Hedge Fund Manager John Griffin Bought This Stock

BLUE RIDGE CAPITALAccording to a 13G filed with the SEC, Blue Ridge Capital has acquired a total of 6.7 million shares of Owens Corning (NYSE:OC). Owens Corning is a $3.9 billion market cap materials company which provides composites and building materials such as glass fiber. Blue Ridge, managed by Tiger Cub John Griffin (Griffin, in fact, was Julian Robertson’s second in command at Tiger Management before launching Blue Ridge in 1996), had initiated a position in the stock during the second quarter and owned 2.6 million shares at the end of June. Find more stock picks from Blue Ridge Capital.

In theory, Owens Corning should be able to benefit from a continued upturn in the housing market (as well as in general from higher construction activity). However, during the second quarter, sales actually came in 4% lower than in the second quarter of 2011. With operating expenses actually up slightly, earnings were cut in half. With the company taking losses in the first quarter of 2012, the first half of the year has actually generated 6 cents per share of losses compared to 81 cents per share of earnings in the same period in the previous year. Cash flow from operations for the first half of 2012 was slightly negative as well.

With these poor results in the books, the company currently trades at 24 times trailing earnings. We would generally consider that a high multiple for a struggling company, even one which has some growth opportunities from construction activity. Wall Street analysts expect quite a bit of upside there, and their consensus estimate for 2013’s earnings per share is $2.16; that implies a forward P/E of 15, but depends on better results in the next several quarters than we’d want to depend on.

Other hedge fund managers also liked Owens Corning during the second quarter. Billionaire David Tepper’s Appaloosa Management increased its own stake in the company by 54% to a total of 2.3 million shares; the fund had initiated its position during the first quarter of 2012 (see more stocks that Appaloosa liked). Maverick Capital, managed by Lee Ainslie, also bought shares and closed June with 4.3 million shares in its portfolio (research more stocks that Maverick owned).

PPG Industries, Inc. (NYSE:PPG) is one peer for Owens Corning; while considerably larger at a market cap of about $18 billion, its operations include glass fiber production. Its forward P/E of 15 matches Owens Corning’s, but PPG doesn’t require as much improvement at its business to hit that figure as its trailing P/E is 20. PPG also grew its earnings by 9% on flat revenue in the third quarter compared to a year ago, and seems to be in a better position as a company.

Peers in the general building materials industry include aggregates provider Martin Marietta Materials, Inc. (NYSE:MLM), gypsum products company USG Corporation (NYSE:USG), and aggregates and concrete company Vulcan Materials Company (NYSE:VMC). USG and Vulcan had little change in revenue in their most recent quarter versus a year earlier; while Martin Marietta’s sales were up, its earnings growth was modest. These companies look like even worse values on a quantitative basis than Owens Corning does. USG and Vulcan are unprofitable on a trailing basis, with forward P/E multiples above 60; Martin Marietta trades at trailing and forward P/E multiples of 64 and 26, respectively. Even with similar optimism from analysts, these peers don’t look as attractive as Owens Corning.

We think it makes more sense to buy Owens Corning than some other building materials companies. PPG, however, looks like a better buy as it is less dependent on improving its business over the next year to justify its valuation.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
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

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!