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Warren Buffett, chairman and CEO of Berkshire Hathaway (NATI HARNIK/AP)
Warren Buffett, chairman and CEO of Berkshire Hathaway (NATI HARNIK/AP)

NUMBER CRUNCHER

34 stocks that value gurus love Add to ...

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.

More Related to this Story

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.

Follow us on Twitter: @GlobeInvestor

 

New positions taken by prominent value managers

Company Symbol Firm/Fund
and no.
of shares
changed
in last
3 mths
Forward
P/E
(Next
12 Mths)
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

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  • JBL-N
  • XRX-N
  • VSR-A
  • APOL-Q
  • NCT-N
  • BRCD-Q
  • ROVI-Q
  • HES-N
  • NOV-N
  • COWN-Q
  • OXY-N
  • EMC-N
  • BCO-N
  • JNS-N
  • KELY.A-Q
  • DELL-Q
  • BRC-N
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