13F filings allow investors to see some of the long equity positions owned by hedge funds and other major investors several weeks after the end of the quarter. These shouldn’t necessarily be taken as what the managers are thinking right now, but can still be useful sources of names for further research. We can also screen these stock picks for characteristics that we like, such as P/E multiples or PEG ratios if we want to find value stocks or those whose growth potential may be high enough to make them undervalued. Here are four stocks that billionaire Bruce Kovner’s Caxton Associates had over $15 million invested in at the end of September (according to the fund’s 13F filing) with low PEG ratios:
Insurer American International Group, Inc. (NYSE:AIG) stands out for a PEG ratio of .43, which is a result of the market’s skepticism of the company- the stock trades at only half of book value, and at 10 times forward earnings estimates- and expectations of solid earnings growth over the next several years. Caxton increased its stake in AIG by over 300% last quarter to a total of 8.7 million shares, and similar optimism from other funds gave AIG a place as one of the most popular stocks among hedge funds (see the top ten most popular stocks). We like the stock at this price; it certainly should have some discount to book value, but we think that the market is giving it too much of one.
Kovner and his team also liked MetroPCS Communications Inc (NYSE:PCS), with 1.6 million shares in their portfolio at the end of September. Fellow billionaire John Paulson initiated a position in the wireless phone company during the third quarter, making it one of his ten favorite stocks (check out Paulson’s stock picks). Analyst consensus for 2013 implies a forward P/E of 13, and a PEG ratio of 0.7; however, revenue growth was light in the third quarter compared to the same period in 2011. It might not be as high a priority.