Visa, Priceline, and More: Billionaire Thomas Steyer’s Top Services Stocks

Steyer and his team also liked News Corp (NASDAQ:NWSA), reporting a position of 5.9 million shares. The media company plans to break up, which has attracted quite a bit of hedge fund interest in the belief that management of the new companies will be better able to focus on operations. News Corp carries a forward P/E of only 13, but that seems to reflect high expectations for how much the financials will improve when the businesses are separated. We’d be cautious about getting into the stock.

Fellow media company CBS Corporation (NYSE:CBS) was another of Farallon’s picks in the services sector. CBS has quite low multiples, with a trailing P/E of 15 and a forward P/E of 12; Wall Street analysts expect for growth to continue, bringing the five-year PEG ratio to 1. The company has in fact been growing its earnings- net income was up over 10% last quarter versus a year earlier- though revenue growth has been considerably weaker. The stock has done well over the last year, and it could be worth looking at as a value play.

Farallon owned about 940,000 shares of $59 billion market cap railroad Union Pacific Corporation (NYSE:UNP). In terms of financials, Union Pacific looks quite a bit like CBS: it trades at 15 times its trailing earnings, with a 15% increase in earnings in the third quarter compared to Q3 2011 despite a significantly lower growth rate on the top line. We think that’s a good combination of growth and value, and at a beta of 1.1 Union Pacific isn’t quite as exposed to the overall economy as many other transportation companies. It’s a good stock to consider, though some smaller railroads trade at a discount and could be better values.