The Smart Money Is Buying These 10 Stocks

I got into the investment business on a steady diet of Graham and Whitman. But that was the 1980s and early 1990s – the golden age of dealmakers and junk bonds, leveraged buyouts and greenmail.

Long before the players became gentlemanly private equity titans and activist investors, they were raiders, vultures, and even, in one famous book about the RJR deal, barbarians.

Legendary fortunes were made, reputations created and shattered.

All of these high-return, high-flying strategies shared a common thread. Leveraged buyouts, distressed investing and risk arb were all just variations on the value investing theme.

The private equity giants of today are still doing this. Thanks to their quarterly filings, you can copy their investment approach—a strategy that has beaten the markets 4-to-1 since 2001.

Even the creation of the junk bond market was based on Michael Milken’s studies on the returns from buying undervalued lower-rated bonds, a strategy founded on basic value investing principles.

The big winners in all these strategies took value investing and added debt.

It was like adding nitro to the tank of a stock car. If you could control the vehicle at high speed through the corners, there was no race you couldn’t win.

Although the golden age of risk arb and the smaller investors’ ability to compete in distressed debt are all behind us, we can still use the combination of debt and value investing to beat the index by a wide margin.

When the 13F filings come out every quarter, most of the short-attention-spans in the market today head for the same filings at the same time.

Warren, Cathie, Stanley, Tepper and Seth still get all the attention.

I may get around to those at some point, but one of the first places I turn is to the leading private equity firms.

Firms like Apollo Global Management APO, Blackstone BX and KKR KKR still use basic principles of value investing along with a healthy dose of debt to drive massive returns for themselves and their investors.

What most people do not realize is that these firms also have large public securities portfolios, and stealing their ideas has created some massive market-beating opportunities.

If you had bought shares of Mr. Cooper COOP when it first appeared in KKR’s public portfolio in 2018, you could have made almost ten times your money.

Buying shares of AppLovin APP when KKR first revealed its position would have resulted in gains of almost seven times your initial cost.

DoorDash DASH would have delivered gains of 3x in just a few years.

Owning the firm’s top ten holdings since 2001 would have beaten the market by a 4-to-1 margin.

I do not care what the media darling investors bought last quarter. Tell me what the profit pirates at KKR own, and I can create an opportunity to score massive gains.

The current top ten holdings for KKR are:

BrightSpring Health Services BTSG provides home and community-based health services to complex patients, positioning itself in a niche with long-term demographic tailwinds. The company is newly public and pursuing scale through both organic growth and targeted acquisitions in behavioral and specialty pharmacy segments.

Henry Schein HSIC is a global distributor of dental and medical supplies primarily serving small- and mid-sized practices. The company generates stable cash flow and has a long history of disciplined capital deployment, though growth is modest and sensitive to procedure volume trends.

BrightView BV is the largest commercial landscaping services provider in the U.S., with recurring maintenance revenue making up the majority of its business. Under new leadership, the firm is undergoing a restructuring push to improve margins and reduce debt after years of underperformance.

KKR Real Estate Finance Trust KREF is a commercial mortgage REIT focused on senior loans backed by institutional-grade real estate, primarily in urban markets. It offers a high dividend yield but remains exposed to office market weakness and refinancing risk in a higher-rate environment.

Madison Square Garden Sports MSGS owns marquee sports franchises, including the New York Knicks and Rangers, offering investors a rare asset-backed play on professional sports. Valuation is driven more by franchise appreciation than earnings power, making it a long-duration, event-driven asset.

Norwegian Cruise Line NCLH is a leading cruise operator with a strong focus on premium and upscale offerings across its brand portfolio. The company is rebounding from pandemic-era disruptions, though it still carries significant leverage and remains sensitive to fuel and labor costs.

Bausch Health BHC is a diversified specialty pharmaceutical company with exposure to eye health, dermatology, and branded generics. However, the company is still burdened by high legacy debt. While it’s pursuing a turnaround strategy and asset divestitures, legal overhangs and weak cash flow remain headwinds.

FS KKR FSK is one of the largest business development companies, focused on senior secured lending to middle-market companies with an emphasis on downside protection. It offers a double-digit yield and strong sponsor backing, though credit quality and NAV stability require close monitoring.

Crescent Energy CSGY is a cash-generating E&P company with a private equity-backed structure and a focus on acquiring and optimizing mature, low-decline assets. The firm maintains a disciplined capital return framework and hedging strategy, making it a defensive upstream play with yield upside.

BridgeBio Pharma BBIO is a commercial-stage biopharmaceutical company developing treatments for genetic diseases and cancers with clear genetic drivers. Its lead drug, Attruby (acoramidis), approved in late 2024 for transthyretin amyloid cardiomyopathy, significantly outperformed sales expectations in its first full quarter, positioning the company as a strong competitor in the cardiomyopathy treatment market.

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