Billionaire Howard Marks’ Cheap Stock Picks Include GM

Marks and his team reported a position of 1.4 million shares in General Motors Company (NYSE:GM), which made our list of the most popular stocks among hedge funds for the third quarter of the year (see the full top ten list). Billionaire David Einhorn’s Greenlight Capital has been one of the most active promoters of the stock in the last several months (research more stocks Einhorn likes). GM is at least a candidate for value status at 11 times trailing earnings, and the sell-side is predicting considerable earnings growth here as well, but we’re more cautious: net income was down 13% in Q3 2012 compared to the same period in the previous year and the discount isn’t that large compared to more reliable- and faster growing- peers such as Honda Motor Co Ltd (NYSE:HMC) and Toyota Motor Corporation (NYSE:TM).

Oaktree owned 1 million shares of Safeway Inc. (NYSE:SWY), which trades at 8 times earnings whether we consider trailing results or expectations for 2013. That’s a cheap multiple indeed, and the five-year PEG ratio is 0.9 as the sell-side sees some earnings growth coming over the next several years. Safeway also pays a high dividend yield- 4% at current prices and dividend levels. However, the stock is down substantially in the last year and nearly 30% of outstanding shares are held short. Ray Dalio’s Bridgewater Associates, which is one of the largest and most successful hedge funds in the world, increased its stake by 41% between July and September to a total of 2.6 million shares (find Bridgewater’s favorite stocks).

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