5 High Growth Value Stocks to Buy According to Seth Klarman

In this article, we discuss 5 high growth value stocks to buy according to Seth Klarman. If you want to see more stocks in this selection, click 12 High Growth Value Stocks to Buy According to Seth Klarman. 

5. Fiserv, Inc. (NASDAQ:FISV)

Number of Hedge Fund Holders: 59

Baupost Group’s Stake Value: $202,382,000

3-year Revenue Growth: 59.2% 

Fiserv, Inc. (NASDAQ:FISV) provides payment and financial services technology worldwide. The company operates through Acceptance, Fintech, and Payments segments. Securities filings for Q4 2022 reveal that Seth Klarman owns 2 million  Fiserv, Inc. (NASDAQ:FISV) shares worth $202.3 million, representing 3.3% of the total holdings. However, Klarman slashed his stake in the company by 44%. 

On February 15, Baird analyst David Koning increased Fiserv, Inc. (NASDAQ:FISV)’s price target to $138 from $132 and maintained an Outperform rating on the stock. The analyst believes that Fiserv has a stable and rapid growth profile and considers KKR’s departure to be beneficial. In recent years, Fiserv, Inc. (NASDAQ:FISV) has been one of the most dependable and least erratic companies on Baird’s list.

According to Insider Monkey’s third quarter data, 59 hedge funds were long Fiserv, Inc. (NASDAQ:FISV), with Harris Associates holding the leading stake in the company, comprising 21.2 million shares worth $2 billion. 

Artisan Partners made the following comment about Fiserv, Inc. (NASDAQ:FISV) in its Q3 2022 investor letter:

“While our list of potential candidates is filling up, we are being patient. We added two new positions in Q3: Fiserv, Inc. (NASDAQ:FISV) and Heineken. Fiserv is a provider of financial technology, core processing and payment processing services to financial institutions and merchants. The company reports three segments: acceptance (merchant acquiring), payments & networks (issuer processing and debit network), and fintech (core bank processing). Fiserv has strong market positions and scale across these businesses, but competitive intensity varies. In the acceptance segment, Fiserv owns Clover, a high-growth point-of-sale (POS) system forsmall and medium businesses, with similar annualized gross payment volume to Block’s Square. However, Fiserv is receiving little credit for Clover. The market is overly concerned about the competitive nature of merchant acquiring and legacy processors losing market share to new entrants. We believe Fiserv’s business is more resilient and will continue to grow in the medium term driven by its scale and Clover. Moreover, fintech and payments are good businesses that are undervalued by the market. Both businesses are in highly consolidated industries where scale advantages are critical, and revenues are sticky due to high switching costs. A high share of recurring revenue and profit, an attractive margin profile and high free cash flow conversion are characteristics that should provide downside protection, in our view. We started our position with shares selling for about 11X normalized operating profit. That is a below-average multiple for an above-average business.”

4. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 177

Baupost Group’s Stake Value: $207,930,000

3-year Revenue Growth: 66.8%

Seth Klarman raised his Meta Platforms, Inc. (NASDAQ:META) stake in the fourth quarter of 2022 by 151%, holding 1.72 million shares worth nearly $208 million, representing 3.39% of the total 13F securities. 

Financial Times recently reported that Meta Platforms, Inc. (NASDAQ:META) may be considering another round of layoffs due to performance reviews and budgetary uncertainty within the company, as noted by BofA analyst Justin Post. While the article did not provide specific numbers regarding the potential layoffs, Post believes that there is still room for further streamlining in the company. He pointed out that Meta Platforms, Inc. (NASDAQ:META) had around 58,000 employees two years ago, compared to an estimated 76,000 today. Additionally, Meta has the highest operating expense per employee among major online media platforms, according to BofA. Although Metaverse spending may be inflating operating expenses by up to 25%, the analyst believes that there is still potential to reduce Meta’s cost structure. Despite these concerns, BofA maintained a Buy rating and a $220 price target on Meta Platforms, Inc. (NASDAQ:META) shares on February 13. 

According to Insider Monkey’s Q3 data, 177 hedge funds were long Meta Platforms, Inc. (NASDAQ:META), compared to 185 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 11.8 million shares worth $1.60 billion. 

Vulcan Value Partners made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q4 2022 investor letter:

“During the quarter we sold Meta Platforms, Inc. (NASDAQ:META) after owning the business for over four years. The fundamentals of our investment case were based on the tremendous number of users that spent time on its various properties and the advertising dollars that flowed to the company as a result. We believed its competitive advantage was that the platform was, more or less, a monopoly on people’s time and attention. The rise of TikTok and other emerging platforms has given us pause on the company’s ability to maximize that advantage. From our perspective, the idea of “one platform to rule them all” may now be a thing of the past as social offerings have become more fragmented.

In addition, though our research has indicated that much of the initial damage done from Apple’s iOS 14.5 privacy changes has been repaired, we remain concerned with Apple’s influence over the digital advertising ecosystem. Apple is one of the largest gatekeepers to Meta’s mobile services, and it has become more difficult for us to gauge the pace of change emerging from Apple relating to privacy, as well as evaluating Apple’s ambitions in advertising…” (Click here to read the full text)

3. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 156

Baupost Group’s Stake Value: $354,412,000

3-year Revenue Growth: 59.1%

Securities filings for the fourth quarter of 2022 indicate that Seth Klarman’s Baupost Group owns nearly 4 million shares of Alphabet Inc. (NASDAQ:GOOG), worth $354.4 million and representing 5.78% of the total portfolio. Klarman increased his position in Alphabet Inc. (NASDAQ:GOOG) by 191% in Q4. With average 3-year revenue growth of 59%, Alphabet is one of the top high growth stocks owned by Klarman. 

Morgan Stanley analyst Brian Nowak said on February 9 that recent presentations from Alphabet Inc. (NASDAQ:GOOG) and Microsoft on artificial intelligence indicate significant changes in the search user experience, overall utility, and higher incremental search compute costs. While Nowak believes that Alphabet Inc. (NASDAQ:GOOG) has the technology and scale to sustain and expand its “leading user base,” the deeper integration of AI may result in greater incremental cost risks. The firm estimates that every 10% of Google Search queries moving to language models could add about $1.2 billion in operating expenses. Despite this concern, Morgan Stanley maintained an Overweight rating and $135 price target on Alphabet Inc. (NASDAQ:GOOG) shares.

According to Insider Monkey’s third quarter database, 156 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), compared to 153 funds in the preceding quarter. 

Diamond Hill Large Cap Strategy made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter:

“Other bottom contributors included media and technology giant Alphabet Inc. (NASDAQ:GOOG), apparel and footwear company V.F. Corporation and utility operator Dominion Energy. We believe Alphabet’s shares underperformed on concerns of a weakening macroeconomic environment. The company also reported weaker-than-expected earnings and revenue for Q3 2022. Longer-term, we expect Alphabet’s search engine advertising, YouTube advertising and other initiatives to continue driving revenue growth. As such, we used the share price weakness this quarter to add to our position.”

2. Qorvo, Inc. (NASDAQ:QRVO)

Number of Hedge Fund Holders: 35

Baupost Group’s Stake Value: $519,517,000

3-year Revenue Growth: 29.9%

Qorvo, Inc. (NASDAQ:QRVO) is a North Carolina-based company that develops and commercializes technologies and products for wireless, wired, and power markets worldwide. The company operates through two segments, Mobile Products, and Infrastructure and Defense Products. In Q4 2022, Seth Klarman held 5.7 million shares of Qorvo, Inc. (NASDAQ:QRVO) worth $519.5 million, representing 8.47% of the total 13F securities. 

On February 3, Mizuho analyst Vijay Rakesh raised the firm’s price target on Qorvo, Inc. (NASDAQ:QRVO) to $100 from $93 and reiterated a Neutral rating on the shares following the “good” Q4 results.

According to Insider Monkey’s Q3 data, Qorvo, Inc. (NASDAQ:QRVO) was part of 35 hedge fund portfolios, compared to 30 in the prior quarter. Jim Simons’ Renaissance Technologies is a significant position holder in the company, with 993,706 shares worth $79 million. 

Here is what Vulcan Value Partners has to say about Qorvo, Inc. (NASDAQ:QRVO) in its Q1 2022 investor letter:

“Qorvo Inc. is one of the two major providers of radio frequency RF systems which are critical components of mobile devices including smartphones and the Internet of Things (IoT). Two transitory concerns have recently affected the company’s stock price. First, supply chain issues continue to be a constraint. Second, Apple recently announced its decision to decrease production of its iPhone SE model. Neither of these issues threatens their long-term competitive position. Qorvo’s value is stable and despite the recent pressure on the stock price, we feel its long-term prospects are promising.”

1. The Liberty SiriusXM Group (NASDAQ:LSXMA)

Number of Hedge Fund Holders: 43

Baupost Group’s Stake Value: $534,166,000

3-year Revenue Growth: 11.5% 

The Liberty SiriusXM Group (NASDAQ:LSXMA) is a Colorado-based company engaged in the entertainment business in the United States and Canada. In the fourth quarter of 2022, Seth Klarman’s Baupost Group owned 13.65 million shares of The Liberty SiriusXM Group (NASDAQ:LSXMA), worth $534 million and representing 8.71% of the total 13F securities. 

Citi analyst Jason Bazinet increased the firm’s price target for The Liberty SiriusXM Group (NASDAQ:LSXMA) from $60 to $62 and maintained a Buy rating on the shares. He also stated that Liberty SiriusXM is still his preferred stock among the companies he covers.

According to Insider Monkey’s data, 43 hedge funds were bullish on The Liberty SiriusXM Group (NASDAQ:LSXMA) at the end of Q3 2022, compared to 44 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 43.20 million shares worth $1.6 billion. 

Here is what Weitz Investment Management, Inc. has to say about The Liberty SiriusXM Group (NASDAQ:LSXMA) in its Q4 2021 investor letter:

“Another Liberty company, Liberty SiriusXM, owns over 80% of SiriusXM Satellite Radio. We believe that SiriusXM is undervalued and that the Liberty SiriusXM structure allows us to own the company at a discount. Both Charter Communications and SiriusXM are growing nicely, generating prodigious amounts of free cash flow and buying back lots of their own stock. John Malone controls both of these Liberty securities, and we believe he will find ways to close the discounts and extract maximum value for shareholders. Both Liberty securities were stock market duds in 2021, but we expect them to be contributors in 2022 regardless of what the general market does.”

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