GuruFocus’ Most Broadly Held model portfolio consists of the 25 stocks that have the highest number of guru owners, rebalanced annually.
Below is a chart comparing the performance of the Most Broadly Held model portfolio to the S&P 500. As we can see, this model portfolio has significantly beaten the S&P 500 since its inception on Dec. 30, 2005:
Overall, it seems like high guru ownership can often be a positive sign for a stock, considering the success of the Most Broadly Held model portfolio.
In addition to looking at the Most Broadly Held model portfolio, GuruFocus users can also search the markets for stocks with high guru ownership by going to the Gurus tab in the All-in-One Screener and selecting which gurus to include in the screen. You can choose to add the Premium or Premium Plus gurus, or a list of gurus that you had compiled previously:
In this article, we will take a look at the most broadly held guru stocks that are trading below their intrinsic values as estimated by the GuruFocus Value chart. The GF Value chart is a unique intrinsic value estimation from GuruFocus that is calculated based on the following three factors:
- Historical multiples (price-earnings ratio, price-sales ratio, price-book ratio and price-to-free cash flow) that the stock has traded at.
- A GuruFocus adjustment factor based on the company’s past returns and growth.
- Future estimates of business performance from Morningstar analysts.
Alibaba Group Holding
Alibaba Group Holding Ltd. (BABA, Financial) is a Chinese multinational conglomerate with holdings in e-commerce, retail, internet and technology assets, among many others. By volume, Alibaba is the largest e-commerce company in the world, with millions of merchants and hundreds of millions of users.
As of the most recent regulatory filings, 40 gurus own shares of Alibaba, including Baillie Gifford (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Frank Sands (Trades, Portfolio) and Chase Coleman (Trades, Portfolio).
On July 27, the stock traded around $184.12 for a price-to-GF Value ratio of 0.51, earning it a rating of significantly undervalued.
Alibaba undeniably has high growth potential. It’s similar to Amazon (AMZN), but it is just as involved with corporate bulk e-commerce as it is with individual customer e-commerce, and it has a bigger domestic addressable market since it is a Chinese company. However, many investors are hesitant to buy shares of Alibaba due to the potential for antitrust measures to affect growth and profits.
Berkshire Hathaway Inc. (BRK.B, Financial) is the conglomerate headed by famous value investor Warren Buffett (Trades, Portfolio) and his partner Charlie Munger (Trades, Portfolio). The Omaha, Nebraskia-based group owns a wide variety of businesses, including Geico and other insurance companies, Berkshire Hathaway Energy, BNSF and a sizable investment portfolio.
As of the most recent regulatory filings, 37 gurus owned Class B shares of Berkshire Hathaway, including Diamond Hill Capital (Trades, Portfolio), Tom Russo (Trades, Portfolio), Chris Davis (Trades, Portfolio), Glenn Greenberg (Trades, Portfolio) and Yacktman Asset Management (Trades, Portfolio).
On July 27, the stock traded around $280.24 for a price-to-GF Value ratio of 0.87, earning it a rating of modestly undervalued.
The unrealized gains and losses from equity holdings are considered part of a company’s earnings, meaning that for companies like Berkshire that have large equity portfolios, earnings can fluctuate wildly depending on the movements of the stock market. This makes it more difficult to get a measure of Berkshire’s value using most yardsticks. However, Berkshire bought back a record $24.7 billion of its stock, or 5% of total shares outstanding, during 2020, indicating that Buffett also thinks the conglomerate has become undervalued.
Baidu Inc. (BIDU, Financial) is a Chinese internet and technology giant that specializes in artificial intelligence, internet services, search engines and related products. It has access to the world’s largest domestic addressable population of internet users.
As of the most recent regulatory filings, 32 gurus own shares of Baidu, including Primecap Management, Catherine Wood (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Dodge & Cox and John Rogers (Trades, Portfolio).
On July 27, the stock traded around $157.26 for a price-to-GF Value ratio of 0.92, earning it a rating of fairly valued.
Baidu operates the largest search engine in China, giving it a significant incumbent’s advantage over competitors. Given the search engine’s reputation, most users would be unlikely to switch to a search engine offered by a new player to the market. Much like with Alibaba, many investors are hesitant to buy shares of Baidu due to the potential for antitrust measures to affect growth and profits.
Citigroup Inc. (C, Financial) is a U.S. global bank major based in New York. It has approximately $2.21 trillion in total assets and provides a wide range of traditional, corporate and investment banking services and other financial services.
As of the most recent regulatory filings, 30 gurus owned shares of Citigroup, including ValueAct Holdings, Hotchkis & Wiley, Richard Pzena (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio).
On July 27, the stock traded around $67.89 for a price-to-GF Value ratio of 0.92, earning it a rating of fairly valued.
Like other bank majors that have historically made the lion’s share of their income on charging interest on loans, Citigroup has seen its top and bottom lines negatively impacted by historic low interest rates, especially in corporate banking. This has been only partially mitigated by increased income from trading and wealth management services as well as higher deposits. If interest rates are raised, Citigroup will likely resume its long-term growth trajectory.
Merck & Co. Inc. (MRK, Financial), also known as Merck Sharp & Dohme outside of the U.S. and Canada, is a pharmaceutical giant based in Kenilworth, New Jersey. The company focuses its research and production primarily on vaccines, oncology, infectious diseases and cardio-metabolic disorders.
As of the most recent regulatory filings, 30 gurus owned shares of Merck, including Warren Buffett (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and the Parnassus Endeavor Fund (Trades, Portfolio).
On July 27, the stock traded around $77.90 for a price-to-GF Value ratio of 0.92, earning it a rating of fairly valued.
After seeing its growth begin to slow in recent years, Merck decided to spin off its women's health, biosimilars and established drugs businesses into a new company, Organon (OGN, Financial), which began trading on June 3. The goals of the split included attracting a higher valuation for the newly divided companies and leaving the parent company with a faster-growing business. Merck’s Keytruda was the second best-selling drug in 2020 with $14.38 billion in sales, and its experimental drug molnupiravir, a pill to treat mild to moderate Covid, could also drive growth if it is approved.
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