AIG, BRK, HHC, DLIA, AAPL: Whitney Tilson’s Top Five

Whitney Tilson launched T2 Partners in 1999 and has returned 177% on a cumulative basis since then, compared to the S&P 500’s 36%. Tilson graduated from Harvard with an MBA in 1994 and takes the approach that the stocks he invests in are deep value plays, and broken to some degree. We have outlined his top five holdings according to his most recent 13F filing with the SEC; each of these picks presents investors with a solid value opportunity. See Whitney Tilson’s entire portfolio here.

American International Group, Inc. (NYSE:AIG) is Tilson’s top stock holding per his latest 13F filing after he increased his stake 1,500% last quarter. With plans to sell over 90% of its airline-leasing unit – ILFC – we believe the insurer is taking positive steps to focus more on its core operations. AIG appears undervalued by various standards, trading at a P/E of under 3x, which is much lower than the industry average of 16x earnings.

On a P/B basis AIG is only at 0.6x, where the industry is 0.9x. The insurance giant also trades at a mere $35, while its book value comes in around $70. Beyond just the undervalued shares is the fact that AIG has very impressive growth prospects. This includes the recent joint venture to sell insurance products in China. This in part will help drive earnings over the next five years to meet the sell-side’s expected 18% annual growth rate.

The U.S. Treasury’s interest in AIG has also declined rather steadily since the start of the year, and now rests at 22%. The federal government’s $18 billion sale in September moved its $182 billion bailout into positive territory for first time since 2008. Billionaire George Soros also took notice of AIG last quarter, taking a new position that made the insurer Soros’ top stock holding (check out George Soros’ latest picks).

After Tilson increased his stake by 1,750% last quarter, Berkshire Hathaway Inc. (NYSE:BRK.B) is now his second largest stock holding and makes up nearly 4.5% of his 13F portfolio. Berkshire is expected to grow revenues by upwards of 7% by the end of this year, driven by solid growth in Berkshire’s largest unit – insurance.

Organic revenues from the insurance unit are expected to grow by 8% this year, due to market share gains via Geico. Given Berkshire’s conglomerate structure, it is virtually impossible to ascribe a peer to the company, but it does trade in line on a P/E basis with its own historical average.

On the surface, Berkshire might not appear to be a value-play in the conventional sense, but we believe that the company is poised to make another key acquisition, having amassed almost $50 billion in cash over the past few quarters. Billionaire Warren Buffett is one of the top managers that we track and still has an integral part in the company’s management process(check out Warren Buffett’s newest picks here).