Value investor Greenblatt says market in expensive range, likes Home Depot, Boeing

Joel Greenblatt, managing principal and co-chief investment officer of Gotham Asset Management LLC
Chris Goodney | Bloomberg | Getty Images

Value investor and Gotham Funds co-chief investment officer Joel Greenblatt said the market is trading in a relatively expensive range on a historical basis, but likes Home Depot and Boeing.

"We're not buying the [S&P 500], we're buying the cheapest stocks in the index," he said from the Third Annual Forbes SHOOK Top Advisor Summit is Las Vegas.

Greenblatt said that from a bottom-up basis since 1990, the S&P 500 is in the 20th expensive percentile. Meaning, when compared to the last 28 years, the market's been cheaper 80 percent of the time and more expensive 20 percent of the time. But there are still name he likes despite pricey markets.

"Home Depot's is a duopoly. It's got an above-average business, trading cheaper than the market, huge returns on capital relative for the retail business. Lowe's is their only main competitor."

"The market overall's expensive, but this is a better business on average than the market," he added. "So it's a pretty great deal."

Greenblatt is also long aerospace and aircraft company Boeing, which he highlighted as a second duopoly. He added that its returns on capital are high for a capital-intensive business and air travel continues to grow over time. He likes Walmart, too.

Walmart "is a great business. They have -- if you want to talk about economies of scale -- if you're a retailer, that's the name of their business. They can do things cheaper, their buying power is better, they have loyal customers. They're in places that are convenient for consumers. They just built a business over time that just does things better."

Greenblatt also talked about the names he is short selling, including Ford, Monster Beverage and Align Technology. All of those stocks are more expensive than the S&P 500, the investor said.

The founder of Gotham Capital famously had annual returns of 40 percent from 1985 to 2005. He wrote the New York Times best-seller "The Little Book That Still Beats the Market."

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