Michael Price founded MFP Investors in 1998, two years after selling Heine Securities for $670 million. We have gone through the fund’s 13F filing from the end of September; though that’s obviously some time ago, our analysis of MFP’s filings indicates that most positions don’t change much over the course of a quarter and so many of them are probably still active. In any case we can screen for value stocks that the fund reported owning and take a closer look to see if these companies should be researched further. Here are five of Price’s top ten stock picks from MFP’s most recent 13F filing (see more stocks the fund owned); each of these five stocks had both trailing and forward P/E multiples of 15 or lower.
MFP increased its stake in Intel Corporation (NASDAQ:INTC) by 23% to a total of 1.6 million shares, making the chipmaker the second largest holding by market value disclosed in the 13F. The industry has been doing poorly recently, and while Intel has not been hit has hard as peer AMD the company did report a 14% decline in earnings for the third quarter of 2012 compared to the same period in 2011. Renaissance Technologies, founded by billionaire Jim Simons, owned 19 million shares at the end of September (check out Renaissance’s stock picks). Intel trades at 11 times consensus 2013 earnings, and may be worth further consideration.
The fund kept its position in Alleghany Corporation (NYSE:Y) the same at about 90,000 shares. Alleghany is a $6 billion market cap insurance company; the forward P/E here is 15, and the stock also trades at a slight discount to book value with a P/B ratio of 0.9. Our database of 13F filings shows that Marty Whitman’s Third Avenue reported a position of about 290,000 shares. In addition, the stock has a beta of 0.6 and so Alleghany isn’t very sensitive to broader market conditions. We might compare it to its peers, as we might be able to find cheaper stocks in the same industry.
Another insurance company, Symetra Financial Corporation (NYSE:SYA), was one of the largest holdings in MFP’s portfolio (though Symetra is a life insurer as opposed to property and casualty insurance as with Alleghany). The stock is up 48% in the last year, and Symetra reported a double-digit earnings growth rate in its most recent quarterly report compared to the same period in the previous year. Highfields Capital Management, which is managed by Jonathon Jacobson, had 4.2 million shares in its portfolio (find Highfields’ favorite stocks).The forward P/E of 9 and P/B ratio of 0.5 suggest that it could be a good value.
Price’s position in ConocoPhillips (NYSE:COP), which currently carries trailing and forward P/Es of 7 and 10, respectively, was unchanged during the third quarter at about 350,000 shares. Warren Buffett’s Berkshire Hathaway cut its stake but still had $1.4 billion invested in ConocoPhillips and this made it one of the holding company’s top ten picks (see more stocks Warren Buffett likes). The dividend yield is high, so it may be of interest for income investors, but revenue and earnings were down by over 10% in Q3 versus a year earlier and it might be better to look at slightly more expensive oil companies.
Becton, Dickinson and Co. (NYSE:BDX) was the tenth largest 13F holding by market value, at a little over 240,000 shares. Generation Investment Management, co-founded by Al Gore and former Goldman Sachs Asset Management head David Blood in 2004, was another major holder of the stock. Becton Dickinson provides medical devices and instruments. The company’s fiscal year ended in September; in the fourth quarter of that fiscal year, revenue and net income were down very slightly. The stock is valued at 14 times trailing earnings, and Wall Street analysts expect that Becton Dickinson will improve on the bottom line in the next couple years as the forward P/E is a little lower than that figure.
