Billionaire Howard Marks’ Cheap Stock Picks Include GM

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Earnings multiples are very basic value metrics, but we think they are still useful in the sense that stocks with low P/Es can be a good place to start looking for undervalued stocks. We can refine the “screen” implied by low earnings multiples further by looking through filings from top investors and seeing which stocks they own have low multiples. Oaktree Capital Management, which is managed by billionaire Howard Marks, has a number of debt investments but also reports many of its long equity positions to the SEC in 13F filings. Here are four stocks which Oaktree had over $10 million invested in according to its most recent 13F (see more stock picks from Howard Marks) and which had trailing and 2013 P/E multiples of 12 or lower:

Auto parts company Delphi Automotive PLC (NASDAQ:DLPH) was one of the top picks in Oaktree’s portfolio as the fund owned over 14 million shares. Fellow billionaire John Paulson cut his fund’s stake in Delphi but Paulson & Co. still owned over 25 million shares at the end of September (check out Paulson’s favorite stocks). Delphi focuses on providing components related to the electrical, electronic, and powertrain systems. The stock carries trailing and 2013 earnings multiples of 10 and 9, respectively; analysts are optimistic about Delphi’s future and so the five-year PEG ratio, which takes the expected earnings growth rate into account, is a quite low 0.6. The company’s business has been about flat despite a poor auto market and we think that investors might want to consider it further as a value opportunity.

OAKTREE CAPITAL MANAGEMENTThe fund also had First Bancorp (NYSE:FBP) as one of its five largest holdings, with a position of over 50 million shares in the roughly $1 billion market cap Puerto Rico-focused bank. The stock trades at a significant discount to book value, with a P/B ratio of 0.7. The current-year P/E is 12, which is a little less attractive particularly when we look at the earnings multiples of larger banks. We’d also note that the stock has a high beta, at 3.1. It might be better to look at megabanks such as JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Company (NYSE:WFC).

GM and a grocery store rounded out the list:

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