In this article, we discuss the 10 best value stocks to buy according to billionaire Dan Loeb. If you want to see more of the value stocks that Dan Loeb is favoring, click 5 Best Value Stocks to Buy According to Billionaire Dan Loeb.
Dan Loeb founded his hedge fund, Third Point, back in 1995 with a borrowed $3.3 million from his friends and family. He rose to prominence after his activist shareholder strategies paid off, and he successfully executed numerous corporate takeovers over the years of his career. As of October 10, 2022, the activist investor is worth $3.5 billion, according to data from Forbes. As of June 30, 2022, Dan Loeb manages over $4.22 billion in 13F securities through his hedge fund. In his letter to investors issued in May this year, Dan Loeb said that the stock market’s present level of volatility is a reaction to the economy’s ongoing, subtle but significant changes. He contends that investors are not responding to the market “shift” in a sufficient way to change their behavior.
In the second quarter, Third Point 13.7%, compared to the S&P 500’s 8.5% annualized return. In the second quarter, the fund sold 21 stocks and acquired 4 new stocks. The fund also decreased its holdings in 14 equities while increasing its purchases in 4 of them. The fund has a top 10 holdings concentration of 74.85%, with the Utilities and Telecommunications sector comprising 24.19% of the portfolio. Its largest holding is PG&E Corp. (NYSE:PCG), with shares held of 65.4 million.
Along with the 10 best value stocks that we are going to discuss in this article, SentinelOne, Inc. (NYSE:S), PG&E Corporation (NYSE:PCG), and Danaher Corporation (NYSE:DHR) are some of the most notable names in Third Point’s portfolio.
Dan Loeb of Third Point
Our Methodology
We selected value stocks from the 13F portfolio of Dan Loeb’s Third Point. The P/E ratio is mentioned as of October 9 for all securities. Stocks with a price-to-earnings ratio of under 25 were picked for the list.
10. T-Mobile US, Inc. (NASDAQ:TMUS)
Third Point’s Stake Value: $65.252 Million
Percentage of Third Point’s 13F Portfolio: 1.54%
Number of Hedge Fund Holders: 96
P/E Ratio (Non-GAAP) as of October 09: 23.86
T-Mobile US, Inc. (NASDAQ:TMUS) was founded in 1994 and is based in Bellevue, Washington. T-Mobile US, Inc. (NASDAQ:TMUS), together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands.
On September 9, Raymond James analyst Ric Prentiss maintained a Strong Buy rating on T-Mobile US, Inc. (NASDAQ:TMUS) stock and raised the price target to $178 from $175, noting that the board had authorized a $14 billion stock repurchase, which is positive for value creation.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. (NASDAQ:TMUS), with 9.2 million shares worth more than $1.2 billion. Dan Loeb’s Third Point exited its complete position in T-Mobile US, Inc. (NASDAQ:TMUS) during Q4, 2017. It has now again initiated a position in T-Mobile US, Inc. (NASDAQ:TMUS) by acquiring 485,000 of its shares worth around $65 million.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and T-Mobile US, Inc. (NASDAQ:TMUS) was one of them. Here is what the fund said:
“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile US, Inc. (NASDAQ:TMUS). Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”
09. Hertz Global Holdings, Inc. (NASDAQ:HTZ)
Third Point’s Stake Value: $99.158 Million
Percentage of Third Point’s 13F Portfolio: 2.34%
Number of Hedge Fund Holders: 49
P/E Ratio (Non-GAAP) as of October 09: 4.08
Hertz Global Holdings, Inc. (NASDAQ:HTZ) was founded in 1918 and is based in Estero, Florida. Hertz Global Holdings, Inc. (NASDAQ:HTZ) operates as a vehicle rental company. It operates through two segments, Americas Rental Car and International Rental Car.
Since declaring bankruptcy during the coronavirus epidemic, Hertz Global Holdings, Inc. (NASDAQ:HTZ) has been on the road to recovery. The company’s Q2 2022 revenues of $2.34 billion are $0.47 billion more than they were during the same period in the previous year. It also beat the EPS estimates by $0.02 during Q2. The business’s strategy shift towards EVs aims to strengthen its competitive standing and financial performance.
Along with SentinelOne, Inc. (NYSE:S), PG&E Corporation (NYSE:PCG), and Danaher Corporation (NYSE:DHR), Dan Loeb held a significant stake in Hertz Global Holdings, Inc. (NASDAQ:HTZ) during Q2. Mr. Dan Loeb’s hedge fund held a $99 million stake in Hertz Global Holdings, Inc. (NASDAQ:HTZ) by the end of this year’s second quarter. This came through the fund owning 6.2 million shares of the company and it represented 2.34% of its investment portfolio. Insider Monkey’s Q2 2022 survey of 895 hedge funds outlined that 49 funds had also invested in Hertz Global Holdings, Inc. (NASDAQ:HTZ).
08. Antero Resources Corporation (NYSE:AR)
Third Point’s Stake Value: $103.992
Percentage of Third Point’s 13F Portfolio: 2.46%
Number of Hedge Fund Holders: 64
P/E Ratio (Non-GAAP) as of October 09: 9.28
Antero Resources Corporation (NYSE:AR) was formerly known as Antero Resources Appalachian Corporation and changed its name to Antero Resources Corporation in June 2013. Antero Resources Corporation (NYSE:AR) was founded in 2002 and is based in Denver, Colorado. Antero Resources Corporation (NYSE:AR), an independent oil and natural gas company, acquires, explores for, develops, and produces natural gas, natural gas liquids, and oil properties in the United States.
On August 18, Mizuho analyst Vincent Lovaglio cut his price target for Antero Resources Corp (NYSE:AR) from $53 to $49 while maintaining a Buy rating on the stock. The analyst claims that after the Q2 results, his larger thesis for the exploration and production industry remains valid. According to Lovaglio, Antero Resources Corp (NYSE:AR) represents a reasonably attractive value when compared to the larger market because structural undersupply, driven by multi-year underinvestment, should continue to sustain higher than anticipated commodity prices and better than anticipated cash returns.
Among the hedge funds tracked by Insider Monkey during Q2, a total of 64 hedge funds were holding a stake in AnteroAntero Resources Corp (NYSE:AR). Antero Resources Corporation (NYSE:AR)’s largest investor is Zach Schreiber’s Point State Capital which owns 4.2 million shares that are worth $129 million. Dan Loeb’s Third Point acquired 3.39 million shares of Antero Resources Corp (NYSE:AR) during Q2, valued at $103.99 million.
07. Cenovus Energy Inc. (NYSE:CVE)
Third Point’s Stake Value: $138.298 Million
Percentage of Third Point’s 13F Portfolio: 3.27%
Number of Hedge Fund Holders: 42
P/E Ratio (Non-GAAP) as of October 09: 12.01
Cenovus Energy Inc. (NYSE:CVE) is an integrated oil and natural gas company based in Calgary, Alberta. On October 13, Scotiabank analyst Jason Bouvier lowered his price target on Cenovus Energy Inc. (NYSE:CVE) to C$33 from C$34 and kept an Outperform rating on the shares. The stock has gained 40.7% value year to date. As of Q2 2022, 42 of the 895 hedge funds tracked by Insider Monkey owned shares of Cenovus Energy Inc. (NYSE:CVE), valued at $2.9 billion. Soroban Capital Partners is its largest shareholder, with ownership of 50.3 million shares valued at $957 million.
Here is what L1 Capital specifically said about Cenovus Energy Inc. (NYSE:CVE) in its Q2 2022 investor letter:
“MEG Energy and Cenovus Energy Inc. (NYSE:CVE): We continue to remain positive on the outlook for Energy. While a potential U.S. recession would result in softer oil demand, we believe this would be more than outweighed by China re-opening over the coming year (which would see a major lift in car and air traffic). Oil supply continues to remain constrained with sustained declines in global inventories and OPEC+ remains unable to grow production significantly. With the sell-off in energy stocks, MEG and Cenovus are currently generating more than 20% of their market cap in cash flow with large dividends and share buybacks to come.
Cenovus Energy (Long +14%) shares rallied driven by continued strong free cash flow generation, as well as being positioned to benefit from strong refining margins and downstream operations. The company recently announced a significant increase in dividends, which gives us greater confidence on the potential for a 100% return of free cash flow generation via dividends and buybacks from early CY23. Given the long-life nature of its oil sand assets and its low cost of production, we estimate the company is free cash flow break-even at an oil price of ~US$40/bbl. At present, oil prices are more than double this break-even point, implying considerable upside to consensus cash flow estimates (if prices remain near current levels). There are also additional value realisation catalysts with the company continuing to progress the de-gearing of its balance sheet via organic cash generation and asset sales.”
06. CSX Corporation (NASDAQ:CSX)
Third Point’s Stake Value: $144.283 Million
Percentage of Third Point’s 13F Portfolio: 3.41%
Number of Hedge Fund Holders: 63
P/E Ratio (Non-GAAP) as of October 09: 15.31
CSX Corporation (NASDAQ:CSX) was incorporated in 1978 and is situated in Jacksonville, Florida. CSX Corporation (NASDAQ:CSX), together with its subsidiaries, provides rail-based freight transportation services. As of October 9, the stock is down by 27.80% year-to-date. In the second quarter of 2022, CSX Corp. (NYSE:CSX) posted an EPS of $0.5, beating estimates of $0.47 by $0.03. Furthermore, in Q2 2022, the company reported total revenue of $3.82 billion. During Q2, 2022, CSX Corp. (NYSE:CSX) was found in 63 hedge funds’ 13F portfolios. The company maintains one of the longest track records of dividend growth in the transport sector, extending to 17 years. It currently pays a quarterly dividend of $0.10 per share and has a yield of 1.50%, as of October 09.
On September 30, while maintaining an Overweight rating on the shares, Barclays analyst Brandon Oglenski cut his price target for CSX Corp. (NYSE:CSX) from $40 to $35. Labor agreements and weaker volume results this fall will put pressure on railroad margins in the short term, according to Oglenski, who forecasts “less robust” 2023 earnings. Although the analyst notes that railroad estimates will probably be revised downward throughout the Q3 reporting season, the valuation compression for many stocks is “at least getting close to prior recessionary periods.”
Clearbridge Investments mentioned CSX Corporation (NYSE:CSX) in their Q4 2021 investor letter. This is what they had to say:
“On a regional basis, the U.S. and Canada was the top contributor to quarterly performance, of which U.S. rail operators CSX (NYSE:CSX) was among the lead performers. CSX (NYSE:CSX) is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX (NYSE:CSX) is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX (NYSE:CSX) performed well during the quarter after the company beats market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”
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Disclosure: None. 10 Best Value Stocks to Buy According to Billionaire Dan Loeb is originally published on Insider Monkey.
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