Seth Klarman’s High Upside Potential Stock Picks: Oracle (ORCL) and More

Page 1 of 2

BAUPOST GROUPSeth Klarman, manager of the large hedge fund Baupost Group, wrote a book on investing entitled Margin of Safety in 1991. He has since become such a closely followed value investor that copies of the book have sold for $1,500. We have gone through Baupost’s recent 13F filing (see Klarman’s favorite stocks)and picked out some stocks which have high upside potential. We measure this by looking at each stock’s PEG ratio, which combines the P/E multiple with estimated earnings growth rates from Wall Street analysts. Keep in mind: these aren’t stocks with high upside, as analyst estimates could be far off, but with high upside potential. Here are four stocks with low PEG ratios and which Baupost had at least $50 million invested in according to the 13F filing:

The fund owned 15 million shares of Genworth Financial Inc (NYSE:GNW), which offers life insurance and other insurance products. At a market capitalization of $3.6 billion, Genworth trades at 10 times trailing earnings. While revenue was about flat in the third quarter compared to the same period in 2011, the sell-side expects significant earnings growth in the coming years: the forward P/E is 6 and the PEG ratio is 0.7. Billionaire Eddie Lampert’s ESL Investments had just over 12 million shares in its own 13F portfolio (check out Lampert’s stock picks). Even though we’re skeptical of the growth expectations, we think that the trailing earnings multiple is low enough that the company is worth a look.

Baupost initiated a position of 4.1 million shares in Rovi Corporation (NASDAQ:ROVI), a provider of interactive program guides and other digital entertainment technology products. The stock is down 36% in the last year as the business has struggled (sales were down 7% last quarter versus a year earlier). Analysts insist that the company is still a good value at the current price, which is only 8 times consensus earnings for 2013 and implies a PEG ratio of 0.8. Glenview Capital, which is managed by former Omega Advisors trader Larry Robbins, more than doubled its own stake in the company last quarter (find more stocks Glenview was buying).

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

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!