Follow the Leaders: 3 Value Stocks to Buy From a Top-Performing Fund
With the S&P 500 up more than 30% over the past year, you don’t hear much about there being any more value stocks to buy. July was the last time I even wrote about value stocks. In 3 Stocks to Snag for Less Than Book Value, I selected three attractive companies based on book value. They’re up an average of 39% since then.
With the index up nearly 18% since last July, it won’t be as easy to find value names to bet on, so I’ve enlisted the help of veteran stock picker Larry Pitkowsky, who runs the GoodHaven Fund (MUTF:GOODX).
Since the portfolio manager made some changes in late 2019 to how the fund operated and how he selected stocks for inclusion in the actively managed portfolio, it outperformed the index. These tfit’hree value stocks from GOODX deserve a spot in your portfolio.
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Berkshire Hathaway (BRK-B)
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Berkshire Hathaway (NYSE:BRK-B) is GOODX’s largest holding, with an 11.15% weighting. Remember, with mutual funds you are looking in the rearview mirror when you examine a portfolio manager’s holdings, which are weeks, if not months, old by the time you get them.
I feel as though Pitkowsky asked me for ideas. At least half of his top 10 holdings are names I’ve recommended quite often in the past. In Berkshire Hathaway’s case, my most recent commentary was on March 4.
Berkshire needs an outlet for some of its massive cash hoards to invest in smaller businesses from the ones Warren Buffett is used to buying. His most recent acquisition of Alleghany Corporation for $11.6 billion in 2022 is a perfect example of the size of a company it would acquire.
Berkshire’s enterprise value is nearly $1 trillion. That’s 7.2 times its EBITDA, 21% less than its five-year average. Berkshire continues to be the low-fee “mutual fund” you should own. This well known company deserves its spot on the list of top value stocks to buy right now.
Builders FirstSource (BLDR)
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Builders FirstSource (NYSE:BLDR) is the third-largest holding of GOODX with a 6.57% weighting. Most recently in February, I included BLDR stock in a list of three companies to buy from a Vanguard fund whose holdings were generated through artificial intelligence (AI).
Builders FirstSource is a Texas-based manufacturer and supplier of building materials. It has ridden the wave of housing construction that’s continued more or less unabated for the last decade. Its shares are up more than 1,500% over the past five years.
I don’t see anything changing regarding its business or operations. It’s focused on capturing a big chunk of the contractor and homebuilder revenue. To do that, it has 570 distribution and contractor locations in 43 states and 89 Metropolitan Statistical Areas.
The company’s sales and earnings in Q4 2023 were down in the single digits. Revenue was $4.2 billion, down 4.7%, while adjusted earnings were off 6.7% to $439.3 million. CEO Dave Rush said the company managed to deliver high-teens EBITDA margins in 2023 despite lower single-family housing starts, a rarity in recent years.
Long-term, I see this being a big part of many money managers’ portfolios, not just Pitkowsky’s.
Exor NV (EXXRF)
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My final value name is Exor NV (OTCMKTS:EXXRF), the Italian holding company that manages the Agnelli family’s investments. It is the seventh-largest GOODX holding with a 4.2% weighting. There are so many reasons to own this stock.
First up, the company has so many interesting holdings. Reading its financials is like a treasure hunt, much like the feeling I get when I read Berkshire’s. On March 19, Bloomberg reported that NUO, a partnership between Exor and World-Wide Investment Company Limited, Hong Kong’s oldest family office, purchased 30% of the parent company of Subdued, the Italian teen fashion brand. It’s another piece of Exor’s diversification push.
In 2023, according to Bloomberg, Subdued revenues last year were $130 million through 130 stores in London, Paris, Rome and other European cities. Could it be the next Abercrombie & Fitch (NYSE:ANF)?
The second reason I like it is that it deploys patient capital that’s willing to wait for good things to happen with its investments. Last year, it acquired 15% of Philips (NYSE:PHG), the Dutch conglomerate that’s transforming into a healthcare company. It paid $2.8 billion for the stake. It might raise its stake to 20%.
Lastly, it controls 34.5% of Ferrari’s (NYSE:RACE) voting shares. The 22.9% equity stake continues to grow in value. They’re up nearly 29% in 2024 and 62% over the past year. Investors looking for value stocks to buy should take a look at EXXFR.
On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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