Billionaire Dan Loeb’s Top Stock Picks Include American International Group Inc (AIG)

While Loeb and his team cut their stake in American International Group Inc (NYSE:AIG) they still owned 13.5 million shares at the beginning of April. Apple (NASDAQ:AAPL) regained its place as the most popular stock among hedge funds during Q1, with AIG dropping to third place (find more of hedge funds’ favorite stocks). The stock still trades at a considerable discount to the book value of its equity, with a P/B ratio of 0.7. We think that this is in part because large institutional investors such as mutual funds continue to avoid the bailed-out insurer, potentially creating a value opportunity.

Third Point was a heavy buyer of International Paper Company (NYSE:IP) between January and March, with the filing disclosing ownership of 6.6 million shares. Loeb has written to his investors that he likes the company’s increasing focus on a consolidating containerboard industry. Wall Street analysts are also bullish, with consensus forecasts for 2014 implying a forward P/E of 10. The company’s revenue was up 7% last quarter compared to the first quarter of 2012. Billionaire Jeffrey Vinik was selling International Paper last quarter but still had 1.3 million shares in his portfolio (research more stocks Vinik owned).

News Corp (NASDAQ:NWSA) rounds out our list of Loeb’s top picks. The media and entertainment company is being split this year; we’ve noticed a number of billionaire fund managers, including Stephen Mandel of Lone Pine Capital and James Dinan of York Capital Management, buying in. Value investors are treating the situation similarly to a spinout, in which the involved companies often experience high returns as management becomes better able to focus on improving operations within each separated business. We’d also note that the forward P/E of 17 is fairly moderate when compared to industry peers.

Disclosure: I own no shares of any stocks mentioned in this article.