Karsch owned 2.2 million shares of Express Scripts Holding Company (NASDAQ:ESRX), which was the most popular healthcare stock among hedge funds at the end of September (see the full top ten list). The stock is priced for growth at 33 times trailing earnings, though in the third quarter of 2012 net income was up 21% from a year earlier. The forward P/E multiple is only 13 and the five-year PEG ratio is 0.8, suggesting that Wall Street analysts are very bullish in the company’s prospects.
American International Group, Inc. (NYSE:AIG) was another top pick with the fund more than doubling its position in the insurer. Other hedge funds loved AIG as well, and it earned the #3 spot in our rankings of the most popular stocks among hedge funds. Research more stocks hedge funds love. A good deal of investor sentiment still runs against AIG, but it trades at only about half the book value of its equity.
Karsch moved heavily into QUALCOMM, Inc. (NASDAQ:QCOM), closing the quarter with 1.6 million shares in its portfolio. This is another stock, like Express Scripts, where the buy case depends on growth: the trailing P/E is a good-but-not-great 18 but earnings have been up and the PEG ratio comes out to 1. Billionaire Ken Fisher’s Fisher Asset Management was another major holder of the stock (check out Fisher’s favorite stocks).
$15 billion market cap machinery company Ingersoll-Rand PLC (NYSE:IR) was Karsch’s fifth largest single-stock holding. Trian Partners, which is managed by billionaire Nelson Peltz, owned over 13 million shares and this made Ingersoll-Rand his top stock pick (find more stocks Peltz likes). The stock carries trailing and forward P/Es of 15 and 14, respectively, and we’d note that while there was an abnormal increase in net income in the third quarter compared to the same period in 2011 revenue actually came in lower.