Soros initiated a position of over 15 million shares in American International Group, Inc. (NYSE:AIG) last quarter, making it the largest stock holding by market value in his 13F portfolio. Cramer’s trust also owned AIG, and in fact the insurer made our list of the most popular stocks among hedge funds for the third quarter (see the full top ten rankings). AIG is trading at half the book value of its equity, and our thinking would be that it probably doesn’t deserve that much of a discount; even a P/B of 0.7 or so would represent a sizable upside, and we think it’s worth considering as a value investment.
General Electric Company (NYSE:GE) was another common pick, with Soros increasing his stake by 22% to a total of more than 10 million shares. GE was one of Fisher Asset Management’s five favorite stocks during the third quarter; that fund is managed by billionaire Ken Fisher and his team (find more of Fisher’s favorite stocks). GE currently offers a dividend yield close to 4%, and the trailing P/E of 16- while not in pure value territory- doesn’t look too high either and income investors who like the yield shouldn’t be too worried about the valuation.
Soros also bought shares of SunTrust Banks, Inc. (NYSE:STI), with 4 million shares reported in the 13F portfolio. SunTrust is up 59% in the last year, and revenue and earnings have risen sharply as well. As a result the current price is 9 times trailing earnings, and 0.8 times the book value of the equity- very good metrics in both cases. Billionaire Stanley Druckenmiller bought the stock during the third quarter, after not having owned any shares at the beginning of July (check out Druckenmiller’s stock picks). We think the valuation is appealing and would just need to check for any red flags.
The Home Depot, Inc. (NYSE:HD) was one of the newest picks in the trust’s portfolio, and Soros had recently initiated a position in the retailer as well. It and peer Lowe’s Companies, Inc. (NYSE:LOW) were among the most popular retail stocks among hedge funds last quarter (see more retail stores hedge funds love). This is likely a way to invest in a strong recovery in housing, though Home Depot at least hasn’t seen much earnings growth relative to a year ago. Considering that it carries trailing and forward P/E multiples of 22 and 18, respectively, we would avoid the stock; there are likely cheaper stocks which would also capitalize on a stronger housing recovery.
Finally, both of these investors liked the most popular stock among hedge funds- Apple Inc. (NASDAQ:AAPL), which is also (obviously) the most widely owned tech stock in our database of 13F filings (research more of hedge funds’ favorite tech stocks). At 12 times trailing earnings, and only 9 times analyst consensus for 2013, we think that Apple Inc. (NASDAQ:AAPL) is undervalued. Those multiples suggest that Apple Inc. (NASDAQ:AAPL) won’t be growing its earnings at all, but we think that even if it loses market share the tablet and smartphone industry will grow fast enough to carry net income higher.
