Energizer Holdings, Inc. (NYSE:ENR), Lockheed Martin Corporation (NYSE:LMT), and The Procter & Gamble Company (NYSE:PG) are Joel Greenblatt’s best long picks at the moment, an interview with CNBC recently revealed.
The managing partner & founder Gotham Capital shared during the interview his investment strategy. He said:
“The way we do things in general, especially for our long/short mutual funds, is we look at the 2,000 largest companies in the U.S. and we rank them on a daily basis from 1 to 2,000 based on their discount to our assessment of value. Of course, values of businesses are not changing daily but prices are, so that’s why we rank daily. We generally buy 300 of the cheapest [stocks] based on our assessment of value and short 300 [stocks] of the most expensive [based on our assessment of value]. We put more weight into those that are cheaper so the first cheapest gets the biggest weight and the second cheapest gets the second biggest weight.”
Asked about who is cheapest and most expensive at the moment, Greenblatt remarked that small caps are very expensive and large caps are somewhat cheaper looking at the data his company has studied over decades. This is contrary to what people may think, he said, especially since the market has gone up in the past five years.
Greenblatt was then made to explain his long and short picks. According to him, his long picks are Energizer Holdings, Inc. (NYSE:ENR), Lockheed Martin Corporation (NYSE:LMT), and The Procter & Gamble Company (NYSE:PG). He said that what these stocks have in common is that what Gotham Capital owns, most people do not like.
Explaining why he picked Energizer Holdings, Inc. (NYSE:ENR), he said that the company may currently not be on the top of people’s list at the moment because they have slightly falling sales. However, he noted that the company is also splitting its battery division and its personal care division.
He added that this shows the Energizer Holdings, Inc. (NYSE:ENR) management cares. Furthermore, he told CNBC that the company is earning huge cash flow and that it has huge return on capital.
The same is true with Lockheed Martin Corporation (NYSE:LMT), the Gotham Capital founder said. Noting that he understands why people do not like defense contractors like Lockheed Martin Corporation (NYSE:LMT), he added that he views the company as a very innovative technology company at a bargain price. He did admit, however, that they are currently winding down on defense contractors.
As for The Procter & Gamble Company (NYSE:PG), Greenblatt said, is a prime example of a very high-quality company which earns well over 50% returns on tangible capital. He added that The Procter & Gamble Company (NYSE:PG) is a great company at a good price.
Watch the video below where Greenblatt also discusses his short picks.
Energizer Holdings, Inc. (NYSE:ENR) shareholders includes Mario Gabelli’s Gamco Investors which had 1.09 million shares in the company by the end of March. Phill Gross’ And Robert Atchinson’s Adage Capital Management also owned 660,039 shares in the company by the end of the first quarter.
Lockheed Martin Corporation (NYSE:LMT) shareholders includes First Eagle Investment Management managed by Jean-Marie Eveillard with 2.73 million shares. Another shareholder is D E Shaw with 509,455.
Warren Buffett’s Berkshire Hathaway had 52.79 million shares in Procter & Gamble Company (NYSE:PG) by the end of the first quarter. Donald Yacktman’s Yacktman Asset Management also had 26.51 million shares in the company by the end of March.
Disclosure: None
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