Ken Heebner’s High Upside Potential Stock Picks Include Citigroup Inc (C)

Page 1 of 2

Editor’s Note: Related tickers: Citigroup Inc (NYSE:C), Whirlpool Corporation (NYSE:WHR), Delta Air Lines, Inc. (NYSE:DAL), Rock-Tenn Company (NYSE:RKT), Hertz Global Holdings, Inc. (NYSE:HTZ)

In May, Capital Growth Management, managed by Ken Heebner, filed its 13F for the first quarter of 2013 with the SEC. Even with the inherent delay which comes with 13F filings, we’ve found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year, and we think that more strategies are possible as well. Another common use of these filings is to screen them according to a variety of investment criteria- not to blindly imitate top investors, but to further refine their initial investment ideas. The PEG ratio takes into account both the P/E multiple and analyst expectations of future earnings growth rates. While analyst forecasts are often inaccurate, this is at least one way to account for both a stock’s growth prospects and value status. Here are Capital Growth’s five largest holdings as of the end of March in stocks with five-year PEG ratios less than 1 (or see the full list of Heebner’s stock picks).

Leading our list is the asset management firm’s largest holding at the end of Q1, Citigroup Inc (NYSE:C). Citigroup Inc (NYSE:C), as it happens, was one of hedge funds’ ten favorite stocks during the quarter (check out our full top ten list). Analyst expectations for next year imply a forward earnings multiple of 9, with continued improvements on the bottom line beyond that points resulting in a PEG ratio of 0.9. Citi also should be noted for trading at a discount to the book value of its equity, and in fact its earnings have been up strongly going by recent reports.

Heebner and his team reported a position of 1.8 million shares in Whirlpool Corporation (NYSE:WHR). The household appliance company has more than doubled in price in the last year, with many investors seeing it as a way to play a rising housing market. The sell-side agrees, with a PEG ratio of only 0.5. With earnings more than doubling in the first quarter of 2013 versus a year earlier (though we’d note this came entirely through higher margins), the trailing P/E is 18 which would certainly be an attractive valuation if we were confident high growth would continue.

Capital Growth Management cut its stake in Delta Air Lines, Inc. (NYSE:DAL) by 34% but still owned 7.3 million shares at the beginning of April. Airlines have done well over the last year as bulls have hoped that the merger of US Airways and American, by reducing competition, will increase companies’ pricing power. Still, a general unease among investors for getting into the traditionally prone to bankruptcy industry has left valuations arguably in value territory. Consensus forecasts for 2014 imply a forward earnings multiple of only 6.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!