In this article, we discuss 5 value stocks to buy according to Joel Greenblatt. If you want to read about some of the other value stocks in the Greenblatt portfolio, go directly to 10 Value Stocks to Buy According to Joel Greenblatt.
5. eBay Inc. (NASDAQ:EBAY)
Number of Hedge Fund Holders: 53
eBay Inc. (NASDAQ:EBAY) owns and runs an online marketplace. Securities filings show that Gotham Asset Management owned 214,872 shares of the company at the end of the fourth quarter of 2021 worth $14.2 million, representing 0.46% of the portfolio’s value. The fund increased its stake in the ecommerce firm by 3% between October and December.
On March 15, Deutsche Bank analyst Lee Horowitz initiated coverage of eBay Inc. (NASDAQ:EBAY) with a ‘Buy’ rating and a price target of $64, underlining that the market was underappreciating the position of the firm given the secular growth trends around ecommerce.
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 4.9 million shares worth more than $327 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 Inc. (NASDAQ: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 Inc. (NASDAQ: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 Inc. (NASDAQ:EBAY) at 9.6x free cash flow, or 11.7x excluding stock-based comp.”
