Bullish Billionaire David Tepper Is Buying AIG, Goodyear, and More High Beta Stocks

Page 2 of 2

The Goodyear Tire & Rubber Company (NYSE:GT), because of its ties to auto demand, its high debt yield, and large pension obligations, has a beta of 2.1 but Tepper had bought shares between July and Septemberto finish the quarter with a position of 14 million shares. Billionaire Steve Cohen’s SAC Capital Advisors also liked Goodyear, reporting a position of 5.7 million shares (research more stocks Cohen liked). While revenue and earnings have been down, Wall Street analysts are very optimistic: their earnings estimates imply a forward P/E of 6 and a five-year PEG ratio of 0.2. It sounds appealing but we would be cautious of the company’s risks.

$9.6 billion market cap property and casualty insurer Hartford Financial Services Group Inc (NYSE:HIG) was another stock highly exposed to the broader economy, carrying a beta of 2. The fund owned 3.6 million shares at the end of September after having more than tripled the size of its position in the previous three months. Citadel Investment Group, managed by billionaire Ken Griffin, also added shares (find more stocks Griffin was buying). The market seems less bullish on the company: 11% of the outstanding shares are held short. However, with a low P/B ratio (0.4) and a low forward P/E (7) it’s worth considering on value terms.

During the third quarter Tepper initiated a position of 8.3 million shares in American International Group, Inc. (NYSE:AIG), making it one of the five largest positions in his 13F portfolio. AIG had made our list of the most popular stocks among hedge funds for the quarter (see what the ten most popular stocks were). The stock has a beta of 2. The insurer looks like a good value play to us, as it trades at half the book value of its equity- our view is that it should trade at a discount, but a smaller one than that- and 10 times consensus earnings for 2013.

Page 2 of 2