Billionaire Israel Englander’s Most Promising Stock Picks

Ocwen Financial Corporation (NYSE:OCN) was another of Millennium’s picks as the fund more than doubled the size of its position and owned 1.5 million shares at the end of September. Ocwen, a loan servicing company, reported revenue growth of 90% and earnings growth of 154% in the third quarter of 2012 compared to the same period in 2011. The trailing P/E is 40, but the sell-side expects continued high growth and so the earnings multiple based on expectations for 2013 is only 8. Billionaire Julian Robertson was also buying the stock (check out Robertson’s stock picks).

Another stock that’s more than doubled since a year ago and which Englander and his team liked was building materials company Eagle Materials, Inc. (NYSE:EXP). Eagle is best known for its cement business. Growth rates have been very high here as well, and more growth is priced in at the current valuation given the trailing price-to-earnings ratio of 65. The stock’s beta is 1.6, which is high but perhaps not as high as would be expected for a company so apparently tied to construction.

Millennium added to its position in United Rentals, Inc. (NYSE:URI), a renter of construction and industrial equipment. The economics of demand for the company’s equipment mean that United Rentals is very highly correlated to the broader market- the beta is 3.1- and it is a popular short target as well. Point State Capital had a large position in United Rentals at the end of September. United Rentals has a similar profile to some of these other companies we’ve discussed: double-digit growth rates of both revenue and net income in its most recent quarterly report from a year earlier, and trailing and 2013 P/Es of 68 and 10 respectively.

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