Brian Pinchuk is a portfolio manager at Lorne Steinberg Wealth Management in Montreal.
What am I looking for?
The most compelling companies that prominent value investors have recently added to their portfolios.
While peering over the shoulder of the “smart kids” may not be a wise approach to doing school homework, a similar strategy can often be a great source for new ideas when it comes to investing – so long as you do your own research to ensure that you’re not too late.
How I did it
At Lorne Steinberg Wealth Management, we are always on the lookout for quality businesses at undervalued prices.
To help pinpoint prospects, I used S&P’s Capital IQ Screener to sift through more than 17,000 stocks on major exchanges worldwide. Specifically, I screened for shares that were recently acquired by well-known and successful value investors, such as Warren Buffett (Berkshire Hathaway), Seth Klarman (Baupost Group), Joel Greenblatt (Gotham Asset Management), and others.
I was interested in companies that are not overburdened with debt, have a track record of generating positive free cash flow and have share prices that are down significantly from their highs. I also wanted to focus on companies that have yet to advance in any meaningful way since the notable investors initiated their positions. I then combed through the list to find companies with favourable value-based metrics, such as relatively low forward earnings multiples and price-to-book ratios. The accompanying chart shows the top companies sorted by the lowest forward earnings multiple, a measure that can help point to stock prices that do not reflect a company’s long-term fundamentals.
What I found
The companies listed here are a good starting point for finding value and our research team is actively looking at investing in a number of them.
Remember, though: Blindly copying what others are doing is unlikely to prove a successful investment strategy. As with hunting for a used car, one can find an apparent bargain, but you should have a mechanic look under the hood. Things are often cheap for a good reason. Investors are strongly advised to do their own homework before buying any of the stocks listed here.
New positions taken by prominent value managers
|Royal Dutch Shell||RDSA-LSE||Tweedy, Browne Fund Inc. (183,887)||7.56|
|BP PLC||BP-LSE||Baupost Group (37,193,400)||7.96|
|Jabil Circuit Inc.||JBL-N||Gotham Asset Management, LLC (333,665)||8.17|
|Xerox Corporation||XRX-N||Gotham Asset Mgt, LLC (292,011); The Tocqueville Fund (250,000)||8.35|
|Versar Inc.||VSR-A||Ariel Investments, LLC (104,891)||8.73|
|Apollo Group Inc.||APOL-Q||Gotham Asset Mgt, LLC (174,537)||8.83|
|Newcastle Investment Corp.||NCT-N||Legg Mason Capital Mgt. LLC (308,300)||9.4|
|Brocade Comm Systems||BRCD-Q||Gotham Asset Management, LLC (268,088)||9.59|
|Tesco PLC||TSCO-LSE||Berkshire Hathaway Inc. (1,662,612)||10|
|Rovi Corporation||ROVI-Q||Baupost Group, LLC (4,025,026)||10.5|
Source: Capital IQ
last 3 mths
|Royal Dutch Shell||RDSA-LSE||Tweedy, Browne Fund Inc. (183,887)||7.56||1.13||-2.05||25.1||19.7|
|BP PLC||BP-LSE||Baupost Group (37,193,400)||7.96||1.03||-1.48||30.8||35.4|
|Jabil Circuit Inc.||JBL-N||Gotham Asset Management, LLC (333,665)||8.17||1.89||13.4||24.9||75.3|
|Xerox Corporation||XRX-N||Gotham Asset Mgt, LLC (292,011); The Tocqueville Fund (250,000)||8.35||0.987||7.44||36.8||71.2|
|Versar Inc.||VSR-A||Ariel Investments, LLC (104,891)||8.73||1.14||8.39||24.7||1.98|
|Apollo Group Inc.||APOL-Q||Gotham Asset Mgt, LLC (174,537)||8.83||1.83||2.04||80||7.87|
|Newcastle Investment Corp.||NCT-N||Legg Mason Capital Mgt. LLC (308,300)||9.4||0.746||-52||57.8||176.7|
|Brocade Comm Systems||BRCD-Q||Gotham Asset Management, LLC (268,088)||9.59||1.17||2.3||41.2||26.7|
|Tesco PLC||TSCO-LSE||Berkshire Hathaway Inc. (1,662,612)||10||1.61||-13.5||26.7||65|
|Rovi Corporation||ROVI-Q||Baupost Group, LLC (4,025,026)||10.5||1.49||8.5||67.1||89.8|
|Hess Corporation||HES-N||GreenLight Capital (1,245,000); MFP Investors LLC (550,000)||11.2||1.01||-9.29||45.2||32.7|
|National Oilwell Varco, Inc.||NOV-N||Berkshire Hathaway (2,189,500)||11.8||1.45||-0.172||22.6||21|
|Cowen Group, Inc.||COWN-Q||Ariel Investments, LLC (1,634,025)||12||0.69||10.3||66.6||84.6|
|Occidental Petroleum||OXY-N||BBH Trust (461,293)||12.2||1.77||14||23.6||18.6|
|EMC Corporation||EMC-N||Gotham Asset Management, LLC (143,175)||12.3||2.19||0.17||21.3||7.11|
|The Brink's Company||BCO-N||Ariel Investments, LLC (216,745)||12.4||2.64||-5.9||63.6||93.5|
|Janus Capital Group, Inc.||JNS-N||Ariel Investments (149,293)||12.6||1.09||-7.27||76.8||36.3|
|Kelly Services, Inc.||KELY.A-Q||Gotham Asset Mgt, LLC (101,229)||12.7||0.864||-5.52||23.3||6.62|
|Dell Inc.||DELL-Q||BBH Trust (765,806)||12.8||2.18||-6.92||48.9||67.4|
|Brady Corp.||BRC-N||Ariel Investments, LLC (203,331)||13.4||1.55||-4.91||22||32.7|
|Ascena Retail Group Inc.||ASNA-Q||Legg Mason Capital Mgt LLC (195,900)||13.4||1.84||-1.66||21.5||10.3|
|Steel Dynamics Inc.||STLD-Q||Gotham Asset Mgt, LLC (115,300)||14.3||1.38||-1.04||56.9||91.8|
|NVIDIA Corporation||NVDA-Q||Gotham Asset Mgt, LLC (172,693)||14.6||1.69||13.6||46.1||0.38|
|Schlumberger Limited||SLB-N||FMI Funds Inc. (620,000)||14.6||2.71||-1.68||32.6||31|
|VeriFone Systems, Inc.||PAY-N||Legg Mason Capital Mgt (210,100); Tocqueville Fund (150,000)||14.6||1.41||-20.8||71.5||96.3|
|Furmanite Corporation||FRM-N||Ariel Investments, LLC (291,727.00)||15.4||2.17||5.26||44.3||35.7|
|Symmetry Medical, Inc.||SMA-N||Gotham Asset Mgt, LLC (102,328)||15.4||0.99||-28||62.4||69.2|
|McDermott Int'l Inc.||MDR-N||Tocqueville Fund (150,000)||15.6||1.03||-21.6||86.3||5.15|
|Checkpoint Systems Inc.||CKP-N||Gotham Asset Mgt, LLC (136,846)||17.3||1.6||13.5||39.6||30.4|
|Carnival Corporation||CCL-N||Ariel Investments, LLC (409,100)||17.5||1.15||2.03||28||42.4|
|MICROS Systems, Inc.||MCRS-Q||ValueAct Capital, LLC (5,924,806)||17.6||2.98||-2.99||25||0.343|
|AuRico Gold Inc.||AUQ-T||Aegis Financial Corp. (437,310)||17.9||0.557||-28||67.1||8.55|
|Coeur Mining, Inc.||CDE-N||Aegis Financial Corp. (394,300)||18.9||0.52||-31.3||66.2||14.3|
|Sotheby's||BID-N||Ariel Investments, LLC (194,675)||19.2||2.78||3.19||30.9||73.9|