Former hedge fund manager Jim Cramer is now one of the most widely followed market commentators, with a popular show on CNBC. Another way to see what stocks Cramer thinks are good buys is to see what his charitable trust has reported owning. We decided to see what stocks the trust had in common with billionaire Louis Bacon’s Moore Global’s most recent filing; Moore has managed over $15 billion and Bacon’s estimated net worth is about a tenth of that figure. Stocks where he and Cramer are in agreement seem particularly likely- though not certain- to be worthy of a closer look. Here is our quick take on five stocks that Moore Global had over $10 million invested in and which Cramer’s trust also reported owning:
One of Bacon’s top stock picks in the third quarter was JPMorgan Chase & Co. (NYSE:JPM), reporting a position of 3.8 million shares; Cramer’s trust owned the large bank as well. There are some appealing value characteristics here, as JPMorgan Chase trades at a small discount to book value (the P/B ratio is 0.9) and at 9 times trailing earnings. At that pricing we think that it is a good candidate for a value stock. JPMorgan Chase made our list of the ten most popular stocks among hedge funds for the third quarter (see the full top ten list).
Moore Global, Cramer’s trust, and the hedge fund community as a whole also liked American International Group, Inc. (NYSE:AIG). The insurer was a new name on the list of the most popular stocks, and billionaire Dan Loeb’s Third Point moved heavily into AIG to finish September with over 23 million shares in its portfolio (check out Loeb’s stock picks). AIG’s P/B ratio is only 0.5, and while the stock should trade at a discount to book value we think the market may be being too conservative on the company. The forward P/E multiple is also at value levels, with the stock at 10 times consensus 2013 earnings. We think that it is another value play.
Wells Fargo & Company (NYSE:WFC) was another common financial stock that Cramer and Bacon both liked. Of course Wells Fargo is also known as Warren Buffett’s favorite big bank, with Berkshire Hathaway owning over 420 million shares; this made it the holding company’s second largest position in its most recent report (find more of Warren Buffett’s favorite stocks). Wells might not be as good a value in terms of book, with a P/B of 1.3, but it manages those assets quite well and so the current market price is only 11 times trailing earnings. It might be worth its premium to JPMorgan Chase and other banks.
It wasn’t all financials…Bacon and Cramer agreed on an energy and a basic materials stock as well:
Moore increased its holdings of Devon Energy Corporation (NYSE:DVN), which was also one of Cramer’s trust’s picks, to about 320,000 shares. Devon is a $22 billion market cap oil and gas company; it is primarily engaged in exploration and production activities but does have some midstream operations. Revenue was down sharply last quarter versus a year earlier. Analyst expectations are that the company will bounce back, but the trailing earnings multiple of 33 is too high for us to recommend buying right now. AQR Capital Management, which is managed by Cliff Asness, was also buying shares of Devon in the third quarter of 2012 (research more stocks Asness was buying).
$110 billion market cap basic materials company Vale SA (NYSE:VALE) was another stock pick we see in the trust’s portfolio and in Moore Global’s filing. Vale provides a variety of metals, fertilizer, and logistics services. As with many other basic materials companies, it is highly exposed to the broader markets with a beta of 1.7 and currently trades at low multiples as the market worries about commodity prices (the forward P/E is only 9). Billionaire Ken Fisher’s Fisher Asset Management increased its stake in the company during the third quarter, to a total of 2.5 million shares (see more of Fisher’s stock picks).
