Value investor Joel Greenblatt says he likes Booking Holdings, thinks Align is too expensive

  • Value investor Joel Greenblatt says that while concerns over competition from Google and Airbnb are reasonable, Booking's cheaper price is enough to make a compelling investment idea.
  • "It's an asset-light, cash flow machine. It's in a very good business, it's essentially in a duopoly with Expedia," he tells CNBC.
  • He also doubled down on his short thesis at Invisalign maker Align Technologies, saying the company is one of the most expensive in the S&P 500.
Joel Greenblatt, value investor and Gotham Funds co-chief investment officer
Scott Mlyn | CNBC
Joel Greenblatt, value investor and Gotham Funds co-chief investment officer

Value investor and Gotham Funds co-chief investment officer Joel Greenblatt told CNBC that he likes online travel company Booking Holdings and remains short medical device maker Align Technology.

The longtime value investor said that while concerns over competition from Google and Airbnb are reasonable, Booking's cheaper price and solid growth in earnings and sales are enough to make a compelling investment idea.

"This is a network type of business where you're getting it at a 40% discount to the S&P," Greenblatt said on "The Exchange" on Monday. "It's an asset-light, cash flow machine. It's in a very good business, it's essentially in a duopoly with Expedia."

Greenblatt added that the company — which operates sites including Booking.com, OpenTable and Kayak — has been active in buying back its outstanding equity, repurchasing about 8% in 2018. Booking generates more than half of its sales outside the U.S.

Shares of Booking Holdings, though up nearly 7% in 2019, are still underperforming the broader stock market over a slew of timelines. Its stock is down more than 11% over the last 12 months versus the S&P 500's 9% gain. Expedia, on the other hand, is up 16.5% over the last year.

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

On the other hand, Greenblatt doubled down on his short thesis on Invisalign company, Align. He argued that while the business itself isn't problematic, the current price people have to pay for the stock appears lofty given recent patent expiration.

"A lot of their patents started coming off in 2017, there's a lot of competition coming into the business. And at 50% discounts to the cost of their stuff," he said. "So really not a good — I mean, it's a great business, but there's not a good case at this valuation level to be excited about it."

The stock is up more than 11% over the last 12 months. Greenblatt said that the stock is current trading at more than 100 times free cash flow, giving it one of the highest valuations in the S&P 500.