In this article, we will take a look at 5 value stocks to buy according to billionaire David Tepper. If you want to read our discussion on Tepper’s history and his hedge fund’s performance, go directly to 10 Value Stocks to Buy According to Billionaire David Tepper.
5. Energy Transfer LP (NYSE:ET)
Appaloosa Management’s Stake Value: $103,075,000
Percentage Of Appaloosa Management’s 13F Portfolio: 4.12%
Number of Hedge Fund Holders: 31
PE Ratio as of June 23: 9.04
Energy Transfer LP (NYSE:ET) is a Dallas, Texas-based energy company involved in the pipeline transportation of natural gas and propane.
In April, Robert Kad at Morgan Stanley increased the price target on Energy Transfer LP (NYSE:ET) from $12 to $15 while maintaining an Overweight rating on the stock. The future prospects of Energy Transfer LP (NYSE:ET) look promising as the company is expected to continue its strong growth trajectory from the last year. Energy Transfer LP (NYSE:ET) recorded a $1.5 billion YoY increase in-store margin in 2021. Furthermore, the operating cash flow was posted at $11.16 billion and EBITDA at $13.05 billion at the end of 2021.
Energy Transfer LP (NYSE:ET) is trading at a PE ratio of 9.04x, compared to the industry’s average of 11.31x. Furthermore, the stock’s PB ratio is also attractively valued at 1.0x, against the industry’s average of 1.81x.
Energy Transfer LP (NYSE:ET) was discussed in the Q1 2022 investor letter of Miller Value Partners. Here’s what the firm said:
“Energy Transfer LP (ET)rose over the period along with the price of oil climbing 40.59% over the period. The company received positive news that the Dakota Access Pipeline project would not be shut down while the Environmental Impact Statement by the US Army Core of Engineers is drawn up. Energy Transfer reported strong 1Q results with revenue of $17B surpassing expectations for $11.8B with adjusted earnings before income, taxes, depreciation and amortization (EBITDA) hitting $5.04B ahead of consensus of $2.77B. The company raised full year adjusted EBITDA guidance to $12.9-13.3B from $10.6-11.0B previously, with the increase largely related to the benefits realized from Winter Storm Uri. The company paid down $3.7B in debt during the quarter, using strong cash f low to reduce leverage. The company also announced the issuance of $900M in 6.5% Series H perpetual preferreds with the company using the proceeds to repay debt and for general purposes.”
As of Q1 2022, Energy Transfer LP (NYSE:ET) was held by 31 hedge funds.
4. Kohl’s Corporation (NYSE:KSS)
Appaloosa Management’s Stake Value: $43,322,000
Percentage Of Appaloosa Management’s 13F Portfolio: 1.69%
Number of Hedge Fund Holders: 42
PE Ratio as of June 23: 6.06
Kohl’s Corporation (NYSE:KSS) is an American retailer offering a range of merchandise, including accessories, apparel, and beauty products.
Kohl’s Corporation (NYSE:KSS) has posted an average free cash flow of $1.1 billion over the last five years. The company plans to add a further $2.5 billion in FCF during the following three years. Kohl’s Corporation (NYSE:KSS) is targeting an increase of 2-3% in sales during FY2022 through various growth initiatives. Kohl’s Corporation’s (NYSE:KSS) forward annual dividend yield stands at 5.26% as of June 23, which is considerably higher than the sector average of 1.5%. The stock is currently trading at $39.6 per share with a PE ratio of 6.06x.
Kohl’s Corporation (NYSE:KSS) was held by 42 hedge funds as of Q1 2022.
3. The Mosaic Company (NYSE:MOS)
Appaloosa Management’s Stake Value: $55,528,000
Percentage Of Appaloosa Management’s 13F Portfolio: 2.22%
Number of Hedge Fund Holders: 66
PE Ratio as of June 23: 6.42
The Mosaic Company (NYSE:MOS) is involved in the production and mining of potash crop nutrients and related minerals.
The Mosaic Company (NYSE:MOS) reported the Potash Segment revenue for May 2022 at $539 million, up from $246 million in the same period last year, reflecting an increase of over 110%. Similarly, the Phosphates segment saw its revenue increase by 53.7%.
The Mosaic Company (NYSE:MOS) has an attractive P/B ratio of 1.60x, compared to the industry’s average of 1.97x. Furthermore, the stock’s P/CF ratio stands at 6.48x, as opposed to the industry’s average of 10.48x. These metrics support the thesis that The Mosaic Company (NYSE:MOS) is currently trading at a discount to its fair value.
Here’s what Ariel Investments said about The Mosaic Company (NYSE:MOS) in its Q4 2021 investor letter:
“We continue to believe recent aggressive fiscal and monetary policy will drive high levels of intransient (rather than transitory) inflation. Recent inflation numbers have exceeded our hawkish predictions. While we believed the Consumer Price Index might rise +4% in 2021, double the Fed target of +2%; it rose +7%, the highest level in forty years. Ariel Focus Fund has been well positioned for this environment as natural resource and material companies such as The Mosaic Company (MOS) which returned +72.15% for the year. This was one of our two largest holdings at year-end and have performed well very early into 2022.”
Overall, 66 hedge funds held a stake in The Mosaic Company (NYSE:MOS) at the end of Q1 2022.
2. APA Corporation (NASDAQ:APA)
Appaloosa Management’s Stake Value: $8,266,000
Percentage Of Appaloosa Management’s 13F Portfolio: 0.33%
Number of Hedge Fund Holders: 46
PE Ratio as of June 23: 5.38
APA Corporation (NASDAQ:APA) is a Houston, Texas-based company involved in hydrocarbon exploration.
In Q1 2022, APA Corporation (NASDAQ:APA) posted revenue of $3.83 billion, surpassing the consensus estimate by $1.39 billion. On June 23, John Freeman at Raymond James reiterated a Strong Buy rating on APA Corporation (NASDAQ:APA) with a price target of $75. While the analyst stated that he doesn’t see a near-term catalyst for the stock, he expressed his positive outlook on APA Corporation’s (NASDAQ:APA) strong free cash flow generation capacity and distribution structure.
The stock is currently trading at $36.2 per share with a PE ratio of 5.38x. APA Corporation (NASDAQ:APA) has a P/S ratio of 1.69x, compared to the industry’s average of 2.29x. Furthermore, the stock’s P/CF ratio stands at 3.84x as opposed to the industry’s average of 11.11x. These valuation metrics coupled with strong business operations make APA Corporation (NASDAQ:APA) an attractive stock for value investors.
Here’s what Ariel Investments said about APA Corporation (NASDAQ:APA) in its Q4 2021 investor letter:
“We continue to believe recent aggressive fiscal and monetary policy will drive high levels of intransient (rather than transitory) inflation. Recent inflation numbers have exceeded our hawkish predictions. While we believed the Consumer Price Index might rise +4% in 2021, double the Fed target of +2%; it rose +7%, the highest level in forty years. Ariel Focus Fund has been well positioned for this environment as natural resource and material companies such as APA Corporation (APA) which returned +90.76% for the year. This was one of our two largest holdings at year-end and have performed well very early into 2022.”
APA Corporation (NASDAQ:APA) was held by 46 hedge funds at the end of Q1 2022.
1. Freeport-McMoRan Inc. (NYSE:FCX)
Appaloosa Management’s Stake Value: $36,808,000
Percentage Of Appaloosa Management’s 13F Portfolio: 1.47%
Number of Hedge Fund Holders: 68
PE Ratio as of June 23: 8.55
Freeport-McMoRan Inc. (NYSE:FCX) is an American company specializing in the mining and processing of minerals.
Over the last three years, Freeport-McMoRan Inc. (NYSE:FCX) has increased its EPS by 38% each year. The company also recorded a gain of 14% in its EBIT margins during the previous year.
According to Chris LaFemina at Jefferies, Freeport-McMoRan Inc. (NYSE:FCX) is “still underappreciated, still under-owned.” In March, the analyst gave a Buy rating on the stock and increased the price target from $58 to $65. Freeport-McMoRan Inc. (NYSE:FCX) is currently valued at $29 per share with a PE ratio of 8.55x as of June 23. LaFemina believes that Freeport-McMoRan Inc. (NYSE:FCX) is trading at a significant discount to its net present value and is expected to generate strong capital returns in the following years.
Horizon Kinetics LLC presented its insights on Freeport-McMoRan Inc. (NYSE:FCX) in its Q4 2021 investor letter. Here’s what the firm said:
“Those were some ideas about copper demand. Here are some specifics about supply. Global copper mine production in the 10 years from 2005 to 2015 rose 2.45% annually. In the next 5 years, to 2020, it increased by only 0.9% annually. Even ignoring the 2020 pandemic year, for the 4 years from to 2019, the expansion rate was 1.66%. We already have the historical context for this: the commodity price collapse prior to 2015, from a position of excess capacity.
What producers must do in that situation, because they have high fixed costs and debt expense, is curtail their exploration and development expenditures and reduce operating costs. They rely on existing mines, instead, and on their highest-grade ores and lowest-cost production. They might not actually reduce current production, but they aren’t replacing the reserves that are being slowly drawn down. You can see this at work at the individual company level.
Freeport-McMoRan will illustrate. It is the world’s third-largest copper producer, closely following Chile’s Codelco and Australia’s BHP Group. In 2014, even though Freeport sold more copper than the prior year, its revenues dropped by over 25%, and it went from $4.8 billion of operating earnings (a 22% margin) to a $(0.2) billion loss. The company’s capital expenditures peaked in 2014 at $3.86 billion and will be about $1.72 billion in 2021, meaning the company is spending 55% less now than it was seven years ago. In inflation-adjusted terms, it’s spending 61% less today than seven years ago…” (Click here to see the full text)
As of Q1 2022, Freeport-McMoRan Inc. (NYSE:FCX) was held by 68 hedge funds.
You can also take a peek at the 6 Defensive Stocks to Buy in 2022 According to Seth Klarman and 10 Stocks to Buy According to BlueSpruce Investments.
