In this article, we discuss the top 10 stocks to buy according to legendary value investor Joel Greenblatt. If you want to skip our detailed analysis of Greenblatt’s history, investment philosophy, and hedge fund performance, go directly to the Top 5 Stocks to Buy According to Legendary Value Investor Joel Greenblatt.
Legendary value investor Joel Greenblatt is an American hedge fund manager and writer, who serves as the managing principal and co-chief investment officer of Gotham Asset Management, an investment management firm that he founded in 1985. Gotham Asset Management has a portfolio valued at $2.46 billion as per the Q3 13F filings, with assets under management of $4.11 billion. With a top ten holdings concentration of 16.24%, Joel Greenblatt’s Q3 portfolio is concentrated in the information technology, finance, healthcare, industrials, consumer discretionary, and communications sectors.
Joel Greenblatt holds an MBA degree from the Wharton School of the University of Pennsylvania. In addition to actively managing Gotham Asset Management, Greenblatt has been a faculty member of Columbia Business School for more than two decades, teaching a course named “Value and Special Situation Investing”.
He is also a director of the global investment management firm, Pzena Investment Management, Inc (NYSE:PZN). Greenblatt is a renowned author, and his publications include You Can Be A Stock Market Genius (Simon & Schuster, 1997), The Little Book that Beats the Market (Wiley, 2005), The Little Book that Still Beats the Market (Wiley, 2010), The Big Secret for the Small Investor (Random House, 2011), and Common Sense: The Investor’s Field Guide to Equality, Opportunity, and Growth (Columbia University Press, 2020).
In the year 2000, Greenblatt helped the American investor, Michael Burry, to create his hedge fund, namely Scion Capital, by purchasing 25% of its capital for $1 million. Greenblatt has a straightforward approach to investment, primarily focusing on the large- and mid-cap American companies. Greenblatt believes that short term price volatility is temporary, and should not impact his investment strategy, since stocks will eventually go back to their fair value. Expensive companies receive a larger short allocation in his portfolio, whereas, the cheaper a company appears to be, the bigger allocation it receives on the long side.
Joel Greenblatt of Gotham Asset Management
The most notable stocks in Joel Greenblatt’s Q3 portfolio include Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
We used the Q3 portfolio of Joel Greenblatt’s Gotham Asset Management to select the legendary value investor’s top 10 stocks.
Ranking the list according to Greenblatt’s stake value in each holding, we have mentioned Q3 earnings, analyst ratings, and the hedge fund sentiment around each stock to give readers a better understanding about the companies.
Top Stocks to Buy According to Legendary Value Investor Joel Greenblatt
10. Johnson & Johnson (NYSE:JNJ)
Gotham Asset Management’s Stake Value: $18,190,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.73%
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE:JNJ), an American multinational corporation offering consumer health products, medical devices, and pharmaceutical products, posted on October 19 its Q3 results. The company reported earnings per share of $2.60, beating estimates by $0.25. The revenue gained 10.70% year-over-year, amounting to $23.34 billion, but missed estimates by almost $380 million.
Joel Greenblatt increased his stake in Johnson & Johnson (NYSE:JNJ) by 68% in the third quarter, holding 112,634 shares worth $18.19 million, representing 0.73% of his total Q3 investments.
Johnson & Johnson (NYSE:JNJ) expects to file for the approval of 14 new drugs by 2025, and the company is actively researching the COVID-19 Omicron variant, to create additional vaccines and booster shots to combat the virus.
On November 12, Johnson & Johnson (NYSE:JNJ) announced its plan to separate its consumer division from its pharmaceutical and medical devices business segments. The healthcare division of Johnson & Johnson (NYSE:JNJ) will be traded as a new publicly listed company, and the company expects to complete this transition over the coming 12 to 18 months.
In the third quarter, 88 hedge funds monitored by Insider Monkey were long Johnson & Johnson (NYSE:JNJ), holding total stakes worth $6.87 billion. Terry Smith’s Fundsmith LLP is the leading Johnson & Johnson (NYSE:JNJ) stakeholder from Q3, with 7.20 million shares valued at $1.16 billion.
Johnson & Johnson (NYSE:JNJ) is one of the top stock picks of Joel Greenblatt as of September this year, in addition to Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Distillate Capital has to say about Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
9. Walmart Inc. (NYSE:WMT)
Gotham Asset Management’s Stake Value: $18,989,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.77%
Number of Hedge Fund Holders: 71
In the third quarter earnings report published on November 16, Walmart Inc. (NYSE:WMT) posted an EPS of $1.45, beating estimates by $0.06. The Q3 revenue totaled $139.21 billion, exceeding estimates by $4.95 billion.
Legendary value investor Joel Greenblatt holds an $18.9 million position in Walmart Inc. (NYSE:WMT) as of September 2021, which represents 0.77% of his total third quarter securities.
MKM Partners analyst Bill Kirk upgraded Walmart Inc. (NYSE:WMT) to Buy from Neutral with a price target of $166, up from $156 on November 19. The analyst observed that relative to peers, Walmart Inc. (NYSE:WMT) has better inventory levels heading into the holiday season and has shown the best progress towards building a subscription model.
At the end of September, 71 hedge funds tracked by Insider Monkey were bullish on Walmart Inc. (NYSE:WMT), with a total stake value of $7.93 billion. Billionaire Ken Fisher, via Fisher Asset Management, increased his stake in Walmart Inc. (NYSE:WMT) by 4% in Q3, holding over 13 million shares worth $1.81 billion.
Here is what ClearBridge Investments has to say about Walmart Inc. (NYSE:WMT) in its Q2 2021 investor letter:
“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart and Costco has been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In September 2020 Walmart raised wages for 165,000 employees, including a number of entry positions to $15 an hour. It followed this in February with a raise for 425,000 workers that moved its average pay above $15 an hour.”
8. Pfizer Inc. (NYSE:PFE)
Gotham Asset Management’s Stake Value: $22,889,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.92%
Number of Hedge Fund Holders: 74
As of the third quarter, Pfizer Inc. (NYSE:PFE) stock represents 0.92% of Joel Greenblatt’s total investments, with the value investor holding 532,176 Pfizer Inc. (NYSE:PFE) shares, worth $22.8 million.
Pfizer Inc. (NYSE:PFE) announced its Q3 results on November 2, reporting earnings per share of $1.34, exceeding estimates by $0.25. The quarterly revenue equaled $24.09 billion, outperforming estimates by $1.28 billion.
Mizuho analyst Vamil Divan on December 14 raised the price target on Pfizer Inc. (NYSE:PFE) to $56 from $44 and kept a Neutral rating on the shares, citing recent developments at Pfizer Inc. (NYSE:PFE) like the Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) acquisition announcement, as reasons for the higher price target. He also increased the revenue guidance of Pfizer Inc. (NYSE:PFE) for 2022 and 2023.
Ric Dillon’s Diamond Hill Capital is the largest Pfizer Inc. (NYSE:PFE) stakeholder from Q3, with 10.6 million shares worth roughly $458 million. Overall, 74 hedge funds tracked by Insider Monkey reported owning stakes in Pfizer Inc. (NYSE:PFE) at the end of September, worth $2.66 billion, up from 67 funds in the prior quarter.
Pfizer Inc. (NYSE:PFE) is a notable stock in Joel Greenblatt’s investment portfolio from the third quarter, just like Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Saturna Capital Amana Funds has to say about Pfizer Inc. (NYSE:PFE) in its Q3 2021 investor letter:
“The Fund’s strongest performer during the quarter was pharmaceutical manufacturer Pfizer. The company submitted trial data to the FDA for use of its COVID-19 vaccine for younger children, and it is widely expected that the FDA will approve it. Health authorities also began recommending booster shots of the Pfizer vaccine for select populations, further increasing demand for vaccinations.”
7. Meta Platforms, Inc. (NASDAQ:FB)
Gotham Asset Management’s Stake Value: $34,710,000
Percentage of Gotham Asset Management’s 13F Portfolio: 1.40%
Number of Hedge Fund Holders: 248
The parent company of popular social networking platforms like Facebook, Instagram, and WhatsApp, Meta Platforms, Inc. (NASDAQ:FB) is one of the top 10 stocks to buy according to legendary value investor Joel Greenblatt. Greenblatt, via Gotham Asset Management, owns 102,272 Meta Platforms, Inc. (NASDAQ:FB) shares, worth $34.71 million, accounting for 1.40% of the hedge fund’s total investments for the third quarter.
In its Q3 earnings report, published on October 25, Meta Platforms, Inc. (NASDAQ:FB) posted an EPS of $3.22, topping estimates by $0.04. The revenue gained 35.12% year-over-year, reaching $29.01 billion, but missed estimates by $513.23 million.
HSBC analyst Nicolas Cote-Colisson upgraded Meta Platforms, Inc. (NASDAQ:FB) on December 6 to Hold from Reduce with an unchanged price target of $300. The analyst stated that the shares are under pressure after a “regulatory setback”, despite upside risks on advertising and rising interest in the metaverse.
In the third quarter, 248 hedge funds in the database of 867 elite funds tracked by Insider Monkey were long Meta Platforms, Inc. (NASDAQ:FB), holding total stakes worth $38.5 billion. Boykin Curry’s Eagle Capital Management is one of the most significant Meta Platforms, Inc. (NASDAQ:FB) stakeholders from Q3, with 7.1 million shares worth $2.44 billion.
Here is what Canterbury Tollgate has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q3 2021 investor letter:
“To say traditional media is anti-Facebook would not be an overstatement. An already intense and multi-year critique of (or attack on) Facebook has ratcheted up in recent weeks. Facebook’s research efforts have been reported on, if often derided, for nearly a decade. Going back to 2014, Slate.com called their research practices “unethical” when FB tried to study the impact social posts had on users. Now those efforts have been turned against them for the kill shot.
My job is to observe, assess, and allocate. Not to commentate on all the whims and wishes of media narrative. However, in the case of Facebook I cannot avoid going into some detail re: the onslaught against them, which I find to be most unwarranted and insincere.
Last month the Wall Street Journal ran a five-piece series titled “The Facebook Files” which allegedly shows how toxic Instagram is for teens. The foundation of their argument was a single slide from an internal presentation claiming, based on FB’s own research, that of teens who had a negative self-image, one-third said Instagram “made them feel worse.”iii Somehow the implication here is that this is not an inescapable aspect of either the human psyche and/or society-at large, but that it is of Facebook’s doing…” (Click here to see the full text)
6. Apple Inc. (NASDAQ:AAPL)
Gotham Asset Management’s Stake Value: $37,435,000
Percentage of Gotham Asset Management’s 13F Portfolio: 1.51%
Number of Hedge Fund Holders: 120
Apple Inc. (NASDAQ:AAPL), one of the Big Five US tech firms, announced its Q3 results on October 28. Earnings per share of $1.24 were in line with analysts’ consensus estimates for the quarter. Revenue over the period jumped 28.84% to $83.36 billion, but missed estimates by $1.62 billion.
The Q3 database of Insider Monkey reported that 120 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL), with total stakes amounting to approximately $146 billion. The leading Apple Inc. (NASDAQ:AAPL) stakeholder as of September is Berkshire Hathaway, with a $125.5 billion position in the company.
On December 14, Evercore ISI analyst Amit Daryanani raised the price target on Apple Inc. (NASDAQ:AAPL) to $200 from $180 and kept an Outperform rating on the shares. According to the analyst, there is room for sustained upside through FY22 as Apple Inc. (NASDAQ:AAPL) benefits from multiple tailwinds, including stable iPhone growth, monetization of the installed base across services and wearables, and new product launches.
As per the third quarter filings of Gotham Asset Management, the hedge fund holds 264,561 Apple Inc. (NASDAQ:AAPL) shares, worth $37.4 million, representing 1.51% of the total Q3 investments.
Here is what ClearBridge Investments has to say about Apple Inc. (NASDAQ:AAPL) in its Q1 2021 investor letter:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
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Disclosure: None. Top 10 Stocks to Buy According to Legendary Value Investor Joel Greenblatt is originally published on Insider Monkey.
