Amidst the S&P 500’s impressive 30% surge in the past year, discussions on value stocks have been scarce. In July of last year, I delved into the realm of value investing in my article “3 Stocks to Snag for Less Than Book Value,” identifying three companies with promising book value metrics. Since then, these picks have soared with an average increase of 39%.
However, as the index has climbed nearly 18% since last July, identifying value plays has become increasingly challenging. As such, I have sought the expertise of seasoned stock picker Larry Pitkowsky, the mastermind behind the GoodHaven Fund (MUTF:GOODX).
Following strategic adjustments to the fund’s operations and stock selection methodology in late 2019, the fund has outperformed the index. Let’s explore three compelling value stocks recommended by GOODX that warrant consideration for your portfolio.
Embracing Berkshire Hathaway (BRK-B)
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Berkshire Hathaway (NYSE:BRK-B) holds the mantle as GOODX’s largest position, commanding an 11.15% allocation. It is crucial to note that when examining a portfolio manager’s holdings within mutual funds, these snapshots are dated, often reflecting positions from weeks or even months ago.
There is a sense that Pitkowsky may have been seeking insights, given that a significant portion of his top 10 holdings aligns with recommendations I have endorsed previously. Notably, Berkshire Hathaway was a subject of my analysis as recent as March 4.
Berkshire is on the lookout for avenues to deploy its substantial cash reserves, venturing into acquisitions of smaller entities beyond Warren Buffet’s traditional playing field. A prime instance is its recent $11.6 billion buyout of Alleghany Corporation in 2022.
With an enterprise value hovering around $1 trillion, Berkshire’s valuation of 7.2 times EBITDA represents a 21% discount from its five-year average. As a stalwart in the domain of low-fee “mutual funds,” Berkshire remains a must-have in your investment arsenal, solidifying its position as a top-tier value stock worth considering.
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Builders FirstSource (NYSE:BLDR) claims the third-largest share of GOODX’s portfolio at 6.57%. In a previous article back in February, BLDR found a spot in a selection of companies sourced from a Vanguard fund utilizing artificial intelligence (AI) for portfolio construction.
Based in Texas, Builders FirstSource is a manufacturer and supplier of building materials that has capitalized on the prolonged boom in housing construction over the past decade, driving its shares up over 1,500% in the last five years.
Its unwavering focus on capturing substantial slices of contractor and homebuilder revenues underpins its robust strategy. Boasting 570 distribution and contractor locations across 43 states and 89 Metropolitan Statistical Areas, Builders FirstSource maintains a robust market presence and growth trajectory.
While the company witnessed a minor decline in sales and earnings in Q4 2023, with revenue slipping 4.7% to $4.2 billion and adjusted earnings down 6.7% to $439.3 million, CEO Dave Rush highlighted the achievement of delivering high-teens EBITDA margins amidst a challenging housing market landscape.
Builders FirstSource holds the promise of becoming a cornerstone in numerous money managers’ portfolios, transcending beyond Pitkowsky’s endorsement.
Exploring Exor NV (EXXRF)
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My final value prospect is Exor NV (OTCMKTS:EXXRF), the Italian conglomerate that oversees the Agnelli family’s investments. Occupying the seventh spot in GOODX’s holdings with a 4.2% allocation, Exor NV presents a compelling case for ownership.
One captivating aspect of the company lies in its diverse holdings, akin to a treasure trove waiting to be explored—a sentiment akin to the allure of dissecting Berkshire’s financials. Notably, Exor recently made headlines with its partnership with World-Wide Investment Company Limited by acquiring a 30% stake in the parent firm of Subdued, an emerging Italian teen fashion label.
Intriguingly, Subdued raked in $130 million in revenues through its 130 outlets spanning London, Paris, Rome, and other key European cities in 2023. Could we be witnessing the rise of the next Abercrombie & Fitch (NYSE:ANF) in this fashion narrative?
Moreover, Exor exhibits the virtue of exercising patient capital, exhibiting a willingness to bide its time for investments to bloom. In a notable move last year, it secured a 15% stake in Philips (NYSE:PHG), the Dutch conglomerate transitioning into a healthcare-dominant entity, for $2.8 billion, with potential plans to heighten its stake to 20%.
Lastly, with a commanding 34.5% grip on Ferrari’s (NYSE:RACE) voting power and a flourishing 22.9% equity stake that surged nearly 29% in 2024 and 62% over the preceding year, Exor NV enchants investors in search of captivating value stocks.
As of the publication date, I do not hold any positions (directly or indirectly) in the securities referenced in this article. The opinions expressed here are personal and align with the guidelines set by InvestorPlace.com.
