10 Best Value Stocks to Buy According to Billionaire Dan Loeb

Published on October 14, 2022 at 9:57 am by Umar Farooq in Hedge Fund Analysis, Hedge Funds, News

In this article, we discuss the 10 best value stocks to buy according to billionaire Dan Loeb.

Dan Loeb founded his hedge fund, Third Point, back in 1995 with a borrowed $3.3 million from his friends and family. He rose to prominence after his activist shareholder strategies paid off, and he successfully executed numerous corporate takeovers over the years of his career. As of October 10, 2022, the activist investor is worth $3.5 billion, according to data from Forbes. As of June 30, 2022, Dan Loeb manages over $4.22 billion in 13F securities through his hedge fund. In his letter to investors issued in May this year, Dan Loeb said that the stock market’s present level of volatility is a reaction to the economy’s ongoing, subtle but significant changes. He contends that investors are not responding to the market “shift” in a sufficient way to change their behavior.

In the second quarter, Third Point 13.7%, compared to the S&P 500’s 8.5% annualized return. In the second quarter, the fund sold 21 stocks and acquired 4 new stocks. The fund also decreased its holdings in 14 equities while increasing its purchases in 4 of them. The fund has a top 10 holdings concentration of 74.85%, with the Utilities and Telecommunications sector comprising 24.19% of the portfolio. Its largest holding is PG&E Corp. (NYSE:PCG), with shares held of 65.4 million.

Along with the 10 best value stocks that we are going to discuss in this article, SentinelOne, Inc. (NYSE:S), PG&E Corporation (NYSE:PCG), and Danaher Corporation (NYSE:DHR) are some of the most notable names in Third Point’s portfolio.

10 Best Value Stocks to Buy According to Billionaire Dan Loeb

Dan Loeb of Third Point

Our Methodology

We selected value stocks from the 13F portfolio of Dan Loeb’s Third Point. The P/E ratio is mentioned as of October 9 for all securities. Stocks with a price-to-earnings ratio of under 25 were picked for the list.

10. T-Mobile US, Inc. (NASDAQ:TMUS)

Third Point’s Stake Value: $65.252 Million

Percentage of Third Point’s 13F Portfolio: 1.54%

Number of Hedge Fund Holders: 96

P/E Ratio (Non-GAAP) as of October 09: 23.86

T-Mobile US, Inc. (NASDAQ:TMUS) was founded in 1994 and is based in Bellevue, Washington. T-Mobile US, Inc. (NASDAQ:TMUS), together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands.

On September 9, Raymond James analyst Ric Prentiss maintained a Strong Buy rating on T-Mobile US, Inc. (NASDAQ:TMUS) stock and raised the price target to $178 from $175, noting that the board had authorized a $14 billion stock repurchase, which is positive for value creation.

Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. (NASDAQ:TMUS), with 9.2 million shares worth more than $1.2 billion. Dan Loeb’s Third Point exited its complete position in T-Mobile US, Inc. (NASDAQ:TMUS) during Q4, 2017. It has now again initiated a position in T-Mobile US, Inc. (NASDAQ:TMUS) by acquiring 485,000 of its shares worth around $65 million.

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and T-Mobile US, Inc. (NASDAQ:TMUS) was one of them. Here is what the fund said:

“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile US, Inc. (NASDAQ:TMUS). Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”

09. Hertz Global Holdings, Inc. (NASDAQ:HTZ)

Third Point’s Stake Value: $99.158 Million

Percentage of Third Point’s 13F Portfolio: 2.34%

Number of Hedge Fund Holders: 49

P/E Ratio (Non-GAAP) as of October 09: 4.08

Hertz Global Holdings, Inc. (NASDAQ:HTZ) was founded in 1918 and is based in Estero, Florida. Hertz Global Holdings, Inc. (NASDAQ:HTZ) operates as a vehicle rental company. It operates through two segments, Americas Rental Car and International Rental Car.

Since declaring bankruptcy during the coronavirus epidemic, Hertz Global Holdings, Inc. (NASDAQ:HTZ) has been on the road to recovery. The company’s Q2 2022 revenues of $2.34 billion are $0.47 billion more than they were during the same period in the previous year. It also beat the EPS estimates by $0.02 during Q2. The business’s strategy shift towards EVs aims to strengthen its competitive standing and financial performance.

Along with SentinelOne, Inc. (NYSE:S), PG&E Corporation (NYSE:PCG), and Danaher Corporation (NYSE:DHR), Dan Loeb held a significant stake in Hertz Global Holdings, Inc. (NASDAQ:HTZ) during Q2. Mr. Dan Loeb’s hedge fund held a $99 million stake in Hertz Global Holdings, Inc. (NASDAQ:HTZ) by the end of this year’s second quarter. This came through the fund owning 6.2 million shares of the company and it represented 2.34% of its investment portfolio. Insider Monkey’s Q2 2022 survey of 895 hedge funds outlined that 49 funds had also invested in Hertz Global Holdings, Inc. (NASDAQ:HTZ).

08. Antero Resources Corporation (NYSE:AR)

Third Point’s Stake Value: $103.992

Percentage of Third Point’s 13F Portfolio: 2.46%

Number of Hedge Fund Holders: 64

P/E Ratio (Non-GAAP) as of October 09: 9.28

Antero Resources Corporation (NYSE:AR) was formerly known as Antero Resources Appalachian Corporation and changed its name to Antero Resources Corporation in June 2013. Antero Resources Corporation (NYSE:AR) was founded in 2002 and is based in Denver, Colorado. Antero Resources Corporation (NYSE:AR), an independent oil and natural gas company, acquires, explores for, develops, and produces natural gas, natural gas liquids, and oil properties in the United States.

On August 18, Mizuho analyst Vincent Lovaglio cut his price target for Antero Resources Corp (NYSE:AR) from $53 to $49 while maintaining a Buy rating on the stock. The analyst claims that after the Q2 results, his larger thesis for the exploration and production industry remains valid. According to Lovaglio, Antero Resources Corp (NYSE:AR) represents a reasonably attractive value when compared to the larger market because structural undersupply, driven by multi-year underinvestment, should continue to sustain higher than anticipated commodity prices and better than anticipated cash returns.

Among the hedge funds tracked by Insider Monkey during Q2, a total of 64 hedge funds were holding a stake in AnteroAntero Resources Corp (NYSE:AR). Antero Resources Corporation (NYSE:AR)’s largest investor is Zach Schreiber’s Point State Capital which owns 4.2 million shares that are worth $129 million. Dan Loeb’s Third Point acquired 3.39 million shares of Antero Resources Corp (NYSE:AR) during Q2, valued at $103.99 million.

07. Cenovus Energy Inc. (NYSE:CVE)

Third Point’s Stake Value: $138.298 Million

Percentage of Third Point’s 13F Portfolio: 3.27%

Number of Hedge Fund Holders: 42

P/E Ratio (Non-GAAP) as of October 09: 12.01

Cenovus Energy Inc. (NYSE:CVE) is an integrated oil and natural gas company based in Calgary, Alberta. On October 13, Scotiabank analyst Jason Bouvier lowered his price target on Cenovus Energy Inc. (NYSE:CVE) to C$33 from C$34 and kept an Outperform rating on the shares. The stock has gained 40.7% value year to date. As of Q2 2022, 42 of the 895 hedge funds tracked by Insider Monkey owned shares of Cenovus Energy Inc. (NYSE:CVE), valued at $2.9 billion. Soroban Capital Partners is its largest shareholder, with ownership of 50.3 million shares valued at $957 million.

Here is what L1 Capital specifically said about Cenovus Energy Inc. (NYSE:CVE) in its Q2 2022 investor letter:

“MEG Energy and Cenovus Energy Inc. (NYSE:CVE): We continue to remain positive on the outlook for Energy. While a potential U.S. recession would result in softer oil demand, we believe this would be more than outweighed by China re-opening over the coming year (which would see a major lift in car and air traffic). Oil supply continues to remain constrained with sustained declines in global inventories and OPEC+ remains unable to grow production significantly. With the sell-off in energy stocks, MEG and Cenovus are currently generating more than 20% of their market cap in cash flow with large dividends and share buybacks to come.

Cenovus Energy (Long +14%) shares rallied driven by continued strong free cash flow generation, as well as being positioned to benefit from strong refining margins and downstream operations. The company recently announced a significant increase in dividends, which gives us greater confidence on the potential for a 100% return of free cash flow generation via dividends and buybacks from early CY23. Given the long-life nature of its oil sand assets and its low cost of production, we estimate the company is free cash flow break-even at an oil price of ~US$40/bbl. At present, oil prices are more than double this break-even point, implying considerable upside to consensus cash flow estimates (if prices remain near current levels). There are also additional value realisation catalysts with the company continuing to progress the de-gearing of its balance sheet via organic cash generation and asset sales.”

06. CSX Corporation (NASDAQ:CSX)

Third Point’s Stake Value: $144.283 Million

Percentage of Third Point’s 13F Portfolio: 3.41%

Number of Hedge Fund Holders: 63

P/E Ratio (Non-GAAP) as of October 09: 15.31

CSX Corporation (NASDAQ:CSX) was incorporated in 1978 and is situated in Jacksonville, Florida. CSX Corporation (NASDAQ:CSX), together with its subsidiaries, provides rail-based freight transportation services. As of October 9, the stock is down by 27.80% year-to-date. In the second quarter of 2022, CSX Corp. (NYSE:CSX) posted an EPS of $0.5, beating estimates of $0.47 by $0.03. Furthermore, in Q2 2022, the company reported total revenue of $3.82 billion. During Q2, 2022, CSX Corp. (NYSE:CSX) was found in 63 hedge funds’ 13F portfolios. The company maintains one of the longest track records of dividend growth in the transport sector, extending to 17 years. It currently pays a quarterly dividend of $0.10 per share and has a yield of 1.50%, as of October 09.

On September 30, while maintaining an Overweight rating on the shares, Barclays analyst Brandon Oglenski cut his price target for CSX Corp. (NYSE:CSX) from $40 to $35. Labor agreements and weaker volume results this fall will put pressure on railroad margins in the short term, according to Oglenski, who forecasts “less robust” 2023 earnings. Although the analyst notes that railroad estimates will probably be revised downward throughout the Q3 reporting season, the valuation compression for many stocks is “at least getting close to prior recessionary periods.”

Clearbridge Investments mentioned CSX Corporation (NYSE:CSX) in their Q4 2021 investor letter. This is what they had to say:

“On a regional basis, the U.S. and Canada was the top contributor to quarterly performance, of which U.S. rail operators CSX (NYSE:CSX) was among the lead performers. CSX (NYSE:CSX) is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX (NYSE:CSX) is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX (NYSE:CSX) performed well during the quarter after the company beats market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”

05. Colgate-Palmolive Company (NYSE:CL)

Third Point’s Stake Value: $159.078 Million

Percentage of Third Point’s 13F Portfolio: 3.76%

Number of Hedge Fund Holders: 55

P/E Ratio (Non-GAAP) as of October 09: 22.55

Colgate-Palmolive Company (NYSE:CL) was founded in 1806 and is based in New York, New York. Colgate-Palmolive Company (NYSE:CL), together with its subsidiaries, manufactures and sells consumer products worldwide.

Colgate-Palmolive Company (NYSE:CL), which has experienced annual dividend growth for the past 60 years, is one of the best stocks to buy as recession approaches. On September 9, the business announced a quarterly dividend of $0.47 per share, as it had in the previous quarter. Shareholders with records as of October 21 will get the dividend on November 15. On August 2, Lauren Lieberman, an analyst with Barclays, raised his price target for Colgate-Palmolive Company (NYSE:CL) from $71 to $74 and maintained an Equal Weight rating on the shares. According to Lieberman in a research note to investors, Colgate’s better-than-anticipated organic sales growth in Q2 has allowed the company to increase its full-year guidance range.

At the end of Q2 2022, 55 hedge funds held stakes in Colgate-Palmolive Company (NYSE:CL). The total value of these stakes amounted to $2.93 billion, up from $2.59 billion a quarter ago, with 50 positions. The hedge fund sentiment for the stock is positive. As of June 30, First Eagle Investment Management is the largest investor in Colgate-Palmolive Company (NYSE:CL) and has stakes worth $899 million in the company.

Here is what First Eagle Investments had to say about Colgate-Palmolive Company (NYSE:CL) in its second-quarter 2022 investor letter:

“Shares of consumer staples giant Colgate-Palmolive have performed well as investors rotated into more recessionary-resilient defensive stocks amid the broader selloff during the second quarter. The company raised revenue guidance for 2022 but lowered its margin outlook because of higher costs for raw materials, packaging and logistics; we believe that the company’s size and market share provide it with options to mitigate the inflation challenges it faces. We continue to like Colgate- Palmolive’s dividend and previously announced $5 billion stock buyback program.”

04. DuPont de Nemours, Inc. (NYSE:DD)

Third Point’s Stake Value: $171.186 Million

Percentage of Third Point’s 13F Portfolio: 4.05%

Number of Hedge Fund Holders: 44

P/E Ratio (Non-GAAP) as of October 09: 13.32

The company was formerly known as DowDuPont Inc. and changed its name to DuPont de Nemours, Inc. in June 2019. DuPont de Nemours, Inc. (NYSE:DD) is based in Wilmington, Delaware. DuPont de Nemours, Inc. (NYSE:DD) provides technology-based materials and solutions in the United States, Canada, the Asia Pacific, Latin America, Europe, the Middle East, and Africa.

DuPont de Nemours, Inc. (NYSE:DD) announced a strong earnings beat for Q2 2022, with normalized EPS up 11% to $0.88 per share. On October 4, P.J. Juvekar, a Citi analyst, maintained a Buy rating while lowering his price target for DuPont de Nemours, Inc. (NYSE:DD) from $75 to $67.

According to Insider Monkey’s Q2 data, DuPont de Nemours, Inc. (NYSE:DD) was found in the public stock portfolios of 44 hedge funds, with collective stakes in the company worth $1.10 billion. New York-based investment firm 40 North Management is a leading shareholder in DuPont de Nemours, Inc. (NYSE:DD), with 5.88 million shares worth more than $326.8 million.

03. EQT Corporation (NYSE:EQT)

Third Point’s Stake Value: $258.860 Million

Percentage of Third Point’s 13F Portfolio: 6.12%

Number of Hedge Fund Holders: 52

P/E Ratio (Non-GAAP) as of October 09: 19.89

EQT Corporation (NYSE:EQT) was founded in 1878 and is based in Pittsburgh, Pennsylvania. EQT Corporation (NYSE:EQT) operates as a natural gas production company in the United States.

On July 20, EQT Corporation (NYSE:EQT) announced a 20% hike in its quarterly dividend to $0.15 per share. As of October 10, the stock’s dividend yield stood at 0.93%. On September 21, Citi analyst Paul Diamond maintained a Buy rating on the shares of EQT Corporation (NYSE:EQT) while raising his price target for the company from $48 to $60. At the end of the second quarter of 2022, 52 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in EQT Corporation (NYSE:EQT), compared to 52 in the preceding quarter worth $2.1 billion.

In its Q2 2022 investor letter, ClearBridge Mid Cap Growth Strategy Fund mentioned EQT Corporation (NYSE:EQT) and explained its insights for the company. Here is what the fund said:

“We initiated a position in EQT (NYSE:EQT), the largest natural gas producer in the U.S., which possesses high-quality acreage within the Marcellus Shale basin. EQT has benefited from tight supply and demand dynamics as cleaner-burning natural gas takes global share from coal and exports to Europe and Asia provide an avenue of demand growth. Longer-term contracts enhance EQT’s earnings visibility as Europe eliminates its dependence on Russian gas.”

02. Ovintiv Inc. (NYSE:OVV)

Third Point’s Stake Value: $270.443 Million

Percentage of Third Point’s 13F Portfolio: 6.4%

Number of Hedge Fund Holders: 47

P/E Ratio (Non-GAAP) as of October 09: 7.58

Ovintiv Inc. (NYSE:OVV) was formerly known as Encana Corporation and changed its name to Ovintiv Inc. in January 2020. Ovintiv Inc. (NYSE:OVV) was incorporated in 2020 and is based in Denver, Colorado. Ovintiv Inc. (NYSE:OVV), together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids.

On September 26, Barclays analyst Jeanine Wai raised his price target for Ovintiv Inc. (NYSE:OVV) to $78 from $75 and maintained an Overweight rating on the stock. Wai writes in a research note to investors that the company’s “top-tier” free cash flow and payout yield are “too good to ignore.” He further claims that there is “enough FCF to go around to both reward equity shareholders and continue to meaningfully reduce net debt”.

Here is what Carillon Tower Advisers specifically said about Ovintiv Inc. (NYSE:OVV) in its Q2 2022 investor letter:

“Oil and gas exploration and production company Ovintiv Inc. (NYSE:OVV) fell as oil prices faded late in the quarter due to aggressive Fed rate hikes and growing credit fears in emerging markets, a source of demand growth for oil. Although oil and fuel product inventories remain scarce, the Fed has been so aggressive with rhetoric and tightening that the dollar rose sharply and investor sentiment shifted toward anticipating a recession. Ovintiv is a self-help improvement story as it lowers debt levels through cash generation and asset sales, while detailing plans to buy back shares more aggressively and pay a higher dividend.”

01. PG&E Corporation (NYSE:PCG)

Third Point’s Stake Value: $652.692 Million

Percentage of Third Point’s 13F Portfolio: 15.44%

Number of Hedge Fund Holders: 51

P/E Ratio (Non-GAAP) as of October 09: 13.95

PG&E Corporation (NYSE:PCG) was incorporated in 1905 and is based in San Francisco, California. PG&E Corporation (NYSE:PCG), through its subsidiary, Pacific Gas and Electric Company, engages in the sale and delivery of electricity and natural gas to customers in northern and central California, the United States.

On October 7, analyst Shelby Tucker from RBC Capital raised his price target for PG&E Corporation (NYSE:PCG) from $16 to $19 and maintained an Outperform rating on the shares. The company’s efforts to prevent wildfires and a number of recent catalysts, including its inclusion in the S&P 500, have “encouraged” the analyst. According to Tucker, investors are more at ease with the Fire Victim Trust sales because the market’s response to the most recent block of 35M shares was more subdued.

A total of 51 hedge funds hold a stake in PG&E Corporation (NYSE:PCG) as of Q2, 2022. Dan Loeb’s Third Point is the largest investor in PG&E Corporation (NYSE:PCG) by owning 65 million shares that are worth $652 million.

In its Q1 2022 investor letter, Third Point Management mentioned PG&E Corporation (NYSE:PCG) and explained its insights for the company. Here is what the fund said:

“We continue to see immense value and potential in our position in Pacific Gas & Electric, which emerged from bankruptcy just two years ago. PG&E’s new CEO, Patti Poppe, has transformed the organization, creating a new leadership and safety culture around a talented, committed, and dynamic executive team that is rethinking the way the Company addresses the energy needs of Northern Californians. California is at the forefront of the new energy transition with aggressive renewable procurement goals and high electric vehicle adoption, yet the state faces escalating climate change risks due to extreme drought conditions and wildfires. These conditions present unique challenges to utilities operating in the state. Patti and her team have brought new and creative solutions to these challenges with her focus on a lean operating system and an ambitious undergrounding plan.

In April, PG&E Corporation reported a straightforward and uneventful set of a results, delivering on its promises to customers and investors. As investors, we celebrate that simplicity. At current prices, the Company trades at under 12x 2022 consensus earnings compared to the utility index average of 21x and below its closest California peer, Edison International, at 15x. While there is an overhang from shares to be monetized by the PG&E Fire Victim Trust, PG&E will benefit from the reinstatement of a cash dividend in 2023 and if, as hoped, it is included in the S&P 500 index. Over the next year, we think PG&E will Page 7 continue to re-rate towards industry averages while also growing earnings at an industry-leading 10% per year. In this type of market environment, the financial equation of consistent earnings growth and multiple re-rating makes for a wonderfully boring story and a solid anchor for our portfolio as Third Point’s largest position.”

You can also take a look at 11 Best Dividend Stocks Under $50 and 14 Best Clean Energy Stocks To Buy Now.

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