We like to analyze 13F filings from hedge funds as part of our research into investment strategies; for example, we have found that the most popular small cap stocks among hedge funds produce an average excess return of 18 percentage points per year (learn more about our small cap strategy). We can also look at individual filings and see what a well-known hedge fund manager’s favorite stocks were in a number of categories, including “cheap stocks” as in those with low earnings multiples. These can sometimes provide good ideas for investors to research further. We went through billionaire Steve Cohen’s SAC Capital Advisors’ most recent 13F (see the full list of Cohen's stock picks) and here are his five largest holdings in stocks with both trailing and forward P/E multiples less than 16:
The fund increased its holdings of Superior Energy Services, Inc. (NYSE:SPN) by 25% to a total of 7.7 million shares, making the $4.1 billion market cap drilling equipment and services company (which has a focus on offshore drilling) one of its ten largest stock holdings. Fellow billionaire Ken Griffin’s Citadel Investment Group was also buying Superior (find Griffin's favorite stocks). Wall Street analysts are much more bullish on Superior than the market: the stock’s trailing P/E is only 11, but consensus implies a forward P/E of 9 and a five-year PEG ratio of 0.6. We’d be interested in learning more about the company and seeing if investors are actually missing anything.
SAC owned 8.2 million shares of Symantec Corporation (NASDAQ:SYMC), a security software company with a market capitalization of $17 billion. Symantec’s revenues were up slightly last quarter compared to the same period in the previous fiscal year, but margins shrunk and as a result earnings actually fell 12%. With the stock price rising 40% in the last year, the stock’s trailing earnings multiple comes in at 15 which would generally be associated with modest earnings growth. Third Point, managed by billionaire Dan Loeb, reported a position of 6.7 million shares in Symantec (research more stocks Third Point owns).
Read on for three more stocks Cohen likes, including an oil major: