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. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

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!