Billionaire Ken Fisher’s High Upside Potential Stocks
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Billionaire Ken Fisher’s Fisher Asset Management released its quarterly 13F filing several weeks ago, disclosing many of its long equity positions (see Fisher’s entire portfolio). The portfolio is a bit old, but we don’t think it’s a good idea to blindly copy notable investors anyway; the real value comes from using the names as a list of suggestions. We can narrow down the suggestions further by looking at the stocks’ PEG ratios- a metric which combines the standard value metric of a P/E multiple with the consensus earnings growth rate from Wall Street analysts. Of course sell-side projections aren’t always correct, so the stocks don’t necessarily have this much upside, but it can be said that they have high upside potential. Here are five stocks which have low PEG ratios and which Fisher Asset Management had at least $500 million invested in as of its most recent 13F filing:
Apple (NASDAQ: AAPL) was the most popular stock in our database of 13F filings from hedge funds and other notable investors such as Fisher; the mutual fund increased its position last quarter to about 960,000 shares (see the top ten most popular stocks). Apple has missed earnings in its last couple quarters but we think that the stock has overreacted: the trailing P/E is 12 and even though our growth expectations aren’t as high as the Street’s (the PEG ratio is 0.5) we do think that the company should be able to increase its net income at least somewhat and so we think that Apple is a good value.
Another high upside potential pick was Rio Tinto (NYSE: RIO), with Fisher reporting a position of over 11 million shares. The $105 billion market cap miner, which produces aluminum, copper, gold, and other metals and materials, trades at 8 times forward earnings estimates. With analysts apparently anticipating higher commodities prices over the next several years, the five-year PEG ratio is 0.6. Fellow billionaire Israel Englander’s Millennium Management bought shares last quarter (check out more of Englander's stock picks). We’d hesitate to buy a stock so closely tied to macro demand, but it might be worth considering for investors who don’t like Freeport-McMoRan Copper & Gold (FCX)’s move into oil and gas.
Fisher owned 8.1 million shares of Schlumberger (NYSE: SLB), a market leader in oil and gas equipment and services. Revenue and earnings were each up about 10% in its most recent quarter compared to the same period in the previous year, and the consensus is that continued strong activity in oil and gas will lead Schlumberger’s numbers up as well. Schlumberger was one of the ten most popular energy stocks among hedge funds in the third quarter of the year. Find more energy stocks hedge funds love. We are interested in the industry, but Halliburton (HAL) is cheaper on a multiples basis- though that company has been seeing negative earnings growth recently.
Telecommunications equipment company QUALCOMM (NASDAQ: QCOM) has a PEG ratio of 1, as the market is pricing at 17 times trailing earnings but revenue and earnings growth have been very good recently and is expected to continue. Fisher owned 9.2 million shares of the stock at the end of September, and fellow billionaire Stephen Mandel’s Lone Pine Capital had 6.9 million shares in its own portfolio. Mandel is a Tiger Cub, having worked for legendary investor Julian Robertson. See more stocks Lone Pine owned. We think that it could be worth taking a closer look at the company.
Fisher sold a small portion of its position in Oracle (NASDAQ: ORCL) but still had over $500 million worth of the stock. At a market capitalization of $158 billion, Oracle carries trailing and forward P/E multiples of 16 and 11, respectively; this shows that 2013 is supposed to be a good year for the company. Oracle was one of Seth Klarman’s favorite stocks at the end of the quarter, with the Baupost Group reporting a position of 13.5 million shares. Again, it might be a good stock to investigate but the multiple is high enough that we’d need quite a bit of convincing that high growth rates will continue.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. Meena has long positions in AAPL and HAL. The Motley Fool owns shares of Apple, Oracle, and Qualcomm. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!