Wouldn’t it be nice to peek over a billionaire’s shoulder when picking stocks? Well, sometimes, you can. This has led to the rise of top value stocks billionaires buy.
In a dynamic and complex world of investing, the billionaires’ decisions sometimes signal potential moves for less-experienced retail investors. And, although these financial titans usually have access to an array of sophisticated alternative investment strategies, sometimes their focus turns to something simpler.
This focus on seemingly plain, undervalued companies with a history of steady returns, may not create headlines but often offers a hint of something much more significant: hidden, untapped potential. Here’s a handful of value stocks some of the world’s wealthiest investors are loading up on. Although overlooked by many, these stocks garner the attention that could represent lucrative opportunities for those willing to follow the money trail.
Caterpillar (CAT)
Recently, billionaire hedge fund CEO Mario Gabelli told CNBC that he’s loading up on Caterpillar (NYSE: CAT) stock. Although Gabelli vouched for the stock in May, his bet’s already paid off as the company reported strong earnings at the beginning of August.
Caterpillar saw second-quarter sales surge to $17.3 billion. That’s a 22% jump from the previous year’s revenue. The company attributes the growth to renewed demand for equipment and realigned pricing strategies, which points to improved economic conditions benefiting Caterpillar. Investors who paid attention could have forecasted the earnings beat, as CEO Jim Umpleby said in June that “the 75% (of CAT’s construction business) that is nonresidential is quite strong [and] we are quite bullish about what we see coming in.”
The stock jumped 7% on the news, but many think it remains undervalued based on its strong fundamental positioning. Analyst consensus affirms the stock as a buy, with the current price between 7% and 18% undervalued. It isn’t too late for retail to jump on this billionaire’s best construction stock pick.
Occidental Petroleum (OXY)
Although oil company Occidental Petroleum (NYSE: OXY) struggled with global energy markets and saw fairly flat returns, billionaire investor Warren Buffett remains very bullish on the stock. He owns nearly 25% of the company today, an investment worth about $13 billion. Why is Buffett so bullish on this value stock?
Value investors often prioritize dividend consistency and steady growth over rapid progress, and Occidental Petroleum comfortably meets these criteria. The company offers a total yield of 7.35%, derived from combining dividend payouts and share repurchases. Both of these corporate actions translate into value for shareholders. This impressive yield positions OXY as an attractive option for investors looking to realize returns that surpass the risk-free rate while benefitting from potential increases as energy markets bounce back.
Buffett is also bullish on the company’s future and commended the company leadership for its strategic foresight earlier this year. He reassured investors of the company’s promising trajectory, stating that OXY has “the right management running it” during a shareholder meeting in May. For value investors, OXY’s current share price makes the company an ideal addition to its portfolio.
Titan International (TWI)
Billionaire hedge funds are flocking to Titan International (NYSE: TWI). That should raise any retail investor’s interest, as hedge funds usually target rapid return strategies that leave value stocks off the table. With 5% of the stock owned by these funds, billionaire clients and fund managers might see something other value investors are missing.
The company’s core stats alone make the stock a prime target for value investing. Today, Titan International trades at a 1.60 price-to-book ratio and a bottom-barrel 4.9 price-to-earnings ratio. These top-tier ratios, and fairly low share price, mean the stock is viable for value investors even if they aren’t part of a massive hedge fund. This makes it one of those top-value stocks billionaires buy.
The company also reported earnings this month, beating analyst estimates by more than 8%. The company saw supply chain trouble previously impact its bottom line, but those days appear to be behind Titan. President and CEO Paul Reitz told investors he was “very pleased with our second quarter 2023 results as we navigate the previously communicated temporary inventory impact with some of our customers.”
The company also saw $61 million in free cash flow over the quarter, critical for fundamental-minded investors focusing on cash as part of a value investment strategy. At the end of the day, billionaire hedge funds see strong possibilities from the global manufacturer, and value investors should take notice.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.