Billionaire Bruce Kovner’s Cheap Stock Picks Include General Motors

A slightly less reliable, but also cheaper, bank was another of Kovner’s favorite stocks: JPMorgan Chase & Co. (NYSE:JPM), which Caxton owned 1.1 million shares of at the end of 2012. JPMorgan Chase is priced right about at book value, and at a slight discount to Wells Fargo at 10 times its trailing earnings. Of course, the bank does not share its peer’s reputation though it would generally be considered safer than say Citigroup or Bank of America. Business has also been doing well; in the fourth quarter of 2012 JPMorgan Chase experienced nearly 20% revenue growth versus a year earlier.

The fund increased its holdings of Ford Motor Company (NYSE:F) to 3.4 million shares as well as buying GM, showing that it is generally bullish on autos. The stock posts trailing and forward P/Es of 9 and 8, respectively, so it is valued about the same as GM on the basis of trailing earnings but analysts are forecasting lower growth. Still, even the cooler projections generate a five-year PEG ratio of less than 1 and any general recovery of the auto market would be expected to benefit both companies.

Regions Financial Corporation (NYSE:RF), a regional bank with a market capitalization of $11 billion, rounded out our list of Caxton’s cheap stock picks. This bank carries a significant discount to the book value of its equity: the P/B ratio is 0.7. Regions is highly sensitive to the broader economy, as shown by the stock’s beta of 2.3. The trailing P/E here is 11 so the valuation in earnings terms is well in line with the larger banks we’ve discussed even though the market value is well below what Regions estimates its assets are worth.

Disclosure: I own no shares of any stocks mentioned in this article.