Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Billionaire David Shaw’s Cheap Stock Picks Include Apple Inc. (AAPL)

We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including billionaire David Shaw’s large hedge fund D.E. Shaw. While one way to make use of this information is to compile 13Fs and use them to develop investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year), we also like to screen managers’ top picks according to a number of criteria, including stocks whose valuations represent low multiples of their earnings. Read on for our thoughts on D.E. Shaw’s five largest holdings as of the end of March in stocks with both trailing and forward P/Es of 13 or lower, or see the full list of D.E. Shaw’s stock picks.

While many hedge funds have been selling Apple Inc. (NASDAQ:AAPL) since the beginning of the year, D.E. Shaw increased its own holdings during Q1 to a total of 1.7 million shares. Apple Inc. (NASDAQ:AAPL) actually regained its place as the most popular stock among hedge funds during the quarter (find more of hedge funds’ favorite stocks). Lower gross margins have pulled the company’s earnings down, and markets are valuing Apple Inc. (NASDAQ:AAPL) as if they expect that trend to continue: even with the company’s large cash hoard and plans to begin a large repurchasing program the trailing P/E is 11.

David ShawThe fund reported a position of 8.7 million shares in Wells Fargo & Co (NYSE:WFC) at the end of the first quarter of 2013. While many large banks have crushed the market’s performance over the last year, Wells Fargo & Co (NYSE:WFC) has outperformed the S&P 500 only slightly. With net income up 25% last quarter compared to the first quarter of 2012, the bank trades at 11 times trailing earnings and also offers a 3% dividend yield. Even with the stock valued at a considerable premium to the book value of the equity, there may be a value case here.

Shaw and his team disclosed ownership of 3.1 shares of Marathon Petroleum Corp (NYSE:MPC) a fairly recent spinout of Marathon Oil’s downstream operations. Oil and gas refining and marketing companies are seeing very low earnings multiples in the current market, and Marathon Petroleum Corp (NYSE:MPC) is no exception with both its trailing and forward P/Es clocking in at 8. With Wall Street analysts expecting business to grow over the next several years, the five-year PEG ratio is 0.7; we think Marathon and its peers are well worth considering as potential value plays.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.