Jim Cramer, former hedge fund manager and current CNBC host, manages a charitable trust. Investors can therefore get an idea of what stocks Cramer likes not only by keeping an eye on his show but also by following this trust’s stock picks. We decided to compare the stocks that Cramer’s trust most recently reported owning with those that billionaire David Shaw’s D.E. Shaw had owned according to the fund’s 13F filing for the end of the third quarter (see the full list of D.E. Shaw’s stock picks). Here is our quick take on the five largest holdings by market value in D.E. Shaw’s portfolio that Cramer’s trust also owned:
D.E. Shaw owned 1.5 million shares of Apple Inc. (NASDAQ:AAPL), giving the fund over $1 billion invested in the stock at the end of the quarter. Apple was the most popular stock among hedge funds for the third quarter (see the full rankings) and at 12 times trailing earnings we have to say that it still looks cheap to us. We aren’t as optimistic as the consensus of Wall Street analysts, who have the stock at a five-year PEG ratio of 0.5, but we think that Apple should see at least modest earnings growth over the next few years and that would make it a buy at the current price.
The hedge fund increased its holdings of International Business Machines Corp. (NYSE:IBM), another Cramer pick, by 13% during the quarter to a total of 2.4 million shares. Weakness in the hardware business has pummeled companies like Dell and HP, but IBM’s software and services operations have helped keep revenue and earnings about flat over the last year. At trailing and forward P/E multiples of 14 and 12, respectively, it’s possible that IBM is a value play and we’d certainly feel safer owning it than its peers.
D.E. Shaw’s investment team also added to their position in Wells Fargo & Company (NYSE:WFC). Wells Fargo isn’t just a popular pick between the large hedge fund and Cramer; it is well known as one of Warren Buffett’s favorite stocks (check out more of Buffett’s favorite stocks). The bank trades at a premium to book value- the other big banks, such as Citigroup and JPMorgan Chase, tend to have P/B ratios well less than 1- but at 10 times trailing earnings it appears that Wells Fargo is monetizing its assets at least as well as its peers are. We think that we’d prefer JPM, but the gap in attractiveness between the two is much smaller than it was a couple months ago.
American International Group, Inc. (NYSE:AIG) was another common pick between the two portfolios. With the Treasury Department finally getting all the way out of the bailed-out insurer, the stock has recently popped a bit but is still valued at only half the book value of its equity. That leaves it with quite a bit of upside, even if in the medium to long term it still ends up at a moderate discount to book value. It’s also priced at 10 times analyst consensus for 2013, and revenue has been up recently. We would call it a value stock at those levels; a number of hedge funds were buying the stock in the third quarter.
Both of these investors also liked General Electric Company (NYSE:GE), which in the third quarter of the year reported 3% higher revenue and 8% higher net income than in the same period in 2011. Those growth rates aren’t particularly high, but are certainly acceptable for such a large company. Even with a dividend yield above 3%, however, we’re not sure that GE is particularly appealing from a value perspective at 17 times trailing earnings. Wall Street analysts expect better numbers in 2013- the forward P/E is 13, which would be a good price- but we don’t want to depend on the company to hit that target.
