“Buy value stocks” is common investment advice, but it’s often difficult to tell whether a low-priced stock is that way because the market doesn’t recognize its potential or because the market has in fact accurately determined that the company is in decline. We thought that we would look at the list of stocks that billionaire Ken Fisher’s Fisher Asset Management reported owning in its most recent 13F filing (see the full list of Fisher's stock picks) and take a closer look at those meeting traditional value criteria. Here are the five largest holdings in Fisher’s portfolio with trailing and forward P/E multiples of 13 or lower:
Cisco Systems, Inc. (NASDAQ:CSCO) was one of Fisher’s top five stock picks, as the fund increased the size of its position by 77% during the quarter to a total near 38 million shares. The company recently reported that in its first fiscal quarter (which ended in October) earnings were up 18% from a year earlier, but the market apparently thinks that these growth rates- or any growth at all really- is quite short lived as the trailing P/E is only 13. Renaissance Technologies, founded by billionaire Jim Simons, initiated a position in the stock during the third quarter (check out Renaissance's stock picks). We think that it’s worth taking a closer look at.
Fisher also bought shares of American Express Company (NYSE:AXP), closing September with close to 12 million shares in its portfolio. While the valuation looks cheap- the trailing and forward P/E multiples are 13 and 12, respectively- the company’s business was about flat last quarter versus the third quarter of 2011. American Express was one of hedge funds’ ten favorite financial stocks during the third quarter (see the full rankings) according to our database of 13F filings, but peer Capital One made the list as well, Discover is another value prospect, and of course Visa and Mastercard represent the credit services business as well. Those stocks might be better buys.