Contrarian investing is not easy. Due to the difficulty of picking a portfolio of stocks that can outperform the S&P 500, many investors get discouraged and just follow the crowd.
However, contrarian investing usually gets its time to shine during bear markets, when these value-focused investors who go against the crowd have an opportunity to pick up quality stocks at bargain prices while everyone else is selling.
According to the GuruFocus All-in-One Screener, a Premium feature, three stocks with high GF Scores that are held by famous contrarian investors Bruce Berkowitz (Trades, Portfolio) and Murray Stahl (Trades, Portfolio) are Apple Inc. (AAPL, Financial), The St. Joe Co (JOE, Financial) and Enterprise Products Partners LP (EPD, Financial).
The GF Score is a unique stock ranking metric from GuruFocus that has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. According to GuruFocus’ bactesting, stocks with higher GF Scores generally generate higher returns than those with lower GF Scores.
Disclaimer: The information on guru holdings comes from quarterly 13F filings and mutual fund reports. Investors should be aware that 13F reports and mutual fund reports do not provide a complete picture of a guru’s holdings. The 13F reports include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. The mutual fund data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. However, even these limited reports can provide valuable information.
Apple
Apple (AAPL, Financial) has a GF Score of 95 out of 100, getting top marks for profitability and growth, decent ranks for GF Value and financial strength and a poor rank for momentum.
Berkowitz’s Fairholme Capital Management owned 4,260 shares of Apple as of its most recent portfolio update for the third quarter of 2022. Meanwhile, Stahl’s Horizon Kinetics owned 11,678 shares as of the third quarter’s end. Overall, more gurus have been selling the stock than buying it in recent quarters, and those who have been reducing their holdings include Berkowitz and Stahl.
Despite its past success, Apple is shaping up to be more of a contrarian investment these days due to having fairly high market saturation in most of its key business areas. It is missing the next Mac or iPhone that will take the world by storm, and it does not pay a dividend, so there is less incentive to hold shares. Investors that have faith in the company’s history of innovation are holding out for Apple’s investments in technologies such as self-driving cars, the Metaverse, Cloud services, advertising and continued smartphone evolution.
St. Joe
St. Joe (JOE, Financial) has a GF Score of 91 out of 100. The real estate company’s GF Value, growth, profitability and momentum ranks are all solid, though the financial strength rank is low.
As of the third quarter’s end, Berkowitz’s firm owned 24,469,790 shares of St. Joe – in fact, St. Joe is its top holding with a 76% portfolio weight. Stahl’s firm owns 609,993 shares as of its latest 13F, and it has been adding to the position in recent quarters. Overall, gurus have been net bearish on the stock in recent quarters, but there were more buys than sells in the third quarter.
St. Joe is a real estate operation in Northwest Florida. It is well-positioned to take advantage of population growth in the area, which is a prime destination spot for retirement. Over the past few years, the company has increased homesite sales by 10-fold, noting that it is having no trouble selling homes. Since the U.S. is in the midst of a real estate slump, this stock falls naturally on the contrarian radar, though it could weather the storm better than many other real estate companies as the baby boomer generation reaches retirement age.
Enterprise Products Partners
Enterprise Products Partners (EPD, Financial) has a GF Score of 87 out of 100. The pipeline company’s momentum rank is its strongest metric, with decent ranks for profitability, growth and GF Value and a low rank for financial strength.
Berkowitz has been building a stake in Enterprise since the first quarter of 2021, and his firm ended the third quarter with 3,882,800 shares. On the other hand, Stahl has held the stock for over a decade and ramped up his investment starting in 2020, ending the third quarter with 107,126 shares. Investors have been overwhelmingly bullish on the stock for the past few quarters.
While most parts of the oil and gas industry tend to be more cyclical, that is often not the case for midstream companies like Enterprise, as long-term contracts and the built-in monopolies of pipelines help ensure predictable and profitable cash flows. Enterprise has not actually paid off much in terms of capital gains over its history, but it does have a forward dividend yield of 7.63% thanks to its stalwart business.
