Below is the list of the top 5 value stocks to invest in according to ValueAct Capital. If you want to read our detailed analysis of Jeffrey Ubben’s history, investment philosophy, and hedge fund performance, go directly to the Top 10 Value Stocks to Invest In According to ValueAct Capital.
5. Trinity Industries, Inc. (NYSE: TRN)
Value: $712,685,000
Percent of Jeffrey Ubben’s 13F Portfolio: 8.26%
No. of Hedge Fund Holders: 22
ValueAct first initiated a position in Trinity Industries, Inc. (NYSE: TRN) in 2016 and it held 27 million shares at the end of 2020, accounting for 8.27% of the overall portfolio. Trinity is among the top 10 value stocks to invest in due to two reasons: share price appreciation and dividends. TRN stock price soared close to 61% in the last twelve-month. On the other hand, it offers a dividend yield of 2.97%. The company raised dividends in the past four straight years. It currently offers a quarterly dividend of $0.21 per share.
As of the end of the fourth quarter, 22 hedge funds in Insider Monkey’s database of 887 funds held stakes in TRN, compared to 23 funds in the third quarter. Jeffrey Ubben’s ValueAct Capital is the biggest stakeholder in the company, with 27 million shares, worth $712.7 million.
4. LKQ Corporation (NASDAQ: LKQ)
Value: $759,343,000
Percent of Jeffrey Ubben’s 13F Portfolio: 8.8%
No. of Hedge Fund Holders: 50
The auto parts distributor LKQ Corporation (NASDAQ: LKQ) is the fourth largest stock holding of ValueAct’s stock portfolio, accounting for 8.81% of the overall portfolio. The firm has been holding a position in LKQ since the third quarter of 2019. The share price gain of 90% in the last twelve months makes it one of the top value stocks to invest in.
LKQ Corporation was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020.
In their Q4 2020 investor letter, Bonsai Partners highlighted a few stocks and LKQ Corp (NASDAQ:LKQ) is one of them. Here is what Bonsai Partners said:
“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 27.1% during the quarter.
LKQ reported reasonably healthy third-quarter results, with revenues nearly flat year-over-year. This is quite remarkable considering ~9 months ago when we first considered buying LKQ, I didn’t know if the company would potentially trip its debt covenants and run into liquidity issues due to steep revenue declines. These issues appear well behind us now.
Given the serious tail-risk concerns when we first acquired the position, we cheaply hedged with put options; the only time we’ve ever done so. These options recently expired worthless and it never felt so good to lose money.
The company seems back on track to execute its strategy of streamlining its operations, and management used COVID as a catalyst to rationalize the business and improve service levels. Fortunately, LKQ’s business is counter-cyclical, so it stands to benefit from economic stresses if they are yet to come.”
3. KKR & Co. Inc. (NYSE: KKR)
Value: $1,540,645,000
Percent of Jeffrey Ubben’s 13F Portfolio: 17.86%
No. of Hedge Fund Holders: 54
Private equity and real estate investment firm KKR & Co. Inc. (NYSE: KKR) has been generating massive returns for investors over the last several years. Its share price soared almost 40% since the beginning of this year, extending twelve-month gains to 123%. The company also offers a dividend yield of just under 1%. ValueAct has been holding a position in KKR since 2017 and the stock holding weighted around 17.87% of the overall portfolio at the end of December.
1 Main Capital, an investment management firm, highlighted a few stocks including KKR, in the first quarter investor letter. Here is what 1 Main Capital stated:
“KKR & Co (KKR) is a top-three global alternative asset manager. Asset management is an exceptionally good business for those that can gather assets. Basically, clients put up most of the capital and the managers get to keep a nice chunk of the profits.
KKR plays in the secularly growing alternative space, focusing on private equity, real estate, infrastructure, and private credit, among other areas. As a leader in its field, KKR benefits from two durable trends:
- More and more assets are being directed to alternatives, due to their superior return profile and lower reported volatility when compared to traditional public credit and equities.
- Leaders in alternative asset management, like KKR, are taking market share and getting a disproportionate amount of the inflows into the space.
Given the above dynamics, KKR should be able to grow its revenue and earnings at an attractive rate for as far as the eye can see. I have shared my most recent financial KKR model here, which highlights the path to 4x growth in distributable earnings per share and a $135+ stock by 2025.”
2. Citigroup Inc. (NYSE: C)
Value: $1,666,392,000
Percent of Jeffrey Ubben’s 13F Portfolio: 19.32%
No. of Hedge Fund Holders: 95
Banking giant Citigroup Inc. (NYSE: C) is the second-largest stock holding of ValueAct’s stock portfolio, according to December quarter filings. The firm held more than 27 million shares of the banking giant, representing 19.33% of the overall 13F portfolio. It is the top value stock to invest in due to dividends and share price appreciation.
Artisan Partners Limited Partnership highlighted a few stocks including Citigroup in the first quarter investor letter. Here is what Artisan Partners Limited Partnership stated:
“We fully exited position in Citigroup. Global financial services company Citigroup made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistakes. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
1. Seagate Technology plc. (NASDAQ: STX)
Value: $1,873,917,000
Percent of Jeffrey Ubben’s 13F Portfolio: 21.73%
No. of Hedge Fund Holders: 30
The information technology company Seagate Technology plc. (NASDAQ: STX) is the largest stock holding of ValueAct’s stock portfolio, accounting for 21.74% of the overall portfolio. The firm has been holding a position in Seagate since 2016. Shares of Seagate Technology grew 53% so far this year. STX tops the list of best value stocks to buy based on ValueAct portfolio.
As of the end of the fourth quarter, there were 30 hedge funds in Insider Monkey’s database that held stakes in STX, compared to 23 funds in the third quarter. ValueAct Capital, with 30.1 million shares of STX, worth $1.8 billion, is the biggest stakeholder in the company.
Alger, an investment management firm, highlighted a few stocks including Seagate Technology in their investor letter. Here is what Alger stated:
“Short exposure to Seagate Technology also detracted from performance. Seagate designs and manufactures data storage products and solutions, including hard disk drives, solid state hybrid drives, solid-state drives, and storage subsystems. We have been short the shares because the company’s hard drive business faces longer-term secular challenges as hard disk drives are increasingly being replaced by solid-state flash drives. Gaming consoles now use flash drives almost exclusively and more than 80% of notebook personal computers also use the technology. The economy’s cyclical pickup off the pandemic low, however, resulted in an uptick in hard disk drive demand in the retail, corporate desktop, and video surveillance markets, which supported the performance of Seagate shares. As the price of Seagate shares increased, the short exposure detracted from the portfolio’s performance.”
You can also take a peek at 10 Best New Stocks to Buy in 2021 According to Billionaire Paul Singer and 10 Best Dividend Stocks to Buy According to Billionaire Andreas Halvorsen.
