Billionaire and founder of Citadel Investment Group – Ken Griffin – started out trading options in his college dorm room and now manages one of the largest hedge funds in the world. In reviewing Citadel’s most recent 13F filing, we have found five stocks that Griffin owns that can pop in the interim. These stocks have large upside potential, as determined by their long-term earnings growth expectations and current valuation, based on P/E ratios (check out Ken Griffin’s latest picks).
Qualcomm, Inc. (NASDAQ:QCOM) has a PEG of 1.0 and also pays a modest dividend yielding 1.6%. At a trailing P/E of 18x and a forward P/E of only 13x, Qualcomm is one of the great growth and value stories in the semiconductor industry – especially when compared to major peers Broadcom (26x trailing P/E) and Texas Instruments (21x trailing P/E). The semiconductor company is expected to see revenues up 25% in FY2013 due to increased demand for high-end chips.
The long-term demand for Qualcomm’s chipsets, meanwhile, will be a strengthening economy that should drive an increase in consumer spending, notably on smartphones. What we believe is one of the underappreciated growth drivers is Qualcomm’s newest chipset, Snapdragon, which gives the chipmaker exposure to the popular iPhone model that Intel previously had a stranglehold on. Billionaire George Soros is one of this tech company’s big-name supporters (check out George Soros’ new picks).
Citadel increased its Aflac Incorporated (NYSE:AFL) stake by 350% last quarter. This insurer has a dividend yielding 2.6% that is a payout of only 22% of earnings. Following the Japanese earthquake and tsunami, Aflac saw steep sales pressures due to the fact that over 70% of revenues are derived from the region. Sales are now expected to rebound in the high single digits from 2012 and 2013, with U.S. sales helping carry the company – up 5.2% year over year in 3Q.
From a valuation standpoint, Aflac is attractive with a PEG of 0.8 and trading at a mere 9x earnings. When looking at Aflac’s zero-debt balance sheet, strong dividend yield, and solid 5-year expected earnings CAGR (10%), it's easy to see why the company is one of Ken Griffin’s deep value-high upside picks.
GNC Holdings Inc (NYSE:GNC) saw Citadel increase its stake in the vitamin and nutrition retailer by 80% in 3Q. GNC is the cheapest of Citadel’s five stocks listed here, trading at a PEG of only 0.7. This is due in part to the vitamin company’s industry-leading 5-year expected earnings CAGR of 22%. GNC trades – at a 16x P/E – well below top peer Vitamin Shoppe’s 29x earnings valuation. The specialty retailer is also cheap on a P/S basis, at 1.4x compared to Vitamin Shoppe’s 1.9x. Jim Simons is one of GNC’s key investors alongside Griffin (see Jim Simons’ latest picks).
Continue reading to check out two of Ken Griffin’s most promising growth names…