Reviewing 13F filings from hedge funds and other notable investors can lead to profitable investment strategies; we’ve shown, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about our small cap strategy). Because these filings disclose many of a fund’s long equity positions, they can also be mined for ideas in a variety of categories including stocks which meet traditional value criteria. We look at billionaire Ken Griffin’s Citadel Advisors’ most recent 13F for the end of December 2012 (see the full list of stocks Citadel reported owning) and here are five of its top picks which also post both trailing and forward price-to-earnings multiples of 15 or lower:
While a number of other hedge funds were selling Apple Inc. (NASDAQ:AAPL) in the fourth quarter of 2012- so many, in fact, that it lost its place as the most popular stock among hedge funds (AIG is the new #1)- Citadel doubled its equity holdings to over 1 million shares. Certainly the stock has been a poor performer, down over 20% in the last year while the market has risen. Investors are worried that even a growing tablet and smartphone market will not save Apple Inc. (NASDAQ:AAPL) from a decline in earnings as gross margins fall. Apple Inc. (NASDAQ:AAPL)’s trailing P/E is 10; as analysts are still bullish, its forward earnings multiple falls to 8.
Griffin and his team were also buying Marathon Oil Corporation (NYSE:MRO), a $23 billion market cap energy company with global exploration and production activities (including unconventional oil from the Alberta oil sands). The stock carries trailing and forward P/Es of 15 and 10, respectively, showing that the valuation is moderate based on existing business and that analyst consensus is for considerable growth over the next two years. Fellow billionaire Steve Cohen’s SAC Capital Advisors added a small number of shares in the fourth quarter and closed December with 3.1 million shares (check out Cohen’s stock picks).
Read on for three more cheap stocks Griffin likes, including one Warren Buffett likes as well: