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.”
4. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 41
3M Company (NYSE:MMM) is a diversified technology company. The firm’s latest 13F filing reveals that Greenblatt’s fund owned 78,792 shares of the company at the end of the fourth quarter of 2021 worth $13.9 million, representing 0.45% of the value of its 13F portfolio. The investment firm upped its stake in the firm by 45% in the fourth quarter.
On February 15, Wells Fargo analyst Joseph O’Dea kept an ‘Equal Weight’ rating on 3M Company (NYSE:MMM) with a price target of $173. The stock has nosedived in recent weeks after the firm lost a $50 million jury verdict in its ongoing stream of defective earplug lawsuits.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company (NYSE:MMM) with 5.7 million shares worth more than $1 billion.
3. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 49
Target Corporation (NYSE:TGT) is a general merchandise retailer. Regulatory filings show that the investment firm led by Joel Greenblatt owned 55,044 shares in the company at the end of the fourth quarter of 2021 worth $12.7 million, representing 0.41% of its 13F portfolio value. The fund slashed its stake in the company by 8% between October and December.
On March 2, BMO Capital analyst Kelly Bania kept an ‘Outperform’ rating on Target Corporation (NYSE:TGT) and raised the firm’s price target on its shares to $295 from $275, highlighting that the shares look inexpensive and reflect the company’s “affordable luxury” proposition.
Among the hedge funds being tracked by Insider Monkey, Florida-based GQG Partners is a leading shareholder in Target Corporation (NYSE:TGT) with 4.9 million shares worth more than $1.1 billion.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Target Corporation (NYSE:TGT) was one of them. Here is what the fund said:
“We added Target Corporation (NYSE:TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target Corporation (NYSE:TGT) is an attractive holding.”
2. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 68
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer. The latest data shows that Gotham Asset Management owned 29,811 shares of the firm at the end of December 2021 worth $12.3 million, representing 0.39% of the value of its 13F portfolio. The firm dumped about 20% of its stake in the firm during the fourth quarter of 2021.
On February 25, investment advisory Edward Jones upgraded The Home Depot, Inc. (NYSE:HD) to ‘Buy’ from ‘Hold’, though without a price target. The ratings update was issued by analyst Brian Yarbrough.
Among the hedge funds being tracked by Insider Monkey, Fisher Asset Management is a leading shareholder in The Home Depot, Inc. (NYSE:HD) with 7.8 million shares worth more than $3.2 billion.
In its Q4 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and The Home Depot, Inc. (NYSE:HD) was one of them. Here is what the fund said:
“On the more positive side, we saw notable performance contribution from The Home Depot, Inc. (NYSE:HD). In the midst of a housing shortage and rising home prices, Americans turned to home improvement projects with Home Depot’s startlingly fast growth in 2020 continuing throughout 2021. With each quarter that passed showing a continuation of strong growth rather than the slowdown that many investors expected, the stock led the S&P 500 for most of the year and turned in a heady 27% rally in the fourth quarter to close out the year. Notably, while Do It Yourself homeowners did indeed shop at The Home Depot, Inc. (NYSE:HD) less than they did during record setting 2020, almost half of the company’s revenue comes from Pro contractors where strong growth continues.”
1. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 57
McDonald’s Corporation (NYSE:MCD) owns and runs fast food restaurants. According to its latest 13F filing, Gotham Asset Management owned 47,950 shares in the company at the end of December 2021 worth $12.8 million, representing 0.41% of its 13F portfolio’s value. The fund increased its stake in the firm by 55% in the fourth quarter.
On March 30, UBS analyst Dennis Geiger kept a ‘Buy’ rating on McDonald’s Corporation (NYSE:MCD) shares, with a price target of $290, underlining that the firm was “attractive for investors looking for a high quality, defensive compounder” given rising inflation.
At the end of the fourth quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in McDonald’s Corporation (NYSE:MCD), compared to 58 funds long MCD in the preceding quarter, with holdings worth $3.3 billion.
For more great investment ideas, check out 13 Best Hemp Stocks to Buy Now and Billionaire Dan Loeb’s Top 10 Stock Picks.
