SM Energy Co. (SM), Penn National Gaming, Inc (PENN) Among $2 Billion Balyasny Asset Management’s Small Cap Picks

According to the 13F, Balyasny and his team were buying Newfield Exploration Co. (NYSE:NFX) between October and December, closing 2012 with 2.9 million shares in their portfolio. Newfield Exploration Co. (NYSE:NFX) is another oil and gas exploration and production company; adjusted earnings have come in below expectations the past few quarters, and the business has been forced to record special items. Wall Street analysts expect Newfield Exploration Co. (NYSE:NFX) to recover, and as a result it trades at only 8 times forward estimates, but we would not want to be too dependent on their optimism.

Balyasny more than doubled its holdings of International Game Technology (NYSE:IGT), a $4.3 billion market cap provider of gaming software and technology. International Game Technology (NYSE:IGT) experienced strong growth on both top and bottom lines in the fiscal quarter ending in December (the first of its fiscal year) from a year ago, and it is valued at a discount to Penn National Gaming, Inc (NASDAQ:PENN) at trailing and forward P/Es of 17 and 12, respectively. The sell-side then expects further growth over the next several years, with a five-year PEG ratio of 0.9.

We think that International Game Technology (NYSE:IGT) actually looks somewhat interesting, though we would want to be more confident in its continued growth. Penn National Gaming, Inc (NASDAQ:PENN), on the other hand, appears overvalued if anything. The E&P companies- and we can throw in Walter for that matter- seem quite speculative, dependent on either a strong improvement in conditions in their respective commodity markets or on acquisitions; neither of those seems like a good investment thesis at this time.

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