In this article, we discuss the 5 undervalued stocks to buy according to billionaire Joel Greenblatt. If you want to read about some more stocks in the Greenblatt portfolio, go directly to 10 Undervalued Stocks to Buy According to Billionaire Joel Greenblatt.
5. AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 70
PE Ratio: 8.68
AT&T Inc. (NYSE:T) is a telecommunications, media, and technology firm. Regulatory filings show that Gotham Asset Management owned 411,045 shares in the company at the end of December 2021 worth $10.1 million, representing 0.32% of the portfolio. The fund increased its stake in the firm by 4% between October and December compared to third quarter filings.
AT&T Inc. (NYSE:T) has been in the Greenblatt portfolio since late 2012, with minor exceptions in 2016 and 2018. The first stake of the firm in the stock consisted of just 18,000 shares purchased at an average price of $34.70 per share. As inflation rises, the fund has been steadily piling into the stock, increasing its stake in the firm the past three quarters.
At the end of the fourth quarter of 2021, 70 hedge funds in the database of Insider Monkey held stakes worth $4.9 billion in AT&T Inc. (NYSE:T), compared to 66 in the preceding quarter worth $3.2 billion.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and AT&T Inc. (NYSE:T) was one of them. Here is what the fund said:
“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T Inc. (NYSE:T) to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”
4. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 47
PE Ratio: 16.60
Philip Morris International Inc. (NYSE:PM) makes and sells nicotine products. According to the latest securities filings, the investment firm led by Greenblatt owned 102,323 shares in the company at the end of the fourth quarter of 2021 worth $9.7 million, representing 0.31% of the portfolio. The investment firm increased its stake in the tobacco giant by 24% in the fourth quarter compared to filings for the previous quarter.
Philip Morris International Inc. (NYSE:PM) is a long-term holding of Greenblatt. It has been in the Gotham portfolio since late 2010. Back then, the stake had consisted of just 6,000 shares bought at an average price of $58.50 per share. The share price has almost doubled in the years since.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Philip Morris International Inc. (NYSE:PM) with 20 million shares worth more than $1.9 billion.
In its Q2 2021 investor letter, Broyhill Asset Management highlighted a few stocks and Philip Morris International Inc. (NYSE:PM) was one of them. Here is what the fund said:
“Philip Morris International Inc. (NYSE:PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
PM Valuation. Philip Morris International Inc. (NYSE:PM) is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of Philip Morris International Inc. (NYSE:PM) net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. Philip Morris International Inc. (NYSE:PM) stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
3. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 53
PE Ratio: 3.74
Ford Motor Company (NYSE:F) is a Michigan-based automobile manufacturer. Latest data shows that Greenblatt’s fund owned 459,104 shares in the company at the end of December 2021 worth $9.5 million, representing 0.30% of the portfolio. The fund slightly increased its stake in the firm during the fourth quarter compared to third quarter filings.
Ford Motor Company (NYSE:F) has intermittently featured in the Gotham portfolio since the second quarter of 2015. Back then, the position consisted of 639,000 shares bought at an average price of $15.50. The share price has increased only moderately since then.
At the end of the fourth quarter of 2021, 53 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Ford Motor Company (NYSE:F), compared to 51 in the preceding quarter worth $1.6 billion.
2. HP Inc. (NYSE:HPQ)
Number of Hedge Fund Holders: 39
PE Ratio: 6.40
HP Inc. (NYSE:HPQ) makes and sells personal computing devices. Regulatory filings reveal that Gotham Asset Management owned 251,115 shares in the company at the end of the fourth quarter of 2021 $9.4 million, representing 0.30% of the portfolio. The fund slashed its stake in the computing company by 23% in the fourth quarter.
Since late 2015, HP Inc. (NYSE:HPQ) has consistently featured in the Gotham portfolio. In three of the last four quarters, the fund has decreased its stake in the company, perhaps preparing the portfolio for rising inflation and interest rates. In 2015, the fund had purchased a stake in the firm at an average share price of $12.80. The shares have now jumped above $32.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in HP Inc. (NYSE:HPQ) with 14.6 million shares worth more than $533 million.
1. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Holders: 45
PE Ratio: 17.83
AutoZone, Inc. (NYSE:AZO) markets automotive replacement parts and accessories. 13F filings show that the hedge fund of Greenblatt owned 4,386 shares in the company at the end of the fourth quarter of 2021 worth $9.1 million, representing 0.29% of the portfolio. The fund increased its stake in the firm by 65% between October and December compared to third quarter data.
AutoZone, Inc. (NYSE:AZO) has been in the Gotham portfolio since late 2013. Back then, the stake consisted of just 14,000 shares purchased at an average price of $427 per share. The shares have now climbed above $1,900.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in AutoZone, Inc. (NYSE:AZO) with 242,400 shares worth more than $508 million.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and AutoZone, Inc. (NYSE:AZO) was one of them. Here is what the fund said:
“The Fund’s investments in auto-related businesses were consistent top performers in 2021. Shortages of new vehicles have driven buyers into the used car market. AutoZone, Inc. (NYSE:AZO) has won new customers who need to maintain vehicles they now plan to own longer (and federal stimulus checks have given car owners some extra cash to spend on car maintenance).”
You can also take a peek at 10 Penny Stocks Redditors are Buying in August and 10 Best Nickel Stocks to Buy Now.
