In this article, we discuss the 10 value stocks to buy according to billionaire Paul Tudor Jones.
Paul Tudor Jones leads Tudor Investment Corp, a hedge fund based in Boston with a portfolio value of more than $6 billion at the end of September 2021. Some of the top stocks in the portfolio included Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Airbnb, Inc. (NASDAQ:ABNB), among others discussed in detail below. Latest data shows that the fund made new purchases in 1,443 stocks, additional purchases in 429, sold out of 594, and reduced holdings in 442 equities during the third quarter, increasing the portfolio value by $1 billion in this period.
Tudor Investment Corp has grown under the able leadership of Jones as the investor reaps handsome returns on currency and interest rate bets. Jones has grown his personal net worth to around $7 billion by building a portfolio of value-heavy stocks. In the inflationary market, these stocks are outperforming their growth counterparts and Jones thinks that this inflation is “here to stay”. Investors who want further exposure to the investment philosophy of the billionaire in the present market conditions should check out some of his top value picks.
Our Methodology
The companies listed below were taken from the investment portfolio of Tudor Investment Corp at the end of the third quarter of 2021. Those that have a Price-to-Earnings (PE) ratio of around 15 were preferred for the list.
Value Stocks to Buy According to Billionaire Paul Tudor Jones
10. American Electric Power Company, Inc. (NASDAQ:AEP)
Stake Value of Tudor Investment Corp : $10.7 million
Number of Hedge Fund Holders: 36
PE Ratio: 18.30
The International Energy Agency estimates that the renewable power generating capacity across the globe, supported by strong policy and ambitious climate targets, will jump 60% by 2026, when compared to 2020 levels, to reach 4,800 GW. American Electric Power Company, Inc. (NASDAQ:AEP), one of the oldest and most trustworthy electric power utility holding companies, plans to contribute to this shift towards cleaner energy by investing $38 billion over the next five years with an emphasis on transmission, distribution and renewable energy.
American Electric Power Company, Inc. recently issued earnings guidance for the next fiscal year in line with market expectations, saying it was transitioning to a more “balanced portfolio” to grow the share of renewables in power generation to almost half of the total capacity of the firm by 2030.
The solid fundamentals and promising future plans of American Electric Power Company, Inc. have attracted the attention of hedge funds. Between June and September, 36 hedge funds in the Insider Monkey database held stakes worth $751 million in American Electric Power Company, Inc.. In the previous quarter, 29 funds had held stakes worth $726 million in American Electric Power Company, Inc..
Renaissance Technologies, the Jim Simons-led quant hedge fund based in New York, is one of the most prominent names on this list. At the end of the third quarter of 2021, the fund owned 2.3 million shares of American Electric Power Company, Inc. worth more than $189 million.
Along with Microsoft Corporation, Apple Inc., and Airbnb, Inc., American Electric Power Company, Inc. is one of the stocks on the radar of hedge funds.
9. Discovery, Inc. (NASDAQ:DISCA)
Stake Value of Tudor Investment Corp : $25 million
Number of Hedge Fund Holders: 42
PE Ratio: 16.23
Discovery, Inc. (NASDAQ:DISCA) has been providing media content to consumers across the globe for many decades. It owns and runs a host of television channels, production studios, and websites. In the past few years, Discovery, Inc., already one of the most recognizable brand names across the globe with an ardent fan base, has stepped up investments in digital products. A blockbuster merger with WarnerMedia is set to further improve free cash flows for the company.
Investment bank Citi sees Discovery, Inc. shares doubling in value over the next few months. Analyst Jason Bazinet claims the merger with WarnerMedia would help Discovery, Inc. compete with streaming giants like Netflix and Disney as revenues grow to $53 billion by 2024.
The positive momentum around Discovery, Inc. is reflected in hedge fund activity around the firm. At the end of September, 42 hedge funds, out of 867 tracked by Insider Monkey were long Discovery, Inc.. These funds held stakes worth $515 million in the media company. New York-based investment firm DE Shaw was a leading shareholder with 4.2 million shares worth more than $103 million.
In its Q1 2021 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Discovery, Inc. (NASDAQ:DISCA) was one of them. Here is what the fund said:
“We also sold most of our holdings in Discovery, Inc. as the stock price continued to increase to new highs. However, in late March the stock declined considerably when brokers liquidated holdings by Archegos Capital (see above in General Commentary) to satisfy margin calls. That brought the stock price down to levels that we found attractive, and we bought back a significant amount of the shares that we had sold earlier that month.”
8. Target Corporation (NYSE:TGT)
Stake Value of Tudor Investment Corp : $4.2 million
Number of Hedge Fund Holders: 49
PE Ratio: 16.13
Target Corporation (NYSE:TGT) is a general merchandise retailer that has faced stiff competition from the rise of e-commerce giants in recent years. However, there are plenty of long-term tailwinds for the firm that are still attracting the attention of elite investors. The core business remains strong, there is continuing grocery market share and new unit growth, and the company is improving the digital side of the business to keep pace with consumer preferences. Target Corporation recently topped market expectations on earnings for the third quarter despite supply chain bottlenecks and inflationary pressures.
Brian Cornell, the CEO of Target Corporation, told news platform CNBC last month that Target Corporation expected a strong holiday season that would focus on providing “value” to customers despite rising costs. Cornell underlined that this was part of a larger strategy to differentiate the company among peers that were shifting rising costs to customers.
Just like Microsoft Corporation, Apple Inc., and Airbnb, Inc., Target Corporation is a notable stock in Jones’ portfolio.
GQG Partners, a Florida-based investment firm, is a leading shareholder in Target Corporation with 5.5 million shares worth more than $1.2 billion. The fund bought a new stake in Target Corporation in the first quarter of 2021 and added to it significantly in the second quarter, before trimming this position by about 6% in the third. Of the 867 funds tracked by Insider Monkey, 49 own a stake in the general retailer. The combined worth of these stakes is $4.3 billion.
7. Qorvo, Inc. (NASDAQ:QRVO)
Stake Value of Tudor Investment Corp : $4.4 million
Number of Hedge Fund Holders: 44
PE Ratio: 15.10
Qorvo, Inc. (NASDAQ:QRVO) is among a host of chip stocks that have enjoyed significant attention from elite hedge funds this year. 44 funds were bullish on the stock at the end of the third quarter of 2021 with stakes worth $1.9 billion in the company. Compared to the second quarter, this represented an increase of 4 funds with bullish views quarter-over-quarter. Select Equity Group was a leading shareholder with 1.2 million shares worth more than $203 million.
Considering the growth catalysts for Qorvo, Inc., it seems like the stock is trading at a relatively cheap price compared to other chip makers. Qorvo, Inc. recently began sampling Wi-Fi 6 iFEMs with an integrated BAW filter, a unique product that enables higher capacity and offers improved efficiency. Qorvo, Inc. already has contracts with leading smartphone manufacturers that are interested in integrating the chipset onto their phones.
6. MDU Resources Group, Inc. (NYSE:MDU)
Stake Value of Tudor Investment Corp : $4.4 million
Number of Hedge Fund Holders: 20
PE Ratio: 14.40
MDU Resources Group, Inc. (NYSE:MDU) is one of the top value stocks that has endured multiple market highs and lows, managing to maintain a clean balance sheet, an impressive dividend. The company has 18 consecutive years of dividend growth and nearly three decades of uninterrupted payouts.
Recently, MDU Resources Group, Inc. raised the quarterly dividend by 2.4% to $0.2175 per share. Although it is a utilities company by core business, the company generates a significant amount of revenue from the construction sector. As such, there is more potential for upside in the shares as infrastructure spending increases in the US in the coming months.
The hedge fund sentiment around MDU Resources Group, Inc. is also positive overall. At the end of September, 20 funds had stakes in MDU Resources Group, Inc. worth $141 million. AQR Capital Management, a Connecticut-based investment firm, was a leading shareholder with 1.6 million shares worth more than $48 million. MDU Resources Group, Inc. is a long-term holding of AQR, with the fund first buying shares in the firm in the fourth quarter of 2010.
Just like Microsoft Corporation, Apple Inc., and Airbnb, Inc., MDU Resources Group, Inc. is one of the stocks that elite investors are buying.
5. The Timken Company (NYSE:TKR)
Stake Value of Tudor Investment Corp : $4.6 million
Number of Hedge Fund Holders: 20
PE Ratio: 13.74
A cursory glance at the fundamentals of The Timken Company (NYSE:TKR) does not make for a very good reading. However, there is more to the firm that meets the eye in the short-term. It has been forced to raise product prices over the past few months due to supply chain and inflation pressures. The guidance for the rest of 2021 was also withdrawn earlier due to increased volatility. Although these headwinds have put pressure on earnings, the new acquisitions of Timken, including that of Intelligent Machine Solutions, promise long-term growth. Value investors recognize the real value of the company through these tailwinds.
One of these value investors is New York-based investment firm Millennium Management. It is a leading shareholder in The Timken Company with 577,302 shares worth more than $37 million. Alongside Millennium, 19 other hedge funds in the database of Insider Monkey held stakes worth $153 million in The Timken Company at the end of third quarter of 2021.
The firm is also financially healthy considering the debt-to-equity and cash flows that are more than enough to cover short-term liabilities. The dividend payout has also been steadily increasing over the past five years and there is lots of room to grow in this regard. The company is expected to grow earnings at a rate of more than 10% in the coming years.
4. Huntington Ingalls Industries, Inc. (NYSE:HII)
Stake Value of Tudor Investment Corp : $4.5 million
Number of Hedge Fund Holders: 15
PE Ratio: 10.78
Analysts expect Huntington Ingalls Industries, Inc. (NYSE:HII) to exceed market expectations on sales, margin, and free cash flows over the coming months. Wolfe Research recently initiated coverage of the stock with an Outperform rating and a price target of $225. Hedge funds seem to agree with analysts in this regard. 15 funds out of 867 tracked by Insider Monkey are bullish on the firm, as of the end of the third quarter of 2021. These funds held stakes in the company that had a combined worth of around $163 million.
Among these funds, AQR Capital Management is a leading shareholder in Huntington Ingalls Industries, Inc. with 460,534 shares worth more than $88 million. The true value of the stock lies in the stable business of the firm as a foremost manufacturer of Navy ships. The company was recently awarded a $113 million contract for Naval Sea Systems. The stock also offers dividend growth at a relatively cheap price. On November 3, the firm raised the quarterly dividend by 4% to $1.18 per share. Huntington has consistently increased dividend payouts for the last eight years.
Huntington Ingalls Industries, Inc. stock also stands to benefit from the rise in US-China tensions, especially in the South China Sea. The US is working with allies in this regard to bolster Navy defenses in the area. Most new product orders are likely to fall to Huntington. In 2022, analysts expect the firm to generate $550 million in free cash flows as well. With room for share buybacks and dividend hikes, the stock looks likely to outperform market expectations in the coming months.
3. Quest Diagnostics Incorporated (NYSE:DGX)
Stake Value of Tudor Investment Corp : $4.3 million
Number of Hedge Fund Holders: 36
PE Ratio: 10.29
Quest Diagnostics Incorporated (NYSE:DGX) provides diagnostic testing services. The stock has benefited from the rise in COVID-19 testing volumes as a new variant of the virus sweeps the globe. Since the new variant is still somewhat “novel” with regards to vaccine protection, this boom for Quest is expected to last well into 2022. The firm recently raised guidance numbers to reflect this. The stock is a favorite of value investors since the company has great pricing power in relation to scale. It beat market estimates on earnings per share and revenue for the third quarter by $1.31 and $250 million respectively.
Quest Diagnostics Incorporated has also been pursuing acquisitions as it looks to shore up long-term growth on the back of solid COVID-19 revenues. One of these is Mercy Health, a laboratory service business. Investment advisors like Mizuho, Wells Fargo, and Deutsche Bank are all constructive on the company, along with hedge funds like AQR Capital Management that owns 822,434 shares worth more than $119 million in Quest.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Quest Diagnostics Incorporated (NYSE:DGX) was one of them. Here is what the fund said:
“Within healthcare, our largest position is Quest Diagnostics, a leader in independent lab testing and diagnostics. Quest offers its lab services at a fraction of the cost of hospital labs, which constitutes a strong cost-savings value proposition to new and existing customers. It is not surprising that by virtue of the value Quest creates, the company is increasingly serving as an outsource partner to hospitals and healthcare networks across the U.S. We believe Quest’s market is very sticky and only getting larger. The cost savings accruing to Quest’s customers should bode well for the long-term success of the business.”
2. Magellan Health, Inc. (NASDAQ:MGLN)
Stake Value of Tudor Investment Corp : $40 million
Number of Hedge Fund Holders: 23
PE Ratio: 8.48
Magellan Health, Inc. (NASDAQ:MGLN) stock has jumped in recent months after the company received accreditation by the National Association of Boards of Pharmacy for a digital pharmacy practice. Under the Magellan Rx Pharmacy brand, the company will now deliver medicines directly to customers. Starboard Value LP, a New York-based investment firm, is bullish on the stock. At the end of the third quarter, it owned 2.3 million shares in the company worth more than $223 million.
Magellan Health, Inc. beat market estimates on revenue for the third quarter by $40 million. The hedge fund led by Paul Tudor Jones owned 426,462 shares in the company at the end of the third quarter of 2021 worth $40 million. The firm recently expanded the Navigate Whole Health program to include AIDS Drug Assistance as well. It has a market cap of almost $2.5 billion.
1. B. Riley Financial, Inc. (NASDAQ:RILY)
Stake Value of Tudor Investment Corp : $20 million
Number of Hedge Fund Holders: 24
PE Ratio: 4.02
Riley Financial, Inc. (NASDAQ:RILY) has registered three years of consecutive dividend growth with four years of payouts. It recently declared a quarterly dividend of $1 per share, an increase of more than 100% compared to the previous dividend of $0.50 per share. The forward yield was 6.15%. 24 hedge funds in the Insider Monkey database held stakes worth $109 million in the company at the end of the third quarter of 2021.
Riley Financial, Inc. recently announced that it had purchased a portfolio of performing credit receivables from WS Badcock for about $400 million. The firm expects additional cash flows through the purchase. The company has also set up a receivables business to provide debt monetization solutions and portfolio acquisition services for clients.
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This article is originally published at Insider Monkey.
