Since the end of the Great Recession, growth stocks have crushed value stocks. Precipitously low interest rates and a dovish Fed have encouraged fast-paced companies to borrow at cheap rates in order to hire, innovate, and expand.
But this pattern may be nearing an inflection point. Historically, value stocks have outpaced growth stocks over the very long term. Further, there’s been a clear-cut outperformance seen in value stocks during the early stages of an economic recovery. This historic outperformance doesn’t seem to be going unnoticed by the world’s most successful investors.
During the fourth quarter, billionaire money managers piled into four well-known value stocks.
According to WhaleWisdom.com, which aggregates Form 13F filings from institutional investors and hedge funds, telecom giant Verizon (NYSE:VZ) was a popular play among successful money managers. Even though the total number of shares held by 13F filers rose by less than 2% in the fourth quarter from the sequential third quarter, the number of new positions opened in Q4 was up 154% from Q3.
In particular, Warren Buffett’s Berkshire Hathaway opened a 146.7 million share position in the company, with Jeff Yass’s Susquehanna International upping its existing stake by almost 1.9 million shares.
The “buy Verizon” thesis looks to have two catalysts on Wall Street. First, there’s the ongoing rollout of 5G networks across the United States. It’s been a decade since wireless download speeds were upgraded, which should create an incredible amount of pent-up demand from consumers and enterprises to upgrade their devices. Since data is a significant driver of Verizon’s wireless margins, 5G should represent a multiyear shot in the arm of organic growth.
The other factor at play here is Verizon’s safety in numbers. The company is lugging around $31 billion less in total debt than chief rival AT&T, and its low beta suggests it’s highly resistant to wild swings in the market. With Treasury yields not necessarily topping the inflation rate, money managers might be turning to Verizon to generate a return on their cash, with its rock-solid 4.5% yield.
Bristol Myers Squibb
Billionaire money managers also seem pretty enthused about the long-term prospects for pharmaceutical stock Bristol Myers Squibb (NYSE:BMY), which can be purchased at the moment for less than eight times forward-year (2022) earnings per share.
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