Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

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

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...
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 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!