In May, billionaire Stanley Druckenmiller- the former head of Duquesne Capital and portfolio manager for George Soros- filed his 13F with the SEC, disclosing many of his long equity positions as of the end of March. While the information in 13Fs is a bit old by the time these filings are released, we’ve found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year and think that more strategies are possible as well. We can also use individual managers’ 13Fs similarly to a stock screen, looking through their portfolios for free investment ideas with low earnings multiples and then doing further research on any interesting names. Read on for our thoughts in five stocks from Druckenmiller’s portfolio with both trailing and forward P/Es of 14 or lower (or see the full list of stocks he reported owning).
One of the billionaire’s top picks from the first quarter of 2013 was Pfizer Inc. (NYSE:PFE), which has been making progress in selling off its non-core assets. This potentially allows management to become more focused on operations. The stock currently trades at 14 times trailing earnings, with a dividend yield of 3.4%. As such it’s cheap for a large pharmaceutical company and so investors interested in such stocks should try to learn more in our view. Billionaire Forbes columnist and Fisher Asset Management head Ken Fisher had listed Pfizer as his top pick for 2013 in December (find Fisher’s favorite stocks).
Druckenmiller reported a position of about 230,000 shares in Goldman Sachs Group Inc (NYSE:GS) as of the beginning of April. Large banks continued to prosper in the second quarter of 2013, and Goldman was no exception with profits doubling versus a year earlier. We’d of course want to look into concerns that investment banks may see a decline in business as monetary policy becomes less dovish, but the earnings multiples in trailing and forward terms are low, in the 10-11 range.
Boykin Curry’s Eagle Capital Management had 2.5 million shares in its portfolio according to that fund’s own 13F.
Due to their historical tendency to go bankrupt, markets generally value airlines at low earnings multiples, and US Airways Group Inc (NYSE:LCC) is no exception at a forward P/E of only 6. Druckenmiller owned 1.2 million shares of the stock at the end of Q1. US Airways is planning to acquire American Airlines, which poses integration risks but has lifted airline stocks somewhat as some investors believe that a consolidating industry will lead to more pricing power. We’d mentioned Soros earlier; his hedge fund most recently disclosed ownership of 7.8 million shares of US Airways (check out Soros’s stock picks).
Between January and March, Druckenmiller initiated a position of about 320,000 shares in PBF Energy Inc (NYSE:PBF), an oil and gas refining and marketing company with a market cap of about $530 million (with an average of over 1 million shares traded per day, so there is plenty of dollar volume for most investors). Midstream oil and gas companies are also generally cheap, and PBF’s forward earnings multiple is low even for the industry at 6. However, many market players are bearish and as a result a quarter of PBF’s float is held short.
Disclosure: I own no shares of any stocks mentioned in this article.
