Cliff Asness’s Cheap Stock Picks Include Apple Inc. (AAPL)

The 13F disclosed that the fund had increased its holdings of CF Industries Holdings, Inc. (NYSE:CF), a $12 billion market cap fertilizer company, by 70% to a total of about 570,000 shares. In the fourth quarter of 2012 CF’s net income increased versus a year earlier despite a 14% decline in revenue; that is impressive, though we would be a bit concerned with how sustainable the company’s earnings would be. Analyst consensus implies a forward P/E of 8. Over the longer term CF may benefit from increased agriculture demand.

Northrop Grumman Corporation (NYSE:NOC) rounds out our list of cheap stocks that AQR owned at the end of 2012. The aerospace and defense company would be expected to see a decline in business as a result of cuts to U.S. military spending, though it’s possible that it would be able to cut costs as well. Northrop Grumman trades at 9 times earnings, whether we consider trailing results or projections for 2014, and this is in line with the multiples of its industry peers. There is a significant dividend yield here as well, at 3.2%, though we’d note that Lockheed Martin’s yield is 5%.

Overall these cheap stocks all look worthy of at least some further research. Northrop Grumman and Apple are trading at low multiples due to concerns about their developing business conditions- and in the case of Apple in particular we aren’t quite ready to write off the days of earnings growth. JPMorgan Chase and Chevron are certainly good value prospects, though we aren’t sure they are better than their peers (we’d note that Exxon Mobil and Wells Fargo are two more of AQR’s largest holdings, but are just outside the valuation criteria we set). CF is also looking into, though with that company we would want to be thinking longer-term and of course reviewing its peers as well.

Disclosure: I own no shares of any stocks mentioned in this article.