5 Cheap Stocks Hedge Funds Are Talking About

5. Bank of America Corporation (NYSE:BAC)

Price as of March 11, 2022: $40.33 per share

Oakmark Funds, an investment management firm, recently published Bill Nygren’s third-quarter 2021 market commentary – a copy of which can be seen here. In the letter, the fund talked about corporate governance, with a related topic about shareholders vs. stakeholders, and also discussed some great companies to invest in. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2022.

Oakmark Funds, in its third-quarter 2021 market commentary, mentioned Bank of America Corporation (NYSE:BAC) and discussed its stance on the firm. Bank of America Corporation (NYSE:BAC) is a Charlotte, North Carolina-based financial services company with a $325.4 billion market capitalization. Bank of America Corporation (NYSE:BAC) shares are down by 9.35% since the beginning of the year, though their 12-month returns are still up by 6.30%. The stock closed at $40.33 per share on March 11, 2022.

Here is what Oakmark Funds had to say about Bank of America Corporation (NYSE:BAC) in its Q3 2021 investor letter:

“Earlier this year, one of our holdings, Bank of America Corporation (NYSE:BAC), announced that it was raising its minimum hourly wage from $15 to $20 and would increase it to $25 by 2025. The company received great press for placing the well-being of its employees above profits. But was it really either/or? Bank of America’s chief human resources officer spoke to the bigger picture: “A core tenet of responsible growth is our commitment to being a great place to work…that includes providing strong pay and competitive benefits to help them and their families, so that we continue to attract and retain the best talent.” Bank of America understood that engaged, high-caliber employees are more productive, less prone to turnover and, therefore, less expensive in the long run. Increasing the pay for employees wasn’t elevating employees above shareholders; it was the right thing to do for employees and for shareholders.

If an increase to $20 was good, why stop there? Why not $50 per hour? Because the benefits the business receives at $50 don’t justify the expense. The bank would no longer be able to price its products competitively and would lose business. The employees would “win” in the short term, but eventually the lost business would lead to job cuts, meaning both employees and shareholders would lose. The negative effects of stakeholder overreach are no different than when CEOs overreach to inflate short-term profits. Both hurt shareholders and stakeholders.”

4. Twitter, Inc. (NYSE:TWTR)

Price as of March 11, 2022: $33.00 per share

RiverPark Funds published its “RiverPark Large Growth Fund” third quarter 2021 investor letter last year – a copy of which can be downloaded here. The RiverPark Large Growth Fund (the “Fund”) lost 3.23% during the third quarter of 2021, while its benchmarks, the S&P 500 Total Return Index (“S&P”) advanced by 0.58%, the Russell 1000 Growth Total Return Index (“RLG”) returned 1.16%, and the Morningstar Large Growth Category lost 0.07%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

RiverPark Large Growth Fund, in its Q4 2021 investor letter, mentioned Twitter, Inc.  (NYSE:TWTR) and discussed its stance on the firm. Twitter, Inc.  (NYSE:TWTR) is a San Francisco, California-based social network company with a $26.4 billion market capitalization. Twitter, Inc.  (NYSE:TWTR) has lost 23.65% since the beginning of the year, while its 12-month losses stand at 51.54%. The stock closed at $33.00 per share on March 11, 2022.

Here is what RiverPark Large Growth Fund had to say about Twitter, Inc.  (NYSE:TWTR) in its Q4 2021 investor letter:

“Twitter, Inc.  (NYSE:TWTR): Despite reporting in-line third quarter results, Twitter, Inc.  (NYSE:TWTR) shares struggled at the end of 2021. For  Twitter, Inc.  (NYSE:TWTR), the declines could be attributed to a fear of continued headwinds from Apple’s iOS tracking changes, as well as the stock continuing to be a show-me story after posting two disappointing quarters since its investor day in February (prior to this in-line quarter), as well as its recent CEO change (founder Jack Dorsey stepped down and is being succeeded by long-time  CTO Parag Agrawal). Investors continue to be concerned with the platform’s user engagement, as total monetizable daily active users (mDAU) grew 13% year over year to 211 million, in-line with expectations, but still below management’s long-term target of 20% growth. Management expects mDAU growth to accelerate, driven by continued economic reopening and new features such as Spaces and Communities and an increase in the number and penetration of Twitter Topics. For the quarter, revenue increased 37% year over year to $1.3 billion and 4Q guidance was strong at about 20% growth, as Twitter has less exposure to Apple’s ATT headwinds.

With $4.8 billion of TTM revenue (only 4% of Facebook’s revenue), the company has a large opportunity to take share in the $200 billion global digital advertising market that continues to flow to mobile, Twitter’s focus. As the company continues to launch and improve its products (including stories, audio chat, podcasting, video and subscriptions), its platform should become more compelling to both users and advertisers, allowing it to take advertising dollar share through increased user engagement and ad pricing. As Twitter showed this year, we believe that the company can generate 20%+ revenue growth while also driving operating leverage in its already highly profitable business model, generating expanding excess free cash flow growth over time (3Q OCF grew 81% year over year).”

3. Uber Technologies, Inc. (NYSE:UBER)

Price as of March 11, 2022: $30.76 per share

ClearBridge Investments published its “Large Cap Growth Strategy” third quarter 2021 investor letter in the fourth quarter of last year – a copy of which can be downloaded here. The ClearBridge Large Cap Growth Strategy underperformed its Russell 1000 Growth Index benchmark during the third quarter. On an absolute basis, the Strategy had gains across four of the eight sectors in which it was invested (out of 11 sectors total). The leading contributors to performance were in the IT and healthcare sectors, while the consumer discretionary and industrials sectors were detractors. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2022.

ClearBridge Large Cap Growth Strategy, in its Q3 2021 investor letter, mentioned Uber Technologies, Inc. (NYSE:UBER) and discussed its stance on the firm. Uber Technologies, Inc. (NYSE:UBER) is a San Francisco, California-based transport company with a $60.1 billion market capitalization. Uber Technologies, Inc. (NYSE:UBER) shares have lost 26.64% since the beginning of the year, pushing their 12-month losses to 49.03%. The stock closed at $30.76 per share on March 11, 2022.

Here is what ClearBridge Large Cap Growth Strategy had to say about Uber Technologies, Inc. (NYSE:UBER) in its Q3 2021 investor letter:

“We have also been looking for multiyear secular trends outside of the IT and Internet sectors to help us maintain a portfolio that can perform well in markets with varied sector or factor leadership. In particular, electrification of the global economy and the transition to electric vehicles (EVs) are areas where we continue to add exposure. We are investing in the brains behind EVs through NXP in the control center and Aptiv for safety features. Global rideshare leader Uber Technologies, Inc. (NYSE:UBER) will also be a key player in the transition from internal combustion engines to EVs.”

2. ViacomCBS Inc. (NASDAQ:VIAC), now Paramount Global (NASDAQ:PARA)

Price as of March 11, 2022: $30.40 per share

Ariel Investments published its “Ariel Focus Fund” third-quarter 2021 investor letter last year – a copy of which can be downloaded here. Ariel Focus Fund lost 4.71% in the third quarter, trailing the Russell 1000 Value Index, which lost 0.78%, and the S&P 500 Index, which gained 0.58%. During the first three quarters of 2021, the Ariel Focus Fund had gained 15.44% compared to 16.14% gains for the Russell 1000 Value Index and 15.92% gains for the S&P 500. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2022.

Ariel Focus Fund, in its Q3 2021 investor letter, mentioned ViacomCBS Inc. (NASDAQ:VIAC) and discussed its stance on the firm. ViacomCBS Inc. (NASDAQ:VIAC) is a New York, New York-based mass media company, and was recently acquired by Paramount Global (NASDAQ:PARA).

Here is what Ariel Focus Fund had to say about ViacomCBS Inc. (NASDAQ:VIAC) in its Q3 2021 investor letter:

“Leading entertainment company, ViacomCBS Inc. (NASDAQ:VIAC) was the top contributor to relative performance over the trailing one-year period. Shares continued to benefit from solid earnings results and continued investor enthusiasm surrounding the launch of Paramount+ and other international streaming video on demand services. As the price of ViacomCBS Inc. substantially increased during the period, management announced an equity offering and a mandatory convertible preferred stock offering to further support investment in its streaming services. Shares began to tumble on the news, as an overleveraged family office, Archegos Capital Management, became a forced seller of the company. As prices moved closer to our assessment of intrinsic value, we reduced our position size in the company, insulating our portfolios from the largest weekly decline in the stock’s history and maintaining its status as a top contributor.”

1. AT&T Inc. (NYSE:T)

Price as of March 11, 2022: $23.19 per share

Weitz Investment Management recently published its “Hickory Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.54% was recorded by the fund in the fourth quarter of 2021, outperforming its Russell Midcap benchmark that delivered a 6.44% return. For the calendar year, the Fund returned 20.32% compared to 22.58% for the index. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Weitz Investment Management Hickory Fund mentioned AT&T Inc. (NYSE:T) and discussed its stance on the firm in its Q4 2021 investor letter. AT&T Inc. (NYSE:T) is a Dallas, Texas-based telecommunications company with a $165.6 billion market capitalization. AT&T Inc. (NYSE:T) is down by 5.73% since the beginning of the year and by 22.21% over the past 12 months. The stock closed at $23.19 per share on March 11, 2022.

Here is what Weitz Investment Management Hickory Fund had to say about AT&T Inc. (NYSE:T) in its Q4 2021 investor letter:

“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T Inc. (NYSE:T) to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”

You can also take a look at 10 Best Dividend Stocks According to Bill Miller’s Miller Value Partners and 10 Undervalued Dividend Aristocrats to Buy in 2022. 

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