Value Investor Joel Greenblatt’s Small Cap Picks Include GameStop Corp. (GME)

Page 1 of 2

Joel Greenblatt, the former manager of Gotham Capital, has achieved a more widespread following among investors through his books (including You Can Be A Stock Market Genius) and his “Magic Formula” among other activities (normally this degree of self-promotion worries us, but Greenblatt does actually offer useful lessons). We track Greenblatt’s 13F filings alongside those of hundreds of hedge funds and other notable investors as part of our work developing investment strategies; we have found, for example, that the most popular small cap stocks outperform the S&P 500 by an average of 18 percentage points per year. We attribute this result to large institutional investors such as mutual funds paying less attention to small cap stocks. If small cap stocks are often mispriced, we can scan individual 13Fs for which small caps top managers like so that investors can do further research on any interesting names. Here are Greenblatt’s five largest small cap holdings as of the end of March (or see the full list of his stock picks):

Warner Chilcott Plc (NASDAQ:WCRX), a $4.9 billion market cap pharmaceutical company, was Greenblatt’s top pick with the filing disclosing ownership of 1.4 million shares. The stock’s trailing earnings multiple of 12 makes it an arguable value play, though in the first quarter of 2013 the company recorded a 13% decline in revenue versus a year earlier. Wall Street analysts expect Warner Chilcott to recover- in fact, their consensus forecasts for 2014 show growth in earnings per share, and imply a forward P/E of only 6- but of course analysts are often too optimistic.

GOTHAM ASSET MANAGEMENTGreenblatt slightly increased his stake in GameStop Corp. (NYSE:GME) to a total of about 660,000 shares. GameStop Corp. (NYSE:GME) has more than doubled in price over the last year, even as business has struggled: in its most recent quarter revenue slipped 7% compared to the same period in the previous fiscal year, with earnings falling by over 20%. The most recent data shows that 36% of the float is held short. Cliff Asness’s AQR Capital Management owned almost 4 million shares of GameStop Corp. (NYSE:GME) at the beginning of April (find Asness’s favorite stocks).

According to the 13F, Greenblatt had close to 300,000 shares of $3.3 billion market cap biotech company United Therapeutics Corporation (NASDAQ:UTHR) in his portfolio at the end of the first quarter of this year. United Thereapeutics is another popular short target, with 17% of the float held by short sellers, despite the fact that its trailing and forward P/Es are 12 and 9 respectively. The sell-side predicts decent earnings growth over the next several years and as a result the stock’s five-year PEG ratio is well below 1.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!