According to current portfolio statistics, Joel Greenblatt (Trades, Portfolio)’s top five holdings as of March 31, the latest portfolio date, are Apple Inc. (AAPL, Financial), Honeywell International Inc. (HON, Financial), Amazon.com Inc. (AMZN, Financial), International Business Machines Corp. (IBM, Financial) and PayPal Holdings Inc. (PYPL, Financial).
Greenblatt, founder and managing partner of Gotham Asset Management, seeks cheap and good companies using a “magic formula” that considers two financial ratios: the return on capital and earnings yield. The author of “Joel Greenblatt (Trades, Portfolio): The Little Book that Beats the Market” defines the return on capital as the earnings before interest and taxes divided by the sum of net fixed assets and net working capital, and the earnings yield as Ebit divided by the enterprise value. The magic formula ranks all stocks based on a combination of the above two financial ratios: The top-ranked stocks are stocks that have higher returns on capital and earnings yield compared to other stocks around the globe. Table 1 lists the number of magic formula stocks for each of the GuruFocus regions as of Friday.
| Region | Number of Magic Formula Stocks |
| USA | 4371 |
| Asia | 13301 |
| Europe | 7003 |
| Canada | 536 |
| UK / Ireland | 2430 |
| Oceania | 570 |
| Latin America | 1084 |
| Africa | 383 |
| India | 3464 |
Table 1
Greenblatt’s 1,161-stock equity portfolio’s top three sectors are technology, industrials and consumer cyclical, with portfolio weights of 22.14%, 18.49% and 17.76%.
Apple
As of first quarter-end, Greenblatt owns 562,812 shares of Apple, the top holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial). Although Berkshire’s stake represents 23.77% of its equity portfolio, Greenblatt’s holding represents a meager 1.57% of his equity portfolio.
The Cupertino, California-based tech giant designs and manufactures various consumer electronic devices, including the iPhone, iPad, Mac and Watch. GuruFocus ranks Apple’s profitability 8 out of 10: Even though the company’s Ebitda growth rate outperforms just 51.95% of global competitors, its profit margins are outperforming over 96% of global consumer electronics competitors. Additionally, Apple’s Greenblatt return on capital of 184.14% outperforms 98.41% of global competitors, suggesting a strong “magic formula” candidate.
Other gurus with large holdings in Apple include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).
Honeywell
Greenblatt owns 484,186 shares of Honeywell, with a portfolio weight of 1.13%.
The Morris Plains, New Jersey-based company manufactures industrial products through four business segments: aerospace, home and building technologies, safety and productivity solutions and performance materials. GuruFocus ranks Honeywell’s profitability 7 out of 10: Even though the company’s revenue growth has decelerated over the trailing 12 months, a cautionary sign, it still has expanding profit margins and a Greenblatt return on capital of 108.15%, a value that outperforms 96.45% of global diversified industrial competitors. Additionally, GuruFocus ranks Honeywell’s business predictability four stars out of five.
Other gurus with large holdings in Honeywell include PRIMECAP Management (Trades, Portfolio) and Mairs and Power (Trades, Portfolio).
Amazon
Greenblatt owns 40,327 shares of Amazon, Berkshire’s new holding for the first quarter. Shares occupy 1.05% of the Gotham fund manager’s equity portfolio.
GuruFocus ranks the Jeff Bezos-led online retail giant’s profitability 8 out of 10 on several positive investing signs, which include expanding profit margins, a four-star business predictability rank and a three-year revenue growth rate that outperforms 91.19% of global specialty retail competitors. Despite this, Amazon’s profit margins and Greenblatt return on capital are outperforming just over half of global competitors.
International Business Machines
Greenblatt owns 483,593 shares of International Business Machines with an equity portfolio weight of 1%.
The Armonk, New York-based company offers a wide range of services, hardware and software. GuruFocus ranks IBM’s profitability 6 out of 10: Although the company’s operating margin and return on equity outperform over 80% of global competitors, its three-year revenue and three-year Ebitda growth rates are underperforming over 65% of global information technology services companies. Additionally, IBM’s Greenblatt return on capital of 117.40% outperforms just 68.27% of global competitors.
PayPal
Greenblatt owns 647,377 shares of PayPal with an equity portfolio weight of 0.98%.
The San Jose, California-based company provides electronic payment solutions to merchants and consumers. GuruFocus ranks PayPal’s profitability 7 out of 10: Even though the company’s profit margins outperform just over 50% of global competitors, its Greenblatt return on capital of 164.08% is outperforming 69.13% of global credit services companies.
See also
Joel Greenblatt (Trades, Portfolio) also recommended spinoffs, companies that were created through the sale or distribution of new shares of an existing business or division of the parent company. Premium members have access to various value screens like the Magic Formula Screener and the list of spinoffs.
Disclosure: No positions.
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