We at Insider Monkey are always advocating the usefulness of imitating hedge funds’ picks in order to generate market-beating returns, without engaging in complex analysis of the thousands of stocks that are out there. Even though we focus our assessment on the hedge fund sentiment of a group of over 700 of some of the best-performing hedge funds, we also like to study separate groups of investors like activists and contrarians, and see what stocks they like individually. In this article we would like to analyze three stocks that are among the favorite picks of a value hedge fund: Edgar Wachenheim‘s Greenhaven Associates. Namely, we will talk about three stocks: Whirlpool Corporation (NYSE:WHR), Citigroup Inc (NYSE:C), and Praxair, Inc. (NYSE:PX).
Even though we discuss various stocks in our daily articles, our main focus is the most popular small-cap ideas among the funds that we track. Through extensive research, we have determined that these stocks are the best at beating the market, because they are often under the radars of the broader market and allow one to benefit from their intrinsic value and valuation inefficiencies. Our strategy involves imitating the top 15 small-cap picks among hedge funds and it has returned 102% since August 2012, beating the market by some 53 percentage points (read more details here).
Greenhaven’s latest 13F revealed an equity portfolio worth over $5 billion, spread across financial, consumer discretionary, transports, industrials, and technology stocks (see its top five picks). The largest part of the portfolio was allocated towards the financial sector, which represented 29% of the total portfolio value. Sticking to its belief of investing in stocks that suffer from short-term issues, which often affects industries or industry segments rather than individual companies, Greenhaven did not make any major changes to its equity portfolio, closing only two positions and not adding any new stocks to it during the third quarter.
Whirlpool Corporation (NYSE:WHR) got our attention first. Overall, 37 funds from our database reported long positions as of the end of June, while the aggregate value of their holdings represented over 12% of the company. Among the funds in our database, Greenhaven is the top shareholder of Whirlpool Corporation (NYSE:WHR), owning 2.60 million shares worth $382.78 million, as of the end of September, after a 2% increase over the quarter. Billionaire quant Ken Griffin is also fond of Whirlpool Corporation (NYSE:WHR), as he owned 456,100 shares at the end of the second quarter.
Just recently, Whirlpool announced the appointment of a new President and Chief Operating Officer, Marc Bitzer. The stock is down by 19% year-to-date, but it trades relatively cheap at 8.5 times forward earnings, which is significantly below the 17-times forward P/E of the S&P 500.
Two more intriguing stock picks of Greenhaven Associates can be found on the next page.