Despite appreciating more than 16% in 2013 alone, shares of AMC Networks are still fairly valued at 18.6 times forward EPS and an earnings growth multiple below 1.4. Furthermore, even though the company does not pay a dividend, there’s more than enough growth here—the sell-side expects 33%-34% EPS expansion next year alone—to warrant further support from momentum-seeking investors.
Next up we have CNO Financial Group Inc (NYSE:CNO), the mid-sized holding company for the insurers Washington National, Colonial Penn Life, Bankers Life and Casualty, and Conseco Insurance. 40/86 Advisors, a fixed income investment advisory firm, is also a subsidiary of CNO. On the whole, shares of the holding company have risen by 28.6% in the past six months, and still trade at a measly forward P/E of 10.0x. This discounted valuation is a result of the sell-side’s extremely bullish EPS forecasts in excess of 40% growth next year, and Wall Street’s average price target on the stock represents a 10% upside from current levels.
CNO pays a projected dividend yield of 0.8% at the moment, but it’s quite possible we’ll see a payout hike in 2013. Zacks, for one, recently upgraded the stock to an “Outperform” rating, partially due to the “prospects of significant capital deployment.” Billionaire Israel Englander sold more than 90% of his position in CNO during the third quarter.
Paulson’s fourth largest small-cap holding is NovaGold Resources Inc. (NYSEAMEX:NG). As its name suggests, NovaGold is primarily focused on gold discovery and extraction, with operations in Alaska and western Canada. Shares of the company have fallen 17.7% since July 26th of last year, when Barrick Gold Corp (NYSE:ABX) announced that the duo’s joint-owned Alaskan Donlin Creek project “no longer meets its investment criteria.”
This news essentially trounced any bullish thesis of NovaGold related to its Ambler spinoff earlier in the year, but it’s worth noting that optimism over the company’s efforts to sell at least 50% of its Galore Creek stake is riding high at the start of 2013. Wall Street expects earnings to double this year, and analysts’ average price target on the stock represents an appreciation of more than twofold, so it’s clear why Paulson is long.
At the end of the last 13F filing period with the SEC, Paulson held shares of Gaylord Entertainment, making it his fifth largest small-cap holding, sitting at the No. 16 spot in his 13F portfolio. Gaylord has since converted into REIT status effective at the start of 2013, and can now be traded as Ryman Hospitality Properties, Inc. (NYSE:RHP). Ryman has gained 4.6% since this reclassification became official, and currently offers value to investors at 2 times its book value—less than half that of the industry’s average of 4.4x.
For more related coverage, continue reading here on Insider Monkey:
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Disclosure: I have no positions in any of the stocks mentioned in this article
