Billionaire Bruce Kovner’s Top Stock Picks for Q2 Include General Motors Company (GM)

Billionaire Bruce Kovner’s Caxton Associates recently filed its 13F for the first quarter of 2013, disclosing many of its long equity holdings in U.S. stocks as of the end of March. At Insider Monkey, we maintain a database of 13F filings from hundreds of hedge funds and other notable investors and use the information included in 13Fs to develop investment strategies; for example, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year. We also like to look at our database shortly after new 13Fs are released and see what billionaire fund managers are doing. Here are our thoughts on Caxton’s five largest holdings from the filing (or compare these picks to those in previous filings):

With some hedge funds selling out of American International Group Inc (NYSE:AIG), that fund lost its place as the most popular stock among hedge funds during Q1 to Apple Inc. (NASDAQ:AAPL). See the rest of hedge funds’ ten most common picks. Caxton cut its stake roughly in half, but with 5.2 million shares at the end of March American International Group Inc (NYSE:AIG) remained its largest stock holding. American International Group Inc (NYSE:AIG) trades at a P/B ratio of 0.7, representing a considerable discount to the book value of its equity. Bulls argue that the insurer is temporarily underowned by large institutional investors such as mutual funds, and that in time this will lead to higher demand for the shares.

The fund reported a position of 7.4 million shares in Morgan Stanley (NYSE:MS) at the end of March. The investment bank has had a good year, with its stock price rising 90%, and while this has brought its valuation to quite a high level in terms of trailing earnings analysts are projecting that business will catch up to this optimism with the result being a forward P/E of 10. In addition, the stock is arguably a value play in book terms with a P/B of 0.8. Billionaire Ken Griffin’s Citadel Investment Group had been buying Morgan Stanley in the fourth quarter of 2012 (check out Griffin’s stock picks).

Ford Motor Company (NYSE:F) was another of Caxton’s favorite stocks, with the filing disclosing ownership of 6.5 million shares. Automakers have been popular value stocks, as many investors claim that the U.S. consumer auto fleet is very old in historical terms and that soon consumers will have to replace their cars. Ford Motor Company (NYSE:F) did record double-digit growth rates on both top and bottom lines last quarter compared to the first quarter of 2012, and trades at only 10 times trailing earnings. It might be worth looking into, though value investors would want to compare the company to its peers before buying.

Joining Ford Motor Company (NYSE:F) as an automaker at the top of the fund’s portfolio was General Motors Company (NYSE:GM). General Motors Company (NYSE:GM) is also thought of as a value play- it had actually made our previously mentioned list of the most popular stocks, and Warren Buffett’s Berkshire Hathaway is a major shareholder (find Buffett’s favorite stocks). General Motors Company (NYSE:GM) is valued at a small premium to Ford in terms of trailing earnings, but Wall Street analysts are forecasting strong earnings growth and its five-year PEG ratio is 0.6. We would note that in contrast to Ford, General Motors Company (NYSE:GM)’s business has been weaker than a year ago and we’d be interested in learning more about why that is.

According to the 13F, Caxton owned 5.2 million shares of Saks Inc (NYSE:SKS), up from 1.5 million shares three months earlier. The $1.8 billion market cap department store gets quite a premium valuation from the market- for example, the trailing P/E is 30- and with net income actually down 45% in its most recent quarter compared to the same period in the previous fiscal year it doesn’t look like a good value. 32% of the float is held short, so many market players agree with that conclusion; our database shows Southeastern Asset Management, managed by Mason Hawkins, with almost 27 million shares at the end of last year.

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