Value Investor Seth Klarman’s Cheap Stock Picks Include BP

Klarman and his team had a large stake in News Corp (NASDAQ:NWSA). Many value investors like News Corp, and it was actually the most popular consumer services stock among hedge funds at the end of December. Its earnings multiples are not particularly high as is compared to other media companies, and the company plans to break into two. It is known that spinouts often increase shareholder value since management no longer has to concern itself with the parent company’s operations (read more about investing in spinouts) and in theory the breakup of News Corp creates a similar situation. The stock price has risen 50% in the last year, so some potential improvement has already been accounted for.

The fund reported a position of 15 million shares in Genworth Financial Inc (NYSE:GNW), a $4.5 billion market cap insurance and wealth management company. Wall Street analysts are very bullish on Genworth, with their consensus for 2014 implying a forward P/E of only 6; even on a trailing basis the earnings multiple is a reasonable 14. The EV/EBITDA multiple is similarly low, at 4.9x going by trailing figures. The company did report high earnings growth last quarter compared to the fourth quarter of 2011, though revenue was actually down slightly. Billionaire Eddie Lampert’s ESL Investments owned over 12 million shares at the end of December (check out more stocks the fund owns).

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