Billionaire Louis Bacon’s Cheap Stock Picks Include Wells Fargo

U.S. Bancorp (NYSE:USB) was another low-multiple stock (the trailing and 2013 P/Es are 12 and 10, respectively) in Bacon’s portfolio. His fund owned 3.1 million shares at the end of September. Warren Buffett’s Berkshire Hathaway is another fan of US Bancorp, with over $2 billion invested in the company (check out Warren Buffett’s stock picks). We would note that there is a high premium to book value here, though obviously the company is monetizing its assets very well and has been increasing both its revenue and its earnings.

Another financial in Moore’s portfolio was Wells Fargo & Company (NYSE:WFC). Like US Bancorp, Wells Fargo has a higher market capitalization than the book value the company has reported for its equity, but the gap is smaller here and Wells Fargo is known as a safer and more reliable bank. It too has fairly low earnings multiples- a trailing P/E of 10, for example- as a result of good financial performance. Buffett also likes Wells Fargo, and large hedge fund D.E. Shaw added shares in the third quarter as well (research more stocks D.E. Shaw likes). We think that it and JPMorgan Chase are both worth a closer look.

Vale SA (NYSE:VALE) recently declined in price partly due to a writedown, and this has left the stock at 9 times earnings whether we are looking at trailing results or analyst consensus for 2013. The company provides basic materials, including iron ore, in Brazil. Cliff Asness’s AQR Capital Management was another fund reporting a significant position in Vale at the end of September. We would be concerned about Vale’s recent financial performance and its exposure to commodity prices, even though the multiples are low.

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