Billionaire Steve Cohen’s Most Promising Stock Picks

The fund cut its stake in Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) but still reported 4.9 million shares of the $3.2 billion market cap cancer drug developer in its portfolio. As a development stage company Ariad is expected to be unprofitable when its 2012 numbers are fully in as well as for the current year, but the stock is up 36% since a year ago as investors have become more optimistic about its prospects. However, we think that we would avoid it for now. Billionaire Dan Loeb’s Third Point also had a position in the stock though he was selling as well (find Loeb’s favorite stocks).

Visteon Corporation (NYSE:VC), a provider of auto components including climate and electronics systems, was another midcap stock in SAC’s portfolio as the fund owned 2.6 million shares. A number of insiders have been buying Visteon (see a history of insider purchases at Visteon), which can signal confidence in the company. The P/E based on 2013 earnings estimates is 15, though the stock is highly exposed to the broader economy (the beta is 2.4) and revenue and earnings have been down. The consensus insider buying makes it worth a look, but we would need quite a bit of convincing considering Visteon’s recent financial performance.

Cohen and his team had about 4 million shares of NCR Corporation (NYSE:NCR), a provider of ATMs and other self-service kiosks. Greenlight Capital, managed by billionaire David Einhorn, had NCR as one of its ten largest single-stock holdings at the end of the third quarter (research more of Einhorn’s favorite stocks). This is another stock where Wall Street analysts see considerable upside: the current price is 10 times expected earnings for this year and the five-year PEG ratio is 0.8. We think that value investors should be considering this stock as well.