Hedge Fund Manager Edgar Wachenheim’s Top Picks for 2013

Air Products & Chemicals, Inc. (NYSE:APD), an $18 billion market cap manufacturer of gases and performance materials, was another of the fund’s favorite stocks. The company has already announced its results for the December quarter, the first of its fiscal year: double-digit growth rates in both sales and net income from the first quarter of the last fiscal year. The trailing and forward P/Es are 16 and 14, respectively, and it may be worth looking into a company with that combination of value and financial performance. Diamond Hill Capital, managed by Ric Dillon, has also reported a large position in the stock. Air Products & Chemicals pays a dividend yield of almost 3%.

Drilling equipment and services company Baker Hughes Incorporated (NYSE:BHI) also was among Greenhaven’s top five picks as the fund increased its holdings to 7 million shares, up from 6.3 million shares three months earlier. The trailing price-to-earnings multiple here is 15, at about the same level as the two stocks we’ve previously discussed. We would note that Baker Hughes is tied to drilling activity, and with that in turn connected to the broader economy the stock’s beta is 1.7. William Gray’s Orbis Investment Management owned nearly 11 million shares at the end of Q3 2012 (find Orbis’s favorite stocks).

United Parcel Service, Inc. (NYSE:UPS) joined Fedex as shipping stocks among the fund’s favorite stocks. Renaissance Technologies, founded by billionaire Jim Simons, has reported adding shares in the third quarter of last year (research more stocks Renaissance was buying). UPS just announced an earnings miss for last quarter; it currently trades at 16 times what analysts had been expecting it to earn this year, and we imagine that figure would increase after revisions to sell-side guidance. Given that the current-year P/E had already been including a strong improvement on the bottom line from last year, it might be best to avoid the stock.

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