Occidental, Capital One, and More: Billionaire Israel Englander’s Cheap Stock Picks

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) was another of Millennium’s picks. The company may need to add “& Oil & Gas” to its name after its recent purchase of two oil and gas companies, which came at abnormally high premiums to where those stocks had been trading. Read our analysis of Freeport-McMoRan’s move into oil and gas. The stock looks cheap in terms of multiples but we’re quite wary of buying as the deal doesn’t look that beneficial. M&A tends to destroy shareholder value anyway, and we’re worried that management will be less focused as a batch of operations dedicated to different commodities joins the company.

The fund added to its stake in electric and natural gas utility PPL Corporation (NYSE:PPL). PPL, which operates in the U.S. and U.K., pays a dividend yield of about 5% and has a beta of only 0.1. As a result it might be a good choice for income investors, or those looking to shield their portfolio from negative economic surprises. However, its revenue and earnings have been down and even with a forward P/E of 12 it’s probably wise to evaluate the company more closely as well as to consider other large utilities.

Englander also liked Capital One Financial Corp. (NYSE:COF), as Millennium more than tripled the size of its position in the company to just over 1 million shares. Capital One has good value characteristics- not only does it trade at 10 times trailing earnings, it is also priced at a discount to the book value of its equity with a P/B ratio of 0.9. Earnings were 45% higher in the third quarter than a year earlier, and while we’d expect that growth rate to slow dramatically even a small amount of improvement next year would leave the stock well undervalued.