In this article, we discuss the 5 value stocks to buy according to billionaire Seth Klarman. If you want to read our detailed analysis of these stocks, go directly to the 10 Value Stocks to Buy According to Billionaire Seth Klarman.
5. eBay Inc. (NASDAQ:EBAY)
Number of Hedge Fund Holders: 49
PE Ratio: 3.67
eBay Inc. (NASDAQ:EBAY) operates in internet and direct marketing retail. The hedge fund of Seth Klarman owned 5.9 million shares of eBay Inc. (NASDAQ:EBAY) at the end of the third quarter of 2021 worth more than $416 million, representing 3.82% of the total portfolio.
UBS analyst Kunal Madhukar recently upgraded eBay Inc. (NASDAQ:EBAY) stock to Buy from Neutral with a price target of $80, noting that the market was “underestimating” the potential the firm had in terms of online advertising.
Among the hedge funds being tracked by Insider Monkey, United Kingdom-based investment firm Ako Capital is a leading shareholder in eBay Inc. (NASDAQ:EBAY) with 7.3 million shares worth more than $512 million.
In its Q4 2020 investor letter, Steel City Capital, an asset management firm, highlighted a few stocks and eBay Inc. (NASDAQ:EBAY) was one of them. Here is what the fund said:
“eBay (Long): EBAY continues to be a core holding in the Partnership’s long book despite not having any “sexy” attributes or unknown catalysts. I like EBAY because it checks the boxes of being both capital light and priced as a value stock (low multiple of free cash flow), factors which are attractive in a potentially inflationary environment.
In 3Q’20 the company printed $2.6 billion of revenue vs. guidance of $2.4 billion (a $200 million beat) while full year revenue guidance was taken up by $400 million, implying 4Q’20 would be higher by $200 million as well. Free cash flow from continuing ops was guided to $2.3 billion for the full year, slightly above the $2.0 billion the business regularly generated before getting a Covid/stimulus related boost.
EBAY will have about $4.6 billion of cash on hand at year end5 and should receive another $2.0 billion in after-tax proceeds this quarter related to the sale of its Classifieds portfolio6 . Additionally, the company will receive 540 million shares from Adevinta which are currently valued at ~$8.3 billion, and also holds a warrant to purchase a 5.0% stake in payment processor Adyen which was last valued at ~$775 million. Additional asset sales are also not out of the question7 . Backing everything out at today’s market cap of $38.2 billion gives a clean market cap for the core marketplace of $22.6 billion. At a minimum, I expect $2.0 billion of free cash flow in FY’21, with the potential for a higher figure to the extent the incoming administration is successful in cutting additional stimulus checks. By FY’22, free cash flow should ramp to $2.3 billion after incorporating a full year’s contribution from the managed payments initiative. This values EBAY at 9.6x free cash flow, or 11.7x excluding stock-based comp.”
