In this article, we discuss the 11 cheap value stocks to buy according to Seth Klarman.
Value investors like Seth Klarman of Boston-based Baupost Group have come under increased spotlight in recent weeks as a slowing macro environment pushes the market away from growth towards value offerings. There are few better at value investing than Klarman, who managed a 13F equity portfolio worth more than $5.4 billion at the end of the third quarter of 2022. Klarman enjoys far more fame among elite investors than the general public because he likes to keep a low public profile. His net worth is in excess of $1.5 billion.
The value of the 13F equity portfolio of Baupost Group, which has held stakes in top stocks like Alphabet Inc. (NASDAQ:GOOG), Intel Corporation (NASDAQ:INTC), and Micron Technology (NASDAQ:MU), decreased by about $1 billion between the second and third quarter. During the time, the fund made new purchases in four stocks, additional purchases in seven, sold out of eleven stocks, and reduced holdings in eight stocks. The top ten holdings of the fund comprise more than 70% of the entire portfolio.
Our Methodology
The companies listed below were taken from the investment portfolio of Baupost Group at the end of the third quarter of 2022. Those that have a Price-to-Earnings (PE) ratio of less than 20 and were priced around $100 per share, or less, as of December 26, were preferred for the list. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the third quarter of 2022.
Cheap Value Stocks to Buy According to Seth Klarman
11. Outbrain Inc. (NASDAQ:OB)
Number of Hedge Fund Holders: 13
PE Ratio: 3.57
Share Price as of December 26: $10.19
Outbrain Inc. (NASDAQ:OB) operates an online content recommendation platform worldwide. On December 15, the shares of Outbrain rose as the firm announced a new $30 million stock buyback program, with no requirement to purchase any minimum number of shares. The program may be commenced, suspended or terminated at any time. At the end of the third quarter, Seth Klarman’s Baupost Group owned 792,000 shares worth $2.9 million in Outbrain Inc..
On December 13, Citi analyst Ygal Arounian initiated coverage of Outbrain Inc. stock with a Neutral rating and $4 price target, noting that the consumer is likely to continue to feel pressure from the macro environment, which has effects on the entire group.
At the end of the third quarter of 2022, 13 hedge funds in the database of Insider Monkey held stakes worth $4.5 million in Cullinan Oncology, Inc. (NADASQ:CGEM), compared to 5 in the preceding quarter worth $5.98 million.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Baupost Group is a leading shareholder in Outbrain Inc. with 792,000 shares worth more than $2.9 million.
Just like Alphabet Inc., Intel Corporation, and Micron Technology, Outbrain Inc. is one of the top stocks in the portfolio of billionaire Seth Klarman.
10. Cullinan Oncology, Inc. (NASDAQ:CGEM)
Number of Hedge Fund Holders: 16
PE Ratio: 4.67
Share Price as of December 26: $10.24
Cullinan Oncology, Inc. (NADASQ:CGEM) is a biopharmaceutical company that focuses on developing a pipeline of targeted oncology and immuno-oncology therapies for cancer patients in the United States. On November 14, Cullinan Oncology posted earnings for the third quarter of 2022, reporting losses per share of $0.54, beating market estimates by $0.43. The cash and investments of the company as of September 30 were approximately $607 million. At the end of the third quarter, Seth Klarman’s Baupost Group owned 6429,646 shares worth $5.5 million in Cullinan Oncology, Inc. (NADASQ:CGEM).
On November 21, BTIG analyst Kaveri Pohlman initiated coverage of Cullinan Oncology, Inc. (NASDAQ:CGEM) stock with a Buy rating and $20 price target, noting that the company has three clinical-stage assets, all with differentiated targets, that look widely applicable and address billion-dollar market opportunities
At the end of the third quarter of 2022, 16 hedge funds in the database of Insider Monkey held stakes worth $155.9 million in Cullinan Oncology, Inc. (NADASQ:CGEM), compared to 16 in the preceding quarter worth $180.9 million.
Among the hedge funds being tracked by Insider Monkey, San Francisco-based firm Biotechnology Value Fund/BVF Inc is a leading shareholder in Cullinan Oncology, Inc. (NADASQ:CGEM) with 7.5 million shares worth more than $96.3 million.
9. Veritiv Corporation (NYSE:VRTV)
Number of Hedge Fund Holders: 19
PE Ratio: 6.01
Share Price as of December 26: $130.98
Veritiv Corporation (NYSE:VRTV) operates as a business-to-business provider of value-added packaging products and services, as well as facility solutions, print, and publishing products and services in the United States and internationally. On November 28, Veritiv Corp initiated a quarterly dividend of $0.63 per share. The forward yield was 2.23%. At the end of the third quarter, Seth Klarman’s Baupost Group owned 3.4 million shares worth $336 million in Veritiv Corporation.
On October 13, BofA analyst George Staphos maintained a Buy rating on Veritiv Corporation and lowered the price target to $126 from $155, noting that the packaging, paper, and forest products industry has more profitability risks going into the third quarter because of increased recession concerns.
At the end of the third quarter of 2022, 19 hedge funds in the database of Insider Monkey held stakes worth $411.7 million in Veritiv Corporation, compared to 17 in the previous quarter worth $443.9 million.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Baupost Group is a leading shareholder in Veritiv Corporation with 3.4 million shares worth more than $336 million.
8. Garrett Motion Inc. (NASDAQ:GTX)
Number of Hedge Fund Holders: 23
PE Ratio: 9.70
Share Price as of December 26: $7.85
Garrett Motion Inc. (NASDAQ:GTX) designs, manufactures, and sells turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers worldwide. On November 2, the shares of Garrett Motion went up after it was reported that the automotive equipment company is said to be exploring options, including a sale. The company is said to be working with an adviser as it evaluates a potential sale, according to traders. At the end of the third quarter, Seth Klarman’s Baupost Group owned 25.5 million shares worth $181.2 million in Garrett Motion Inc..
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Oaktree Capital Management is a leading shareholder in Garrett Motion Inc. with 68.8 million shares worth more than $489.4 million.
In its Q3 2022 investor letter, Alluvial Capital Management, an asset management firm, highlighted a few stocks and Garrett Motion Inc. was one of them. Here is what the fund said:
“Garrett Motion Inc. has elected to begin paying cash dividends on its convertible preferred shares. Doing so prevents dividends in arrears from further accruing and is a wise use of the company’s free cash flow. I believe the choice to initiate a cash dividend is a tacit admission by the company that the necessary conditions for converting the preferred shares will not be met soon. This is a mild short-term negative, as the complex capital structure will remain in place for now. On the other hand, I am thrilled for us to earn a 9% yield as the company uses its free cash flow to buy back cheap stock and wait for the automotive cycle to turn.”
7. Gray Television, Inc. (NYSE:GTN)
Number of Hedge Fund Holders: 29
PE Ratio: 3.97
Share Price as of December 26: $10.46
Gray Television, Inc. (NYSE:GTN) owns and/or operates television stations and digital assets in the United States. On November 4, Gray Television declared a quarterly dividend of $0.08 per share, in line with the previous. The forward yield was 2.37%. The payable date of the dividend for shareholders of record is late December. At the end of the third quarter, Seth Klarman’s Baupost Group owned 3.3 million shares worth $46.7 million in Gray Television, Inc..
On November 10, Barrington analyst James Goss maintained an Outperform rating on Gray Television, Inc. stock and lowered the price target to $15 from $25.
At the end of the third quarter of 2022, 29 hedge funds in the database of Insider Monkey held stakes worth $228 million in Theravance Biopharma, Inc. (NASDAQ:TBPH), compared to 25 in the preceding quarter worth $236.4 million.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Darsanan Capital Management is a leading shareholder in Gray Television, Inc. with 4.6 million shares worth more than $65.7 million.
Alongside Alphabet Inc., Intel Corporation, and Micron Technology, Gray Television, Inc. is one of the top stocks in the portfolio of billionaire Seth Klarman.
6. Liberty Global plc (NASDAQ:LBTYA)
Number of Hedge Fund Holders: 31
PE Ratio: 1.42
Share Price as of December 26: $19.04
Liberty Global plc (NASDAQ:LBTYA) provides broadband internet, video, fixed-line telephony, and mobile communications services to residential and business customers. The stock has outperformed the S&P 500 in the past few days on the back of better-than-expected earnings for the third quarter. At the end of the third quarter, Seth Klarman’s Baupost Group owned 47.85 million shares worth $789.5 million in Liberty Global plc (NASDAQ:LBTYA).
On December 6, Citi analyst Georgios Ierodiaconou maintained a Neutral rating on Liberty Global plc (NASDAQ:LBTYA) stock and raised the price target to $20 from $18, noting that price target was raised after incorporating the third quarter results as well as recent currency movement.
At the end of the third quarter of 2022, 31 hedge funds in the database of Insider Monkey held stakes worth $440.4 million in Liberty Global plc (NASDAQ:LBTYA), compared to 28 in the preceding quarter worth $763.9 million.
5. Qorvo, Inc. (NASDAQ:QRVO)
Number of Hedge Fund Holders: 35
PE Ratio: 14.21
Share Price as of December 26: $90.50
Qorvo, Inc. (NASDAQ:QRVO) develops and commercializes technologies and products for wireless, wired, and power markets worldwide. On November 2, Qorvo Inc posted earnings for the second quarter of 2022, reporting earnings per share of $2.66, beating market estimates by $0.12. The revenue over the period was $1.16 billion, down 7.9% compared to the revenue over the same period last year and beating market estimates by $30 million. At the end of the third quarter, Seth Klarman’s Baupost Group owned 6.8 million shares worth $538 million in Qorvo, Inc..
On November 15, Credit Suisse analyst Chris Caso initiated coverage of Qorvo, Inc. stock with an Outperform rating and $120 price target, noting that the company is cyclically dependent on the phone market while also expanding its diversification into higher-growth non-handset industries.
At the end of the third quarter of 2022, 35 hedge funds in the database of Insider Monkey held stakes worth $950.4 million in Qorvo, Inc., compared to 30 in the preceding quarter worth $1.2 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Qorvo, Inc. was one of them. Here is what the fund said:
“Qorvo, Inc. is one of the two major providers of radio frequency RF systems which are critical components of mobile devices including smart phones and the Internet of Things (IoT). Two transitory concerns have recently affected the company’s stock price. First, supply chain issues continue to be a constraint. Second, Apple recently announced its decision to decrease production of its iPhone SE model. Neither of these issues threatens their long-term competitive position. Qorvo’s value is stable and despite the recent pressure on the stock price, we feel its long-term prospects are promising.”
4. The Liberty SiriusXM Group (NASDAQ:LSXMA)
Number of Hedge Fund Holders: 43
PE Ratio: 14.90
Share Price as of December 26: $39.24
The Liberty SiriusXM Group (NASDAQ:LSXMA) engages in the entertainment business in the United States and Canada. On November 4, Liberty Media Corp posted earnings for the third quarter of 2022. The revenue over the period was $2.28 billion, an increase of 4% year-over-year. Net income was $247 million and diluted earnings per share were $0.06. At the end of the third quarter, Seth Klarman’s Baupost Group owned 13.8 million shares worth $519.6 million in The Liberty SiriusXM Group.
At the end of the third quarter of 2022, 43 hedge funds in the database of Insider Monkey held stakes worth $1.96 billion in The Liberty SiriusXM Group, compared to 44 in the previous quarter worth $1.7 billion.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and The Liberty SiriusXM Group was one of them. Here is what the fund said:
“Another Liberty company, The Liberty SiriusXM Group, owns over 80% of SiriusXM Satellite Radio. We believe that SiriusXM is undervalued and that the Liberty SiriusXM structure allows us to own the company at a discount. Both Charter Communications and SiriusXM are growing nicely, generating prodigious amounts of free cash flow and buying back lots of their own stock. John Malone controls both of these Liberty securities, and we believe he will find ways to close the discounts and extract maximum value for shareholders. Both Liberty securities were stock market duds in 2021, but we expect them to be contributors in 2022 regardless of what the general market does.”
3. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)
Number of Hedge Fund Holders: 50
PE Ratio: 19.63
Share Price as of December 26: $51.31
SS&C Technologies Holdings, Inc. provides software products and software-enabled services to financial services and healthcare industries. On December 5, SS&C Technologies Holdings revealed that it has acquired Complete Financial Ops Fund Services, a Colorado-based fund administration firm that targets private equity funds and family offices, in an all-cash deal. On November 16, SS&C shared a quarterly dividend of $0.20, in line with the previous, with a forward yield of 1.53%. At the end of the third quarter, Seth Klarman’s Baupost Group owned 3.8 million shares worth $180 million in SS&C Technologies Holdings, Inc..
On December 6, Truist analyst Terry Tillman maintained a Hold rating on SS&C Technologies Holdings, Inc. stock and lowered the price target to $55 from $75, noting that software and tech-enabled service stock valuations have remained weak.
At the end of the third quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $2 billion in SS&C Technologies Holdings, Inc., compared to 50 in the preceding quarter worth $2.7 billion.
In its Q3 2022 investor letter, LVS Advisory, an asset management firm, highlighted a few stocks and SS&C Technologies Holdings, Inc. was one of them. Here is what the fund said:
“SS&C Technologies Holdings, Inc. is a publicly traded acquisition platform led by its founder Bill Stone who is also the largest shareholder. SS&C’s platform focuses on investment fund services (accounting, administration, back-office tools) and enterprise software. The company routinely makes large acquisitions in its target markets financed by debt and then quickly rationalizes the acquired companies and pays down debt. SS&C and its operators are very good at what they do. Since becoming public in 2010, SSNC has compounded its earnings per share at 25% per year (over 11 years). Despite this impeccable track record, the stock is down more than 40% this year. Investors are generally skeptical that an acquisition platform can generate strong investment returns given the current level of interest rates. Investors are also worried that SS&C’s customer base will be negatively impacted by the decline in asset prices. I am happy to take the other side of that bet! While SS&C will face some near-term headwinds from the market’s volatility, its client base is largely composed of private equity funds and hedge funds which have fared relatively well during 2022. SS&C’s valuation multiple is the cheapest it has ever been since its IPO and the company is aggressively buying back stock. A well-timed transaction could also be in the cards. SS&C made several outstanding, opportunistic acquisitions during the great recession from 2008 to 2010 and the company is primed to run that playbook again.”
2. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: 61
PE Ratio: 5.10
Share Price as of December 26: $9.23
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a media company that provides content across various distribution platforms. On November 3, the CEO of Warner Bros. Discovery Inc, on the earnings call, announced that the company’s streaming platform will combine HBO Max and Discovery+ and will roll out by spring 2023. At the end of the third quarter, Seth Klarman’s Baupost Group owned 29 million shares worth $333 million in Warner Bros. Discovery, Inc..
On November 7, RBC Capital analyst Kutgun Maral maintained an Outperform rating on Warner Bros. Discovery, Inc. stock and lowered the price target to $27 from $44, noting that the company reported mixed third quarter results.
At the end of the third quarter of 2022, 61 hedge funds in the database of Insider Monkey held stakes worth $1.6 billion in Warner Bros. Discovery, Inc., compared to 68 in the preceding quarter worth $2.3 billion.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Warner Bros. Discovery, Inc. was one of them. Here is what the fund said:
“We sold the last of our shares in Warner Bros. Discovery, Inc. in early April. Luckily, we were able to sell the majority of our long-held holdings in the crazy run-up that accompanied the Archegos Capital debacle in early 2021. We did, however, rebuild a position in the stock when the stock went back down and this second go was disappointing.
We weren’t happy with the shift in strategy from the company’s core non-scripted and documentary content—where it commanded a leading position— into the wider media business it dived into with the Warner Media acquisition. We were also unhappy with the resulting increase in debt levels. It was time to take our money and walk away.”
1. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 74
PE Ratio: 9.10
Share Price as of December 26: $50.20
Micron Technology, Inc. designs, manufactures and sells memory and storage products worldwide. On December 21, Micron Technology declared a quarterly dividend of $0.115 per share, in-line with the previous. The forward yield was 0.9%. At the end of the third quarter, Seth Klarman’s Baupost Group owned 3.3 million shares worth $164.6 million in Micron Technology, Inc..
On December 7, Wells Fargo analyst Aaron Rakers maintained an Overweight rating on Micron Technology, Inc. stock and lowered the price target to $70 from $75, noting that instead of the previously expected first half of 2023, the downturn’s bottom is relocating to mid- or later in 2023.
At the end of the third quarter of 2022, 74 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in Micron Technology, Inc., compared to 69 in the preceding quarter worth $2.2 billion.
In its Q2 2022 investor letter, Meridian Funds, an asset management firm, highlighted a few stocks and Micron Technology, Inc. was one of them. Here is what the fund said:
“Micron Technology, Inc. is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
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This article is originally published at Insider Monkey.
