In this article, we discuss the 10 best value stocks in Joel Greenblatt’s portfolio. If you want to skip our detailed analysis of these stocks, go directly to the 5 Value Stocks in Joel Greenblatt’s Portfolio.
The American hedge fund manager and legendary value investor Joel Greenblatt founded Gotham Asset Management in 1985. Gotham Asset Management is an investment management firm with a $2.46 billion portfolio as per the 13F filings from September 2021. The investment portfolio of Greenblatt’s fund is focused on the information technology, finance, healthcare, industrials, consumer discretionary, and communications sectors, with a top ten holdings concentration of 16.24%.
Greenblatt’s Gotham Asset Management operates three leading funds for investors, including the Gotham Absolute Return Fund, that looks out for long-term capital appreciation and aims to achieve solid returns annually in a risk adjusted manner. Second is the Gotham Enhanced Return Fund, that seeks long-term capital gains exceeding that of the S&P 500 Index, and lastly, the Gotham Neutral Fund, that aims for long-term capital gains with the least correlation to the general stock market.
Joel Greenblatt of Gotham Asset Management
In addition to value stocks, Greenblatt’s Q3 portfolio also includes popular growth stocks like Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
We used the Q3 portfolio of Joel Greenblatt’s Gotham Asset Management to select his top 10 value stocks, ranking the list according to the hedge fund’s stake value in each holding.
We have selected the value stocks with price to earnings ratio of less than 10.
Value Stocks in Joel Greenblatt’s Portfolio
10. HP Inc. (NYSE:HPQ)
Gotham Asset Management’s Stake Value: $8,919,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.36%
Number of Hedge Fund Holders: 34
P/E Ratio as of December 22: 6.95
HP Inc. (NYSE:HPQ), a California-based multinational technology company dealing in printers, computers, cameras, computer software, and related products, is one of the best value stocks in Joel Greenblatt’s Q3 portfolio. Greenblatt, via Gotham Asset Management, owns 325,987 shares of HP Inc. (NYSE:HPQ), worth $8.91 million, representing 0.36% of the firm’s total Q3 investments.
HP Inc. (NYSE:HPQ) published its third quarter results on November 23, posting an EPS of $0.94, beating estimates by $0.06. Revenue over the period increased 9.29% year-over-year, reaching $16.68 billion, exceeding estimates by $1.25 billion.
Evercore ISI analyst Amit Daryanani on November 24 raised the price target on HP Inc. (NYSE:HPQ) to $40 from $35 and kept an Outperform rating on the shares after the company reported “impressive upside” in revenue and EPS versus expectations.
According to Insider Monkey’s Q3 data, 34 hedge funds reported owning stakes in HP Inc. (NYSE:HPQ) worth $1.04 billion, compared to 39 funds in the preceding quarter that owned stakes worth $1.27 billion in the company.
Arrowstreet Capital is the largest HP Inc. (NYSE:HPQ) stakeholder as of Q3 2021, increasing its stake in the company by 7%, holding 18.7 million shares worth $511.8 million.
In addition to growth stocks like Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), elite hedge funds are piling into value stocks like HP Inc. (NYSE:HPQ).
9. Nielsen Holdings plc (NYSE:NLSN)
Gotham Asset Management’s Stake Value: $9,093,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.36%
Number of Hedge Fund Holders: 24
P/E Ratio as of December 22: 9.22
Gotham Asset Management holds 473,825 shares of Nielsen Holdings plc (NYSE:NLSN) as of September 2021, worth over $9 million, representing 0.36% of the hedge fund’s total investments. Nielsen Holdings plc (NYSE:NLSN) is one of the best value stocks in the Q3 portfolio of the legendary value investor Joel Greenblatt.
Nielsen Holdings plc (NYSE:NLSN), an American company specializing in consumer research, consumer information, and market measurement, posted its Q3 results on October 28. Nielsen Holdings plc (NYSE:NLSN) reported earnings per share of $0.45, beating estimates by $0.09. The $882 million revenue also exceeded estimates by $12.59 million.
According to the hedge funds tracked by Insider Monkey in the third quarter, 24 funds were bullish on Nielsen Holdings plc (NYSE:NLSN), with total stakes worth almost $1.5 billion. This is compared to 28 funds holding stakes valued at approximately $2 billion in Nielsen Holdings plc (NYSE:NLSN) in the preceding quarter.
The biggest Nielsen Holdings plc (NYSE:NLSN) stakeholder from Q3 is Windacre Partnership, with 35.2 million shares worth $675.5 million.
Here is what Ariel Investments has to say about Nielsen Holdings plc (NYSE:NLSN) in its Q3 2021 investor letter:
“There are times when our conviction for a name can be so high that we hold it across all of our domestic equity portfolios. Nielsen Holdings (NLSN), one of this quarter’s poorest performing names, sits in this category. Nielsen shares slumped -22% during the quarter. Although we hate losing money, we believe unrealized upside embedded in our portfolios was boosted as the stock was oversold.
Nielsen is a global leader in tracking television audience viewership. Having held the position since 2017, we were pleased to see its shares rally last year after the company deleveraged its balance sheet by selling its less attractive Connect business (which measures market share for consumer products at retail) for $2.7 billion. Once focused on the more attractive Watch business (which measures viewership ratings across media), we anticipated continued recovery. But in September, the Media Rating Council (MRC) suspended Nielsen’s TV ratings accreditation. MRC alleged the company was undercounting viewership during COVID and Nielsen acknowledges the pandemic reduced its rating panel participant home visits. This setback has been compounded by the fact that broadcasters have long been skeptical of Nielsen’s ability to capture all of the ways people watch broadcast television, particularly on mobile devices…” (Click here to see the full text)
8. Verizon Communications Inc. (NYSE:VZ)
Gotham Asset Management’s Stake Value: $9,148,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.37%
Number of Hedge Fund Holders: 57
P/E Ratio as of December 22: 9.92
Gotham Asset Management owns 169,378 shares of Verizon Communications Inc. (NYSE:VZ), an American multinational telecommunications company, worth $9.14 million, representing 0.37% of the fund’s total investments for the third quarter. With a price to earnings ratio of 9.92, Verizon Communications Inc. (NYSE:VZ) is one of the best value stocks in Joel Greenblatt’s portfolio.
In the third quarter results published on October 20, Verizon Communications Inc. (NYSE:VZ) announced earnings per share of $1.41, exceeding estimates by $0.05. The $32.92 billion revenue gained 4.35% year-over-year, but missed estimates by $301.93 million.
Following the solid Q3 results, Cowen analyst Colby Synesael on October 21 raised the price target on Verizon Communications Inc. (NYSE:VZ) to $71 from $68 and kept an Outperform rating on the shares.
Of the 57 hedge funds that were long Verizon Communications Inc. (NYSE:VZ) in Q3 2021, Berkshire Hathaway is the biggest company stakeholder, with 158.8 million shares worth $8.57 billion.
Here is what Miller/Howard Investments has to say about Verizon Communications Inc. (NYSE:VZ) in its Q1 2021 investor letter:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
7. Berkshire Hathaway Inc. (NYSE:BRK-B)
Gotham Asset Management’s Stake Value: $10,114,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.41%
Number of Hedge Fund Holders: 106
P/E Ratio as of December 22: 7.87
Berkshire Hathaway Inc. (NYSE:BRK-B) is an American multinational conglomerate holding company that is involved in multiple market segments via its subsidiaries, including diversified investments, property and casualty insurance, utilities, restaurants, aerospace, automotive, consumer products, internet, and real estate.
In the third quarter of 2021, Gotham Asset Management held 37,055 shares of Berkshire Hathaway Inc. (NYSE:BRK-B), worth $10.1 million, representing 0.41% of the fund’s total Q3 securities.
Berkshire Hathaway Inc. (NYSE:BRK-B) posted its Q3 earnings on November 6. The company announced earnings per share of $2.87, missing estimates by $0.06. The quarterly revenue equaled $70.58 billion, outperforming estimates by $163.14 million.
According to Insider Monkey’s Q3 data, 106 hedge funds reported owning stakes in Berkshire Hathaway Inc. (NYSE:BRK-B), worth $19.4 billion, down from 116 funds in the preceding quarter, holding stakes worth $22.3 billion.
The leading Berkshire Hathaway Inc. (NYSE:BRK-B) stakeholder from Q3 is Bill & Melinda Gates Foundation Trust, with 38.6 million shares worth over $10.5 billion.
Here is what Black Bear Value Partners has to say about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q3 2021 investor letter:
“Please see the Q1 letter for our Berkshire on a Napkin investment exercise. We have written on it extensively and will save your eyeballs from extraneous reading. Berkshire is very cheap for owning such high-quality businesses and will continue to grind higher and compound value for us.”
6. General Motors Company (NYSE:GM)
Gotham Asset Management’s Stake Value: $10,302,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.41%
Number of Hedge Fund Holders: 77
P/E Ratio as of December 22: 7.33
Gotham Asset Management holds a $10.3 million position in General Motors Company (NYSE:GM) as of September 2021, and the stock represents 0.41% of the hedge fund’s 13F portfolio.
General Motors Company (NYSE:GM) is one of the best value stocks in Joel Greenblatt’s Q3 portfolio, with a price to earnings ratio of 7.33. General Motors Company (NYSE:GM), a Michigan-based automaker, announced on October 27 its Q3 results. EPS in the quarter totaled $1.52, beating estimates by $0.55. Revenue over the period came in at $26.78 billion, missing estimates by $1.10 billion.
On December 16, Wells Fargo analyst Colin Langan raised the price target on General Motors Company (NYSE:GM) to $74 from $67 and kept an Overweight rating on the shares. The analyst stated that the increased multiple reflects his more optimistic view of the multiyear auto recovery.
In Q3, 77 hedge funds tracked by Insider Monkey were bullish on General Motors Company (NYSE:GM), with total stakes valued at $6.4 billion. One of the leading stakeholders of General Motors Company (NYSE:GM) is Harris Associates, holding 34.71 million shares worth $1.82 billion.
General Motors Company (NYSE:GM) is a notable stock pick of Joel Greenblatt as of Q3 2021, just like Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Miller Value Partners has to say about General Motors Company (NYSE:GM) in its Q3 2021 investor letter:
“Another name we’ve recently purchased and have grown incredibly excited about: General Motors (GM). GM is interesting on many levels. We see it as an attractive investment opportunity and it might be a microcosm of current markets, both past and prospective.
Tesla trounced GM over the last decade. Tesla rose 15,797% crushing GM’s 238% increase, which lagged the S&P 500’s 365%. Tesla came out of nowhere creating what many said was the best car ever made. A decade ago, no one saw that coming, including GM. GM’s historical strength led to arrogance. It completely dismissed the threat of any newcomer.
Where are we now? Expectations are entirely different. Tesla’s current price embeds 18 years of growth while GM embeds under one year (see a pattern in what we like?!). Tesla’s expectations look even loftier when you consider that in that 18th year, Tesla would be projected to earn $1.35 trillion revenues at very high, Ferrari-type margins. The largest automakers today generate roughly $250 billion revenues at less than half those margins.
Tesla’s priced to go where no man (or woman!) has gone before. It’s impossible for Tesla to meet these expectations with auto manufacturing alone. It requires something more. Bulls believe Tesla can dominate an autonomous driving future and make significant money on software subscriptions. We don’t have a view on this other than that Tesla needs to do so to be attractive at the current price.
Market expectations for GM, on the other hand, are muted. There appears to be no innovation or growth priced into the stock. Yet GM plans to launch 30 EV (electric vehicles) models globally by 2025 (Tesla has launched a total of 4). GM’s new electric vehicles, like the Hummer and Cadillac Lyric, are extremely impressive. It’s revamping its manufacturing production to be modular, allowing greater speed and adaptability. The entire culture has transformed from a stodgy, bureaucratic old manufacturer to a speedier, more innovative software-enabled automaker. GM currently employs 25,000 software engineers.
GM believes it can double revenues by 2030, and improve margins through software and services. GM currently earns $2 billion of high margin software and services revenue, which is more than Tesla. Cruise, GM’s majority owned autonomous company, recently detailed why it sees the potential for $50B in revenues within 6-8 years of its 2023 launch of the Origin vehicle. BrightDrop, its autonomous commercial vehicle unit, looks promising as well with the potential for $10 billion in revenues. We don’t think this optionality is reflected in the current price. Investors started to see the potential after GM’s recent analyst day. We can easily get values for GM more than double its current price of $58.
The contrast between GM and Tesla illustrates what we see more broadly in the market, which is why we see more opportunity in classic value names than in the secular growth names. After a decade of dominance, expectations for innovative and disruptive companies are quite high. Many classic value companies were caught flat-footed, but have invested heavily to catch up. Muted expectations don’t reflect their improved prospects.”
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Disclosure: None. 10 Value Stocks in Joel Greenblatt’s Portfolio is originally published on Insider Monkey.
