In this article, we discuss 10 best value stocks to buy according to Robert Bishop’s Impala Asset Management. If you want to see more value stocks in Bishop’s portfolio, click 5 Best Value Stocks to Buy According to Robert Bishop’s Impala Asset Management.
Robert Bishop employs a long-term value investing approach at his $1.5 billion flagship fund at Impala Asset Management. He does not select mainstream and trending market names, rather searches for deep value propositions at discounted rates.
In April 2022, the flagship fund at Robert Bishop’s Impala Asset Management posted a 10% gain. The robust performance in comparison to several other hedge funds that suffered losses so far this year can be attributed to the lack of tech stocks and other growth plays in the Impala portfolio. The hedge fund was safe largely from the broader tech selloff. In addition to that, value stocks are positioned to tackle market volatility better than growth names, and Impala Asset Management is primarily a value fund.
Robert Bishop’s hedge fund invests in the transportation, materials, energy, and consumer discretionary sectors, and some of the most notable securities owned by the fund in Q1 2022 included Alphabet Inc. (NASDAQ:GOOG), ConocoPhillips (NYSE:COP), and Moderna, Inc. (NASDAQ:MRNA).
Our Methodology
We used the Q1 2022 portfolio of Robert Bishop’s Impala Asset Management for this analysis, picking the hedge fund’s most prominent value picks for the quarter. To provide further context on the stocks, we have mentioned the Q1 earnings and analyst ratings.
Elite funds pour billions into their stock picking strategies and hire some of the best brains to design their portfolios. Insider Monkey believes imitating their stock picks is a wise strategy. This is why the hedge fund sentiment around the holdings as of Q1 2022 is mentioned from a database comprising 912 elite funds.
Robert Bishop
Source: Impala Asset Management
Best Value Stocks to Buy According to Robert Bishop’s Impala Asset Management
10. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 39
P/E Ratio as of May 25: 2.94
Northrop Grumman Corporation (NYSE:NOC) is one of the best value stocks in Robert Bishop’s Impala Asset Management portfolio, with the hedge fund acquiring 20,000 shares of the company in Q1 2022, worth about $9 million. Northrop Grumman Corporation (NYSE:NOC) is a new arrival in Bishop’s Q1 portfolio and it operates as an aerospace and defense company worldwide.
On May 18, Northrop Grumman Corporation (NYSE:NOC) declared a $1.73 per share quarterly dividend, a 10.2% increase from its prior dividend of $1.57. The dividend is payable on June 15, to shareholders of the company as of May 31.
Argus analyst John Eade on May 12 raised the price target on Northrop Grumman Corporation (NYSE:NOC) to $495 from $420 and reiterated a Buy rating on the shares. The company has consistently reported positive results in recent years, trumping Street forecasts regardless of whether defense spending is rising or falling, the analyst told investors in a research note. Though most of the recent gain in Northrop Grumman Corporation (NYSE:NOC) shares was in response to the Russian invasion of Ukraine, the stock’s valuation is attractive, with the current P/E ratio clocking in below the midpoint of the historical range, the analyst added.
Among the hedge funds tracked by Insider Monkey, Northrop Grumman Corporation (NYSE:NOC) was found in 39 public hedge fund portfolios at the end of Q1 2022, up from 33 funds in the last quarter. Donald Yacktman’s Yacktman Asset Management reported a prominent position in the company, comprising 435,159 shares worth $194.6 million.
In addition to Alphabet Inc. (NASDAQ:GOOG), ConocoPhillips (NYSE:COP), and Moderna, Inc. (NASDAQ:MRNA), elite investors are piling into Northrop Grumman Corporation (NYSE:NOC).
Here is what LRT Capital Management has to say about Northrop Grumman Corporation (NYSE:NOC) in its Q1 2022 investor letter:
“Based in Virginia, Northrop Grumman is one of the world’s largest defense contractors with annual revenue of more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation has resulted in the US defense market being controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).
Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This has allowed Northrop Grumman to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximately 15x next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-18, the F-35 and the F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; Raytheon dominates missile systems; and so on.
Northrop’s revenue growth over the past decade has been mediocre but even that has led to impressive shareholder returns that have far outpaced the S&P 500. What’s more, we believe that revenue growth may accelerate in the next few years. A lot of ink is spilled every year about the “massive” U.S. defense budget that critics claim is “out of control”. Given this, you might be surprised to hear that U.S. defense spending as a share of GDP is at the lowest level in recorded history, at a mere 3.8%. In other words, U.S. military spending could double and not be out of line with historical norms. While we are not calling for a new Cold War, given the global instability we are witnessing, it is not unreasonable to expect U.S. defense spending to grow faster than GDP over the next decade.”
9. ZIM Integrated Shipping Services Ltd. (NYSE:ZIM)
Number of Hedge Fund Holders: 32
P/E Ratio as of May 25: 1.47
ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) is an Israel-based container shipping and port-to-port transportation services company. With a price to earnings ratio of 1.47 as of May 25, ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) is one of the most notable value picks of Bob Bishop. His hedge fund boosted its ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) stake by 13% in Q1 2022, holding 525,000 shares worth $38.1 million.
Citi analyst Sathish Sivakumar on May 12 opened a “positive Catalyst Watch” on ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) ahead of the Q1 results. The analyst sees upside risk to the adjusted EBITDA guidance.
On May 18, ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) declared a $2.85 per share quarterly dividend. The dividend is distributable on June 8, to shareholders of the company as of May 31. ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) delivered on May 25 a dividend yield of about 32%. The company posted Q1 earnings on May 18, reporting an EPS of $14.19 and a revenue of $3.72 billion, topping market consensus estimates by $1.06 and $155.40 million, respectively.
Among the hedge funds tracked by Insider Monkey, 32 funds were bullish on ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) at the end of March 2022, with collective stakes exceeding $1 billion. Jim Simons’ Renaissance Technologies reported a leading position in the company, with more than 4 million shares worth $295.3 million.
Here is what Evermore Global Advisors has to say about ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) in its Q2 2021 investor letter:
“ZIM Integrated Shipping Services (ZIM) was the largest contributor to the Fund’s performance during the second quarter. With a market cap of $5.2 billion, ZIM is an Israel-based containership operator that had its initial public offering on the New York Stock Exchange this past January. As a reminder, we discussed ZIM at length in the Q1 2021 quarterly commentary as one of the new investments that we initiated during that period.
There were several notable developments during the second quarter. Given the company’s unique asset light business model and targeted, global niche approach, ZIM continued to generate exceptionally strong cash flows. ZIM ended the period with approximately $1.25 billion in cash and about $915 million in net debt. Due to the strong operational performance, the company further strengthened its balance sheet by redeeming its Series 1 and Series 2 unsecured notes due in 2023. With the early redemption of the unsecured notes, ZIM was no longer subject to certain dividend restrictions, and it declared a special dividend of $2 per share, which will be payable on Sept 15th (goes ex on August 24th). Lastly, management revised its 2021 full year EBITDA guidance from $1.4 – 1.6 billion to $2.5 – $2.7 billion, which was a sizable increase compared to the levels set last March. To that end, we continue to have high conviction in our position in ZIM.”
8. Star Bulk Carriers Corp. (NASDAQ:SBLK)
Number of Hedge Fund Holders: 21
P/E Ratio as of May 25: 4.79
Star Bulk Carriers Corp. (NASDAQ:SBLK) is a shipping company that specializes in the ocean transportation of dry bulk cargoes worldwide. Robert Bishop boosted his Star Bulk Carriers Corp. (NASDAQ:SBLK) stake by 72% in the first fiscal quarter of 2022, holding 1.12 million shares worth $33.2 million, representing 2.87% of the total 13F portfolio.
On May 24, Star Bulk Carriers Corp. (NASDAQ:SBLK) reported earnings for Q1 2022, posting an EPS of $1.72, beating estimates by $0.32. Revenue for the period grew 91.68% year-over-year to $307.48 million, outperforming market consensus by $31.28 million. The company declared a $1.65 per share quarterly dividend on May 24. The dividend is distributable on June 16, to shareholders of record on June 3. Star Bulk Carriers Corp. (NASDAQ:SBLK)’s dividend yield on May 25 came in at 25.09%.
Jefferies analyst Christopher Robertson on April 27 reinstated coverage of Star Bulk Carriers Corp. (NASDAQ:SBLK) with a Buy rating and a $36 price target. As per the analyst, rates across maritime groups experienced normal seasonal pressures during Q1, and the Jefferies shipping index is up about 25% year-to-date, mostly due to recent equity performance in the dry bulk and tanker sub-sectors.
According to Insider Monkey’s Q1 data, Star Bulk Carriers Corp. (NASDAQ:SBLK) was part of 21 hedge fund portfolios, up from 20 funds in the prior quarter. Howard Marks’ Oaktree Capital Management is the biggest shareholder of the company, with more than 26 million shares worth $772.5 million.
Here is what Massif Capital has to say about Star Bulk Carriers Corp. (NASDAQ:SBLK) in its Q3 2021 investor letter:
“We initiated one long position, one short position and exited one position during the third quarter. Our new long position was in Star Bulk Carriers (SBLK), a pure-play dry bulk operator with roughly 120 controlled vessels and 14 million tons of combined cargo capacity globally.
SBLK has one of the better management teams in the maritime shipping industry and the lowest cost structure among all dry bulk names. After announcing their new dividend policy in May, SBLK now has one of the best payout structures in shipping. The firm has paid out $0.3 and $0.7 per share in dividends for the first and second quarters of 2021. SBLK will most likely announce a dividend for the third quarter somewhere in the $1.15-$1.25 per share range, depending on movement in net working capital.
We believe the best way to look at this business is through cash generation potential and how much is returned to investors. The current equity valuation does not reflect current rates for shipping (earnings), partly because of the velocity of the move in rates and because shipping cycles turn, and it’s not clear whether this is a local top or the early innings of a multi-year cycle. Our belief is the latter. Part of our catalyst is the market re-rating the stock higher once the length of the increased earnings power becomes understood. It is a relatively strong catalyst in the sense that with a strong dividend policy, we can be patient for the market to underwrite this story as the cash is either returned to us via a high dividend yield if the market is either slow or chooses not to join our side of the trade.
Our estimates suggest a time-charter equivalent rate (net profit or loss of operating a vessel daily) of at least $30,000 for SBLK in Q4, with the firm earning a potential annual average of $26,000. Our base case is that this is a strong floor going into next year, with little need to articulate much more upside. If rates hold, which we expect them to do, we could see a 20+% annual dividend next year for SBLK. If the market priced the equity such that the dividend yield was 8%, that implies a $62 stock. Today our base case target for the firm is $37 per share. This is likely conservative as we know that third-quarter rates are higher than the second quarter, and third-quarter dividends will most likely reflect that. We are cautious about diving too deep into the sensitivities to the upside with this position as we are arriving at some pretty remunerative torque using current contracted values and seemingly conservative forecasts…” (Click here to see the full text)
7. NVR, Inc. (NYSE:NVR)
Number of Hedge Fund Holders: 39
P/E Ratio as of May 25: 11.19
NVR, Inc. (NYSE:NVR) is a Virginia-based homebuilder that operates through two segments – Homebuilding and Mortgage Banking. The company mainly deals in single-family detached homes, townhomes, and condominium buildings. As of Q1 2022, Robert Bishop’s Impala Asset Management held a position in NVR, Inc. (NYSE:NVR) worth about $32 million.
On April 26, NVR, Inc. (NYSE:NVR) reported its financial results for the first fiscal quarter of 2022. The company posted earnings per share of $116.56, topping Street forecasts by $19.62. The revenue of $2.31 billion grew 17.60% year-over-year but fell short of analysts’ predictions by $14.50 million. NVR, Inc. (NYSE:NVR) announced on May 4 that its board has authorized the repurchase of $500 million of its outstanding common stock.
JPMorgan analyst Michael Rehaut on April 13 maintained a Neutral rating on NVR, Inc. (NYSE:NVR) and lowered the price target on the shares to $4,770 from $5,300. The analyst does not expect any “material or sustained rebound” in the homebuilding stocks this earnings season, given his view that key investor concerns are likely to remain unaddressed. He maintains a “less constructive, more selective approach” to the homebuilding stocks.
According to Insider Monkey’s Q1 database, 39 hedge funds were long NVR, Inc. (NYSE:NVR), compared to 35 funds in the earlier quarter. Ric Dillon’s Diamond Hill Capital is the largest position holder in NVR, Inc. (NYSE:NVR), with 124,583 shares worth $556.5 million.
NVR, Inc. (NYSE:NVR) is on the radar of smart investors, just like Alphabet Inc. (NASDAQ:GOOG), ConocoPhillips (NYSE:COP), and Moderna, Inc. (NASDAQ:MRNA).
Here is what Motiwala Capital has to say about NVR, Inc. (NYSE:NVR) in its Q4 2021 investor letter:
“NVR Inc (NYSE:NVR) is a home builder with half of its revenues in the Washington D.C and Baltimore metro areas. NVR was among the first home builders to move to an asset-light business model wherein the company does not purchase too much land ahead of sales. It uses options that give it the right to purchase land in the future to construct homes. The company requires less capital to run the business and as a result, generates one of the best returns on equity in the industry (over 25%). NVR has used ample free cash flow to repurchase shares over the decade. We purchased shares at about ~13x 2021 earnings of $320/ share. Note, the high share price of $4000 does not indicate it is expensive, just like a $2 share price does not mean it is cheap. What we look at is the earnings per share (EPS or E) and compare that to the share price (and many other aspects). In this case, the share price was $4000 (P) and the EPS (E) is expected to be $320 for a P/E of 12.5. With the booming demand for homes in the US and limited supply, we think the housing industry and this company should do well. Even though this is cyclical, it is a higher quality company in this cyclical industry with a solid balance sheet.”
6. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 67
P/E Ratio as of May 25: 11.44
ConocoPhillips (NYSE:COP) was founded in 1917 and is headquartered in Houston, Texas. The company markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. Robert Bishop’s hedge fund held 300,651 shares of ConocoPhillips (NYSE:COP) as of Q1 2022, worth $30 million.
On May 5, ConocoPhillips (NYSE:COP) declared a quarterly dividend of $0.46 per share, in line with previous. The dividend is payable on June 1, to shareholders of the company as of the close of business on May 17. ConocoPhillips (NYSE:COP) announced a third-quarter variable dividend of $0.70 per share, payable on July 15 to stockholders of record on June 28.
ConocoPhillips (NYSE:COP) reported on May 5 its Q1 2022 results, posting earnings per share of $3.27, beating analysts’ estimates by $0.05. The $19.29 billion revenue grew 82.70% year-over-year, outperforming Street forecasts by $929.66 million.
Barclays analyst Jeanine Wai on May 25 raised the price target on ConocoPhillips (NYSE:COP) to $132 from $131 and kept an Overweight rating on the shares. The analyst thought payout yields will be a core driver of stock performance in 2022 for the exploration and production companies.
Among the hedge funds tracked by Insider Monkey, 67 funds were bullish on ConocoPhillips (NYSE:COP) at the end of March 2022, up from 56 funds in the preceding quarter. Harris Associates held the largest stake in the company, with more than 5.14 million shares worth $514.3 million.
Here is what ClearBridge Investments Large Cap Value Strategy has to say about ConocoPhillips (NYSE:COP) in its Q1 2022 investor letter:
“The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holding ConocoPhillips (NYSE:COP) benefited from higher commodity prices and was among the top contributors to first-quarter performance.”
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Disclosure: None. 10 Best Value Stocks to Buy According to Robert Bishop’s Impala Asset Management is originally published on Insider Monkey.
