Billionaire James Dinan’s High Upside Potential Picks Include Apple Inc. (AAPL)

Citigroup Inc. (NYSE:C) was another of Dinan’s top picks- the 13F disclosed ownership of 2.7 million shares in the bank following a large increase in Q4- and with a five-year PEG ratio of 0.8 it qualifies as a stock with upside potential. Net income increased 25% in its most recent quarter compared to the same period in the previous year; however, we’d note that many other large banks look cheap including some other which have been strong performers recently. Citi’s P/B ratio is 0.7, so it is being priced lower than the book value of its equity as well.

Dinan and his team were adding shares of Apple Inc. (NASDAQ:AAPL) between October and December, closing 2012 with about 110,000 shares in their portfolio. Following the decline in its stock price Apple Inc. (NASDAQ:AAPL) carries trailing and forward P/Es of 11 and 9, respectively. There is a significant gap between market expectations (which look to be pricing in a decline in earnings, particularly considering Apple’s large cash position) and those of the sell-side where forecasts call for significant growth. Even underperforming Street numbers, then, could be positive for the stock.

York had 2.7 million shares of Chemtura Corp (NYSE:CHMT) in its portfolio at the beginning of January. Chemtura is a $2.1 billion market cap specialty chemicals and materials company. It’s another company whose stock price is sensitive to changes in broader market indices, with a beta of 2.5. Wall Street analysts are expecting high growth over the next few years: Chemtura trades at 21 times trailing earnings, but the forward P/E is only 11.

Popular stocks Apple and AIG are at least worth checking out, in our view, as market expectations are low enough that the companies have quite a bit of upside. Citi also looks interesting but we would want to compare it to other large banks including JPMorgan Chase and Wells Fargo. Chemtura and Hertz carry the risk of exposure to industrial activity and with their “upside potential” coming from high growth expectations rather than current value levels we would be more careful when researching those companies.

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