Another of the ten largest 13F holdings was Hartford Financial Services Group Inc (NYSE:HIG), which is primarily a property and casualty insurance company. The forward P/E multiple here is only 7, and with further growth expected from the sell-side the PEG ratio is 0.7. Appaloosa Management, which is managed by billionaire David Tepper, more than tripled the size of its own position during the third quarter to a total of 3.6 million shares (see Tepper’s favorite stocks). The stock is tied closely to the broader economy with a beta of 2, but we think that it could be worth further investigation.
Paulson initiated a position of almost 24 million shares in MetroPCS Communications Inc (NYSE:PCS), which also has a PEG ratio of 0.7. However, revenue growth at MetroPCS has been limited and the Street is actually currently projecting a decline in net income next year (with, presumably, a recovery to follow). Billionaire James Dinan’s York Capital Management also liked the stock, buying over 6 million shares last quarter (research more stocks Dinan was buying), but we think that we’d avoid it.
HCA Holdings Inc (NYSE:HCA), a large hospital company (the current market cap is over $13 billion), rounded out our list of Paulson’s high upside potential picks with a PEG ratio of 0.7. The stock is trading at only 8 times consensus earnings for 2013, so HCA would have to start underperforming expectations very soon to prove anything but undervalued at these prices. Of course, there is quite a bit of uncertainty as to how federal policies will affect the entire healthcare sector, including hospitals, and many investors may want to stay away from the stock for that reason alone. Glenview Capital increased its holdings of a number of hospitals, including HCA; the fund is managed by Larry Robbins, who had previously worked under Leon Cooperman at Omega Advisors. Find more stocks Glenview liked.