Billionaire James Dinan’s High Upside Potential Picks Include AIG

Page 1 of 2

Value investors know that low price-to-earnings multiples are a good place to start looking for good values, but this metric gives no weight to a stock’s growth potential. In order to consider future growth at the cost of less accuracy, we can consider the PEG ratio as well: this metric combines the P/E multiple and analyst expectations of earnings growth rates. As such it’s one way to measure the upside potential- though not necessarily the actual upside- of a stock, with lower values corresponding to lower multiples or higher growth rates. Here are five stocks which billionaire James Dinan’s York Capital Management had at least $70 million invested in at the end of the third quarter of 2012 (some of these picks may no longer be large positions in his portfolio, but we’re looking for suggested stocks to look at rather than to copy Dinan’s portfolio) and which had low PEG ratios.

YORK CAPITAL MANAGEMENT

Dinan’s top pick was American International Group, Inc. (NYSE:AIG) with a position of 8.1 million shares. AIG was one of the most popular stocks among hedge funds in the third quarter (see the full rankings) and the negative sentiment towards the company has helped place it at a very interesting valuation. AIG trades at about half the book value of its equity- we think a more modest discount would be appropriate- and 10 times forward earnings estimates. Analyst estimates imply a PEG of 0.4 and we think that it’s worth considering AIG as a value play.

York reported a position of 13 million shares in Hertz Global Holdings, Inc. (NYSE:HTZ). The $7.3 billion market cap car and equipment rental company is exposed to the broader economy with a beta of 2.7, indicating that its stock price is very responsive to changes in market indices (this is likely more due to the equipment rental business). There’s also considerable short interest in Hertz despite 18% earnings growth in the third quarter of 2012 versus a year earlier and a forward P/E of 10. The PEG ratio is 0.3, though it’s possible that the sell-side is being overly bullish. Jeffrey Tannenbaum’s Fir Tree initiated a position of 5 million shares.

See three more high upside potential stocks:

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!