible investing.

Inclusive Capital’s Portfolio and Returns

In the first quarter of 2022, Inclusive Capital added 1 new security to its portfolio and reduced its stakes in 4 of its previously held investments. As of March 31, the fund has 8 holdings, concentrated in energy, finance, consumer discretionary, and utilities & telecommunications. Over the past 5 quarters, Jeff Ubben’s Inclusive Capital has been returning negative numbers quarter on quarter, with an exception of the third quarter of 2021, in which the fund returned 5.59% quarter on quarter. The fund’s average quarter-on-quarter returns from Q1 2021 to Q1 2022 stand at a negative 7.16%.

Top 8 ESG Stock Picks of Jeff Ubben’s Inclusive Capital Partners

Jeffrey Ubben, Founder of ValueAct Capital and Inclusive Capital Partners

Our Methodology

These stocks were picked from Jeff Ubben’s first-quarter 2022 investment portfolio and were ranked in increasing order of Inclusive Capital’s stake in them.

Top 8 Stock Picks of Jeff Ubben’s Inclusive Capital

8. Exxon Mobil Corporation (NYSE:XOM)

Inclusive Capital’s Stake Value: $14,618,000 

Percentage of Inclusive Capital’s 13F Portfolio: 1.5%

Number of Hedge Fund Holders: 83

As of Q1 2022, Inclusive Capital’s stake in Exxon Mobil Corporation (NYSE:XOM) is valued at $14.61 million. The investment covers 1.5% of Jeff Ubben’s 13F portfolio. As of July 22, Exxon Mobil Corporation (NYSE:XOM) has a trailing twelve-month PE ratio of 14.44 and is offering a forward dividend yield of 3.94%, which the company supports with its free cash flows of $40.06 billion.

Exxon Mobil Corporation (NYSE:XOM) is working towards becoming a carbon-neutral company and announced that it plans to achieve net-zero emissions from its entire operations by 2050, and by 2030, the company plans on achieving net-zero emissions from its Permian Basin operations.

Wall Street analysts are bullish on Exxon Mobil Corporation (NYSE:XOM). On July 19, Piper Sandler analyst Ryan Todd upgraded Exxon Mobil Corporation (NYSE:XOM) to Overweight from Neutral and raised his price target to $109 from $102. On July 20, HSBC analyst Gordon Gray raised his price target on Exxon Mobil Corporation (NYSE:XOM) to $97.50 from $92.50 and reiterated a Hold rating on the shares.

At the close of Q1 2022, 83 hedge funds were long Exxon Mobil Corporation (NYSE:XOM) and held stakes worth $8.55 billion in the company This is compared to 71 positions in the prior quarter with stakes worth $5.38 billion. The hedge fund sentiment for the stock is positive.

Saturna Capital, an investment management firm, mentioned Exxon Mobil Corporation (NYSE:XOM) in its “Amana Funds” fourth-quarter 2021 investor letter. Here is what the firm said:

“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”

In addition to Exxon Mobil Corporation (NYSE:XOM), some large-cap companies such as Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:FB), and Alphabet Inc. (NASDAQ:GOOG) are also aiming to achieve net-zero carbon emission from their operations by 2030.

7. Unifi, Inc. (NYSE:UFI)

Inclusive Capital’s Stake Value: $25,649,000 

Percentage of Inclusive Capital’s 13F Portfolio: 2.64%

Number of Hedge Fund Holders: 12

Unifi, Inc. (NYSE:UFI) engages in the manufacture and sale of recycled and synthetic products in the United States, Brazil, China, and internationally. The company operates through four business segments: Polyester, Nylon, Brazil, and Asia. Unifi, Inc. (NYSE:UFI) was founded in 1969 and is based in Greensboro, North Carolina. The company is known for its REPREVE brand, which offers high-quality performance fibers that are made from 100% recycled materials, including post-consumer plastic bottles and pre-consumer waste. The company’s fibers are being widely used in automotive interiors, clothing & apparel, and home goods.

As of March 31, Inclusive Capital owns over 1.4 million shares of Unifi, Inc. (NYSE:UFI) which amounts to a stake of $25.64 million. The investment covers 2.64% of Jeff Ubben’s 13F portfolio.

In May 2022, Unifi, Inc. (NYSE:UFI) repurchased 0.5 million shares of its common stock for $6.8 million under its share repurchase program. During the fiscal second quarter of 2022, the company repurchased a total of roughly 0.61 million shares of its common stock for $9.2 million. The company can further buy roughly $38.9 million worth of shares of its common stock under its share repurchase program by December 31, 2022. Unifi, Inc. (NYSE:UFI) is undervalued and as of July 22, the stock has a trailing twelve-month PE ratio of 10.81.

At the end of Q1 2022, 12 hedge funds were bullish on Unifi, Inc. (NYSE:UFI) and held stakes worth $68.56 million in the company. This is compared to 13 positions a quarter ago with stakes worth $96.31 million.

6. AppHarvest, Inc. (NASDAQ:APPH)

Inclusive Capital’s Stake Value: $31,168,000

Percentage of Inclusive Capital’s 13F Portfolio: 3.21%

Number of Hedge Fund Holders: 17

AppHarvest, Inc. (NASDAQ:APPH) is an applied agricultural technology company that develops and operates indoor farms to grow non-GMO produce free of chemical pesticide residues. The company’s products include tomatoes, berries, peppers, cucumbers, and salad greens among other fruits and vegetables. AppHarvest, Inc. (NASDAQ:APPH) was founded in 2018 and is headquartered in Morehead, Kentucky.

AppHarvest, Inc.’s (NASDAQ:APPH) goal is to build a resilient food system through organic and sustainable farming. The company uses approximately 90% less water than the global average in its operations and carries them out in hybrid lighting facilities which consume 40% less energy than traditional lighting facilities.

As of Q1 2022, Inclusive Capital owns more than 5.79 million shares of AppHarvest, Inc. (NASDAQ:APPH). The fund’s stakes in the company are valued at $31.16 million, which covers 3.21% of its 13F portfolio.

At the close of Q1 2022, 17 hedge funds were eager on AppHarvest, Inc. (NASDAQ:APPH) and disclosed stakes worth $50.59 million in the company. This is compared to 13 positions a quarter ago with stakes worth $39.41 million. The hedge fund sentiment for the stock is positive.

5. Nikola Corporation (NASDAQ:NKLA)

Inclusive Capital’s Stake Value: $86,474,000 

Percentage of Inclusive Capital’s 13F Portfolio: 8.92%

Number of Hedge Fund Holders: 16

Nikola Corporation (NASDAQ:NKLA) is a technology innovator and integrator that works to develop energy and transportation solutions. The company’s two primary businesses are trucking and energy. The company’s trucking division develops and commercializes zero-emission hydrogen-electric and battery-electric vehicles for the trucking sector. The company’s energy business develops and constructs networks of hydrogen fueling stations and offers BEV charging solutions for its FCEV and BEV customers, as well as other third-party customers.

On July 18, Deutsche Bank analyst Emmanuel Rosner trimmed his price target on Nikola Corporation (NASDAQ:NKLA) to $7 from $11 and reiterated a Hold rating on the shares.

As of March 31, Inclusive Capital owns more than 8 million shares of Nikola Corporation (NASDAQ:NKLA) which amounts to a stake of $86.47 million. The investment covers 8.92% of Inclusive Capital’s 13F portfolio.

At the end of Q1 2022, 16 hedge funds held stakes in Nikola Corporation (NASDAQ:NKLA) worth $199.52 million. This is compared to 13 positions a quarter ago with stakes worth $198.72 million. The hedge fund sentiment for the stock is positive.

4. Strategic Education, Inc. (NASDAQ:STRA)

Inclusive Capital’s Stake Value: $100,854,000 

Percentage of Inclusive Capital’s 13F Portfolio: 10.40%

Number of Hedge Fund Holders: 12

Strategic Education, Inc. (NASDAQ:STRA) provides affordable education services through campus-based and online post-secondary education, and programs to develop job-ready skills in individuals. The company operates through three segments: U.S. Higher Education, Australia/New Zealand, and Education Technology Services. Strategic Education, Inc. (NASDAQ:STRA) was founded in 1892 and is headquartered in Herndon, Virginia.

As of Q1 2022, Inclusive Capital’s stake in Strategic Education, Inc. (NASDAQ:STRA) is valued at $100.85 million. The investment covers 10.40% of Jeff Ubben’s 13F portfolio.

At the close of Q1 2022, 12 hedge funds disclosed ownership of stakes in Strategic Education, Inc. (NASDAQ:STRA). The total value of these stakes amounted to $137.59 million, up from $122.38 million a quarter ago with 13 positions.

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Disclosure: None. Top 8 Stock Picks of Jeff Ubben’s Inclusive Capital is originally published on Insider Monkey.