Hedge fund manager Joel Greenblatt, author of the “Little Book that Beat the Market”, has initiated a new position in semiconductor maker Advanced Micro Devices, Inc. (NASDAQ:AMD) while reducing positions in graphics processor maker NVIDIA Corporation (NASDAQ:NVDA) and iPhone maker Apple Inc. (NASDAQ:AAPL), according to 13F forms filed with the SEC every quarter. Greenblatt is founder of the hedge fund Gotham Asset Management which he started with just $7 million from junk-bond king Michael Milken back in 1985. The fund, which he runs with his partner Robert Goldstein, now has a portfolio value of $7.77 billion.

Greenblatt, who is ranked #57 out of 202 hedge funds tracked by financial accountability engine TipRanks, presided over an impressive annualized return of 40% from 1985 to 2006. Times have changed but the fund still generates respectable returns of 25.79% in 2016 and 15.10% on a 3-year annualized basis, beating the average hedge fund portfolio if not the S&P 500. We can see that the measured performance of the fund is 73.62% vs the average hedge fund’s 51.58% and the S&P 500’s 84.2%.

So what is the rationale behind the fund’s investing strategy? Greenblatt invented the concept of “Magic Formula Investing” which means investing in cheap and good companies with a solid financial outlook, high-earnings yield, growth potential and high returns on investments. In the words of Greenblatt and Goldstein “there is a true north when it comes to the stock market. If we do a good job of analyzing and valuing companies, we believe our effort will be rewardedeven if it takes some time.

Now let’s take a closer look at how this strategy played out in the fund’s Q4 moves:

Advanced Micro Devices, Inc.

In Q4, Greenblatt initiated a new position in chipmaker AMD with 93,768 shares worth $1.06 million. Although this is a relatively small position for the fund it does indicate a vote of confidence in the stock’s outlook. And since the last filing date, the shares have already gained 24.5% in value to the current share price of $15.20.

AMD has just launched its Ryzen next-generation computer processor. From March 2, the processor will be available to the market for between $329 to $499. The market is very excited about what the launch will mean for AMD. Ryzen will generate profit for AMD and enable it to compete with larger rival Intel for the first time in years. In fact, Ryzen is both faster (by 10%) and cheaper (by $500) than Intel’s recently-released equivalent Kaby Lake processor. Bearing all this in mind, it is hardly surprising if Joel Greenblatt is keen to get his foot on the door even if AMD’s high share price means there is little room for disappointment.

Out of the 22 analysts polled by TipRanks (in the past 3 months), 10 rate Advanced Micro Devices stock a Buy, 10 rate the stock a Hold, while two recommend to Sell. With a downside potential of 25%, the stock’s consensus target price stands at $10.92.

NVIDIA Corporation

In Q4, Greenblatt reduced his holding in Nvidia by -5.63%. The fund has still retained 414,000 NVDA shares worth $44.25 million. In contrast to AMD. NVDA shares have dropped by -4.83% in value since the last filing date. Shares pulled back in price following the release of Nvidia’s Q4 earnings results. Although Nvidia’s earnings beat estimates as did its FY17 guidance (for revenue of $1.9 billion vs the expected $1.88 billion) Nvidia bulls were disappointed that the beat was not more spectacular.

However, while Greenblatt may have reduced his holding, some analysts are calling for investors who missed last year’s rally to take advantage of the share’s relative weakness to join the NVDA party.

“Since our initiation in June, we have spoken with a large number of investors who have expressed interest in the stock and yet continue to remain on the sidelines given concerns around valuation, despite their positive view on Nvidia’s fundamental outlook. We recommend investors take advantage of this recent pullback” says Goldman Sachs analyst Toshiya Hari. He remains confident about the growth prospects for the company’s core gaming, data center and automotive businesses.

Top Mizuho analyst Vijay Rakesh similarly chimes in with a positive outlook for the stock’s long-term potential, saying that a short-term slowdown in gaming does not justify a “write-off” of the whole cycle especially as gaming will receive a boost from the release of upcoming titles such as Take-Two’s Red Dead Redemption 2 and Activision’s Destiny.

Apple Inc.

Greenblatt slashed the fund’s Apple position in Q4 by -26.49% to 337,900 shares worth $39 million. The shares have gained 18% since the last filing date. The move stands against the bullish outlook on the stock from analysts, bloggers and other hedge fund managers, although corporate insiders have a strong sell signal on AAPL stock with the sale of $42.3 million shares in the last 3 months. Most notably, director and ex- Vice President of the US, Al Gore, sold shares with $29.4 million on Feb 24.

The market is currently hyped about the new iPhone 8 due to be released in September this year. The phone is expected to have undergone the most radical redesign since the launch of the iPhone 6 to mark the 10-year anniversary of the first iPhone release. The new, and no doubt more expensive, iPhone could drive Apple’s record ASP (average selling price for each phone) even higher driving significant revenue gain for the company. So says BMO analyst Tim Long who believes the stock is still attractively prices and consequently raised his price target from $142 to $160 ($24 above the current share price).

“We expect some cannibalization of both regular and large-screen models but still model 11 million of net incremental unit growth in the first 12 months, which would make the upcoming cycle the most successful refresh cycle since iPhone 6 was launched in 2014” says Long. The stock has a strong buy analyst consensus rating on TipRanks and an average analyst price target of $142.