The most compelling companies that prominent value investors have recently added to their portfolios.
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 key 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 price-earnings multiples and price-to-book ratios. The accompanying chart shows the top 20 companies sorted by the lowest forward P/E multiple, a measure that can help point to stock prices that do not reflect a company’s long-term fundamentals.
What I found
The 20 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: 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.