Value Investor Karen Finerman's Latest Stock Picks

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Readers may recognize value investor Karen Finerman from her frequent appearances on CNBC’s Fast Money. Outside of her television appearances, Finerman is the CEO and co-founder of Metropolitan Capital Advisors, a New York-based hedge fund established in 1992.

The 48-year old Finerman recently authored a book titled Finerman’s Rules: Secrets I’d Only Tell My Daughters About Business and Life. The new release offers insights on a variety of topics, including personal finance and advice for career-minded women. Although I do not meet the target female demographic, I consider the book a must-read for both male and female audiences.

With respect to her hedge fund, Finerman maintains a simple goal. The fund aims to outperform large-cap indices such as the S&P 500 using a value-oriented approach, all while incurring less risk.

Here are three stocks owned by Finerman that readers might consider:

Health benefit company

Metropolitan Capital entered the New Year with a large position in WellPoint (NYSE: WLP), and Finerman increased her stake even more during the first quarter.

Finerman’s good work has been confirmed by the healthy rally in the stock (no pun intended) that has taken place since April. Shares of WellPoint have outperformed the S&P 500 with a 34% gain through June.

Despite the recent gains, I believe the health benefit company can run higher in the next 12 months. WellPoint reported better than expected Q1 earnings on April 24, with EPS of $2.94 significantly above the consensus of $2.38. Management provided full-year earnings guidance of “at least $7.80” based on anticipated enrollment growth.

In my view, the Q1 earnings beat is the start of a long-term positive at WellPoint. New members are likely to join a WellPoint health plan based on the expansion of Medicaid under President Obama’s Affordable Care Act. The company is also benefiting from a new CEO, Joseph Swedish.

On May 13, WellPoint reiterated its full year guidance in a regulatory filing. Numerous Wall Street firms have upgraded the stock in recent weeks, which could lead other hedge funds to ride on Finerman’s coattails.

The company will release Q2 2013 earnings before the market open on July 24. I believe management’s guidance is likely conservative, and the stock could reach $90 before year-end.

Industrial machinery & equipment

As a value investor, Karen Finerman will often buy and hold stocks for the long-term. She continues to view Timken Company (NYSE: TKR) positively, with a large ownership position as of the most recent SEC filing.

Timken develops and sells products for friction management and mechanical power transmission, alloy steels, and steel components. The $6 billion company operates outside northeast Ohio with more than 20,000 employees in 30 countries and territories.

Shares of Timken are near all-time highs, despite Q1 results that reflected lower demand across the company’s end markets. Full year 2013 sales are expected to fall 5% compared to last year due to weaker demand in oil, gas, and other industrial businesses. Management provided EPS guidance of $3.75–$4.05 for the full year, giving the stock a 15x earnings multiple.

Investors are optimistic on Timken despite the moderate outlook, as the company announced plans to separate its steel business on June 10. The transaction will likely unlock further value for shareholders.

Analysts at Jefferies raised their price target on Timken to $65 from a previous $50 following news of the proposed spin-off, citing the potential for a share repurchase plan and higher dividend. Timken currently pays $0.23 per share quarterly for a yield of 1.54%.

Live entertainment company

Metropolitan Capital Advisors initiated a new position in Live Nation Entertainment (NYSE: LYV) during the first quarter, buying stock and long call options in the name. The $3 billion company is composed of four segments: Ticketmaster.com, Live Nation Concerts, Artist Nation Management, and Media/Sponsorship.

The Live Nation story may be one of the best opportunities in the market today. Management laid out a compelling three-year growth outlook to increase its show audience by 5 million, a figure that could boost operating income as much as 35%.

Initial optimism was found in May’s first quarter results, as concert attendance grew 12% in the three months ending March 31. Longer-term results are likely to be even better. Live Nation is introducing a new ticket platform which could save $0.35 per ticket, and increased usage of mobile apps should drive a higher gross margin.

On May 20, Live Nation announced a joint venture to expand its international presence. The company now operates five offices in Hong Kong, Beijing, Shanghai, Seoul and Tokyo. International attendance at Live Nation concerts grew to 3.04 million during the first quarter, compared to 5.06 million North American attendees.

Foolish takeaway

Whenever Karen Finerman speaks, I pay attention. It’s a powerful resource to get the opinion of a Wall Street manager with decades of experience. And with more than $100 million in AUM, Finerman has demonstrated her ability to “call the shots” in the difficult game called stock market.

Readers should consider Live Nation Entertainment, Timken Company, and WellPoint based on their own portfolio strategy and risk profile. And don’t forget about Karen’s new book, Finerman’s Rules.

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John Macris has no position in any stocks mentioned. The Motley Fool recommends WellPoint. The Motley Fool owns shares of WellPoint. 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!

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