Should Value Investors Buy SPACs?

Starboard Value Acquisition Corp. went public as a SPAC in early September and raised $360 million.

It’s a blank-check company which means it doesn’t own anything or even have a business yet. It will use the money raised from going public to acquire companies.

Starboard Value, the hedge fund, has $6.1 billion under management and files 13-F forms showing its trades and positions every quarter.

The SPAC will be led by Starboard Value managers Jeffrey Smith and Martin McNulty.

You can tell a lot about a manager’s strategy by what they already own in the portfolio.

What kind of value stocks are in Starboard Value’s portfolio?

5 Top Holdings in Starboard Value

1.       NortonLifeLock Inc. (NLOK - Free Reportis a Zacks Rank #2 (Buy) stock. It’s trading with a forward P/E of just 15.8 as shares are still down 18.5% year-to-date and have pulled back with the rest of the technology stocks in September. Yet earnings are expected to rise 47.7% in Fiscal 2021.

2.       Advance Auto Parts (AAP - Free Reporthas staged a huge rally off its March coronavirus lows, surging 98%. However, it’s still down 6.9% year-to-date. It’s trading with a forward P/E of 18 and a PEG of 1.7. Is it a buy on a bigger correction?

3.       Aecom (ACM - Free Reportis an infrastructure firm that has worked on projects such as SoFi Stadium in California and One World Trade Center in New York. Over the last 6 months, the shares have rallied 54% which is 10% better than the S&P 500 during that same time. It has a forward P/E of 18.6 and a PEG of 1.5. Could infrastructure be hot in 2021?

4.       Green Dot Corp. (GDOT - Free Reportoperates an online banking platform. Analysts have revised 2020 estimates higher over the last 3 months as they got too pessimistic during the lock down. Earnings are still expected to be down 30.5% in 2020 but rebound 19.3% in 2021. Shares have surged 112% year-to-date. Is it too hot for value investors to handle with a forward P/E of 25.6?

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Disclaimer: Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the  more

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