Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Tontine Asset Management’s Top Stock Picks

Jeffrey Gendell’s Tontine Asset Management took large losses due to the financial crisis, but after shutting several funds the firm- which operates as an investor in stocks which are tied to attractive global macro trends- continues to manage capital and report many of its long equity positions in 13F filings. It recently released its applicable holdings as of the end of September, and while investors shouldn’t necessarily buy everything that Gendell or any other fund manager likes we think that these filings can serve as a source of ideas for further analysis. Read on for our quick take on some of Tontine’s top picks and compare them to previous filings.

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)

The top pick in the fund’s portfolio is a play on housing: Patrick Industries, Inc. (NASDAQ:PATK). The $200 million market cap company (it has $1-2 million in daily dollar volume) provides components such as countertops and cabinet doors for builders of homes and RVs. The stock is up an incredible 700% in the last year, and Tontine is taking some profits as it reported owning 4.2 million shares at the end of September compared to 4.7 million shares three months earlier. Revenue and earnings last quarter were each up about 45% from the third quarter of 2011.

Exide Technologies (NASDAQ:XIDE) was another smaller cap stock (market capitalization of about $220 million) with sufficient volume that we think investors wouldn’t have to worry about the liquidity of an investment. The fund cut its stake slightly here but still owned 6.3 million shares at the end of the second quarter. Exide provides lead-acid batteries to the auto industry and for industrial functions. It’s unprofitable on a trailing basis, and revenue has been down, so even with a forward P/E of 4 it might not be a good buy particularly compared to more stable auto parts and auto-related companies.

Chemicals company Innospec Inc. (NASDAQ:IOSP), whose business focuses on fuel additives, is another of Tontine’s favorite stocks. The P/E multiples look quite good- the company is valued at 10 times trailing earnings and 8 times analyst consensus for 2013- and in terms of enterprise value Innospec carries an EV/EBITDA multiple of 5.5x. It might be a value stock, though like many other chemical companies its revenue has been down slightly and we would want to examine the financials more closely before recommending an investment.

Gendell and his team liked Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) during the third quarter, increasing the holdings of the large basic materials company that is generally seen as a stand-in for global growth and Chinese growth in particular. Due to poorer pricing, the company had both its revenue and earnings come in considerably lower last quarter than a year ago. It does look fairly cheap at a trailing P/E of 13 and a dividend yield of 3.3%; while we’d generally be wary of the commodity price risk ourselves, we know that a number of investors are looking for just that and may find an equity more appealing than an ETF or futures trading. We looked at Freeport-McMoRan last month.

Tontine also took a more aggressive position in Citigroup Inc. (NYSE:C). The bank’s stock price is up this year, along with many other financials, but it still looks cheap compared to the book value of its equity with a P/B ratio of 0.6. Citi experienced steep drops in both top and bottom lines last quarter relative o what the company had done in Q3 2011, though Wall Street analysts expect that it will have a considerably better 2013. Specifically, their projections for next year’s earnings imply a forward P/E of 8. We might not be quite that optimistic, and think that there may be better opportunities in the banking industry. Read our analysis of Citigroup, including our view on what large banks might be more undervalued.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.