We primarily track 13F filings from hedge funds and other notable investors as part of our work researching investments strategies (for example, we have found that the most popular stocks among hedge funds earn an average excess return of 18 percentage points per year). However, we also like to see what successful fund managers’ favorite stocks are and treat this information similarly to a stock screen. We can also combined ownership by a top manager with other screens including a low PEG ratio (which incorporates both the price-to-earnings multiple and analyst consensus earnings growth rates). Assuming the analysts are correct in their forecasts, the PEG is one way to measure a stock’s upside potential. Here are five stocks with low PEG ratios that billionaire James Dinan’s York Capital Management owned at the end of December (or see the full list of Dinan’s stock picks):
The fund’s top single-stock position was American International Group Inc (NYSE:AIG), reporting a position of 8.8 million shares. Between a number of hedge funds buying AIG last quarter and those selling Apple Inc. (NASDAQ:AAPL), AIG became the most popular stock among hedge funds (find more of hedge funds’ favorite stocks). The insurer trades at a significant discount to the book value of its equity with a P/B ratio of 0.6. It also looks potentially cheap in earnings terms, with the current price representing a forward P/E of 9.
See three more stocks Dinan likes with low PEG ratios, including Apple:
