Bank of America Likes Ford, Wal-Mart, and More; Billionaires Agree

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Bank of America is one of the best performing bank stocks this year, but its financial pick for 2013 is rival Citigroup Inc. (NYSE:C) at a price target of $45. Citigroup trades at a considerable discount to book value, at a P/B ratio of 0.6. While there’s good reason to be skeptical about the value of Citi’s assets, particularly as Europe looks weak, that does give the stock quite a bit of upside. Citi made our list of the most popular stocks among hedge funds for the third quarter (see the full rankings) as 94 funds and other notable investors owned the stock. However, we think that we’d prefer JPMorgan Chase & Co. (NYSE:JPM) at a small premium.

Representing the technology sector was one of hedge funds’ favorite tech stocks last quarter: networking company Cisco Systems, Inc. (NASDAQ:CSCO). The equities team placed a price target of $24 on the stock. Cisco’s revenue was up 6% last quarter versus a year earlier, and net income climbed 18%. Despite this decent growth performance and a dividend yield close to 3%, the stock trades at 13 times trailing earnings and only 9 times consensus for 2013. We’d lean towards agreeing with the analysts here; that seems like a good price.

The team’s energy pick isn’t as well known as the other stocks on this list: $18 billion market cap refining and marketing company Valero Energy Corporation (NYSE:VLO) has a price target of $46. Valero produces gasoline, jet fuel, other petroleum products, and ethanol. The stock is up 61% in the last year, and even with earnings actually not looking good last quarter that places it at a trailing P/E of 16. That’s likely a bit high for consideration as a pure value stock, and we’d want to see better performance on the bottom line before buying. Billionaire Stanley Druckenmiller initiated a position of about 860,000 shares in Valero last quarter (see more stocks Druckenmiller was buying).

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