For Immediate Release
Chicago, IL – September 25, 2020 – Zacks Value Trader is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here:
Should Value Investors Buy SPACs?
Welcome to Episode #207 of the Value Investor Podcast.
Market Edge From Zacks · Should Value Investors Buy SPACs?
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
Tracey recently got an e-mail from a podcast listener who wondered about the recent SPAC from hedge fund Starboard Value’s managers and whether he should buy it.
Starboard Value Acquisition Corp. went public as a SPAC in early September and raised $360 million.
It’s a blank-check company which means it doesn’t own anything or even have a business yet. It will use the money raised from going public to acquire companies.
Starboard Value, the hedge fund, has $6.1 billion under management and files 13-F forms showing its trades and positions every quarter.
The SPAC will be led by Starboard Value managers Jeffrey Smith and Martin McNulty.
You can tell a lot about a manager’s strategy by what they already own in the portfolio.
What kind of value stocks are in Starboard Value’s portfolio?
5 Top Holdings in Starboard Value
1. NortonLifeLock Inc. NLOK is a Zacks Rank #2 (Buy) stock. It’s trading with a forward P/E of just 15.8 as shares are still down 18.5% year-to-date and have pulled back with the rest of the technology stocks in September. Yet earnings are expected to rise 47.7% in Fiscal 2021.
2. Advance Auto Parts AAP has staged a huge rally off its March coronavirus lows, surging 98%. However, it’s still down 6.9% year-to-date. It’s trading with a forward P/E of 18 and a PEG of 1.7. Is it a buy on a bigger correction?
3. Aecom ACM is an infrastructure firm that has worked on projects such as SoFi Stadium in California and One World Trade Center in New York. Over the last 6 months, the shares have rallied 54% which is 10% better than the S&P 500 during that same time. It has a forward P/E of 18.6 and a PEG of 1.5. Could infrastructure be hot in 2021?
4. Green Dot Corp. GDOT operates an online banking platform. Analysts have revised 2020 estimates higher over the last 3 months as they got too pessimistic during the lockdown. Earnings are still expected to be down 30.5% in 2020 but rebound 19.3% in 2021. Shares have surged 112% year-to-date. Is it too hot for value investors to handle with a forward P/E of 25.6?
5. Merit Medical Systems MMSI makes disposable medical devices. This mid-cap company is not a value stock right now as it trades with a forward P/E of 32.3 even though shares have come down 15% in the last month.
Just because a fund manager owns these types of companies in the fund, doesn’t mean the SPAC will own similar companies.
Should value investors buy into this, or some of the other SPACs that have been listed in 2020?
Tune into this week’s podcast to find out.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
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AECOM (ACM) : Free Stock Analysis Report
Advance Auto Parts, Inc. (AAP) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
Green Dot Corporation (GDOT) : Free Stock Analysis Report
NortonLifeLock Inc. (NLOK) : Free Stock Analysis Report
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