Investors can glean some valuable insights from inspecting the stock holdings of some of the world’s most prominent asset managers. Often called the “smart money”, institutional money managers such as asset managers and hedge funds often buy individual stocks for their clients. While no investor should ever blindly replicate another investor’s strategy, there is a lot that can be learned from the top asset managers.

LSV Asset Management is a value-oriented equity management firm that focuses on building wealth for institutional investors globally. The firm manages $80 billion for about 350 unique clients.

LSV was founded in 1994 as a quantitative value equity manager that utilizes active portfolio management through proprietary investment models. LSV is actively managed, generally turning over about 30% of its portfolio each year, and generally favors large-cap stocks.

The following dividend stocks represent core holdings for LSV, and we find them to be equally appealing for everyday investors due to their competitive advantages, growth potential, and attractive dividends.

Intel Corporation (INTC)

The firm’s largest position is in tech giant Intel, a stock with a $258 billion market capitalization, and a six-year streak of dividend increases. We see Intel as a decent pick in the mega-cap space, sporting a reasonable valuation and a dividend yield slightly above the broader market. Intel’s impressive growth history has been slowed by the COVID-19 crisis, but we see mid-single-digit growth annually moving forward.

Intel’s strong position in the chip business, as well as its burgeoning data and cloud businesses combine to create tailwinds for future growth. Intel’s massive PC business will allow it to continue to generate cash it can use to acquire growth, perform R&D, buy back stock, and raise the dividend. Intel has a 2.2% current yield.

Verizon Communications (VZ)

Intel is followed by Verizon, another stock with a $200+ billion market capitalization. We like buy-rated Verizon for its valuation we see as below fair value, as well as its ample dividend yield, which is about twice that of the broader market. We see growth in the mid-single digits for Verizon, which is roughly in line with its historical performance. The dividend is also quite safe at just half of earnings, so we see ample room for Verizon to boost its dividend over time.

Verizon released first-quarter earnings results on 4/24/2020. Revenue was down 1.6% to $31.6 billion, which was $770 million lower than expected. Adjusted earnings-per-share increased 5% to $1.26. Wireless revenue decreased 0.5% to $22.6 billion, though service revenue improved 1.9%. This segment saw 50K retail postpaid net losses, which included 68K phone net losses and 95K postpaid smartphone net additions.

Verizon is a high-yield stock with a 4.4% yield.

Pfizer Inc. (PFE)

LSV’s third-largest holding, Pfizer, is a stock we have a strong buy rating on. Pfizer has remade its portfolio in recent years, acquiring fast-growing drugs with high peak sales potential, as well as combining its former generic drug business with Mylan (MYL). We see Pfizer as posting mid-single-digit earnings-per-share growth annually in the coming years and combined with a valuation that we see as substantially below fair value, we think Pfizer can create very strong returns for shareholders for the foreseeable future. Combined with a dividend yield that is more than double that of the broader market, we see Pfizer as appealing to a variety of investors.

Pfizer reported first-quarter on April 28, 2020. Companywide revenue declined (8%) to $12,028M from $13,118M and adjusted diluted EPS declined (5%) to $0.80 from $0.85 in comparable quarters. The Biopharma segment increased revenue 12% to $10,007M in the quarter from $9,045M in the prior year driven by 29% increase in Eliquis sales, 11% increase in Ibrance sales, 8% increase in Xeljanz, 25% increase in Xtandi, 15% increase in sterile injectibles from COVID-19, and 63% increase in Biosimilars. Pfizer has about 7 therapies in Phase 2 or 3 trials and is now pursuing a COVID-19 vaccine and testing existing medicines. This could be a major growth catalyst for Pfizer stock going forward, while shares offer a nearly 4% yield.

Final Thoughts

LSV Asset Management takes a value-oriented approach to investing its clients’ money. The firm seeks to identify long-term value with a short-term catalyst via behavioral finance. The firm’s largest three holdings are stocks we have favorable outlooks for, and all pay dividends that are in excess of the market. We see Pfizer as the strongest stock in the top holdings of LSV.