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David Tepper’s Low P/E Stocks
Posted by: Holly LaFon (IP Logged)
Date: December 11, 2013 10:05PM
The highest paid hedge fund manager of 2012, David Tepper frequently makes accurate market forecasts. On Nov. 22, he told Bloomberg that the market is not currently in a bubble, using the S&P and Nasdaq forward PD multiple as an indicator.
“Basically you have had very little change in P/E multiples in the last five years,” he said, comparing this to a greatly inflated P/E during the pre-Internet bubble from 1995 to 2000. “How can you say there’s any bubble? You see what a bubble looks like,” he added, “This is not one.” He also said that he sees the market going higher in the future.
Within his portfolio of 64 stocks, valued at $6.3 billion, Tepper holds a number of equities trading at relatively low P/E multiples. Below are the lowest.
MPG Office Trust Inc. (MPG)
P/E ratio: 0.50
Tepper has traded MPT since the third quarter of 2009, and has reduced the position over the quarters since the second of 2011 to a size of 3,967,674 shares at third quarter end.
The REIT was acquired by Brookfield Office Properties in October for $3.15 a share, representing a 74% gain on Tepper’s average buy price of $1.80 a share.
Dean Foods Company (DF)
P/E ratio: 1.9 – close to a 10-year low
Tepper holds 428,792 shares of Deal Foods, as he has reduced the position multiple times since the first quarter of 2011. The holding represents 0.13% of his portfolio, and he has an average gain of 80% on it from his average price paid of $9.75 a share.
Dean Foods is a food and beverage company and the nation’s largest processor and distributor of dairy products. Year to date, Dean Foods’ stock price dropped 47% to $17.45. Through the first nine months of 2013, Dean Foods’ earnings increased to $857 million, compared to $130.45 million for the same period of 2012.
In the third quarter, Dean Foods’ share of the U.S. fluid milk volume market declined as it lost the business of a large retailer, while the fluid milk volumes industry-wide declined approximately 1.7% year over year, according to the USDA.
Dean Foods 10-year revenue and earnings:
Dean has approximately $361 million in cash as of the third quarter, with total debt of approximately $1.1 billion. It has a P/E ratio close to a one-year low at 0.1, and P/B ratio of 2.4. It also in the third quarter announced a new quarterly dividend of $0.07, beginning in the first quarter of 2014.
US Airways Group Inc. (LCC)
P/E ratio: 7.8
Tepper added 46,262 shares to his US Airways Group holding in the third quarter, increasing it 0.5% to 9,385,636 shares, comprising 2.8% of his portfolio.
US Airways Group merged with American Airlines (AAL) on Dec. 9, 2013, to form the largest airline in the world. Under the terms of the agreement, investors in US Airways Group will receive one share of American Airlines Group for every share of US Airways Group that they owned. This will reflect in Tepper’s fourth quarter 13F filing.
Hess Corp. (HES)
P/E ratio: 7.8
Tepper initiated his Hess stake in the first quarter of 2013 with 479,500 shares, trimmed the holding in the two subsequent quarters, and holds 420,180 at the end of the third quarter. He has an approximate 23% average gain on his average buy price.
Hess is a global exploration and production company for oil and natural gas that also produces petroleum products, natural gas and electricity. The company’s stock year to date gained 49%, near its five-year high price at $80.51 Wednesday. For the first nine months of 2013, Hess’s earnings grew to $3.13 billion from $1.65 billion in the same period of 2012.
The company’s cash at quarter-end stood at $321 million, down from $642 million at year-end 2012, and debt totaled $6.21 billion, 23% reduced from year-end 2012.
Hess’ 10-year revenue and earnings:
Hess also has a P/S ratio near a one-year high at 0.7, P/B ratio of 1.2, and dividend yield of 0.69%.
Ashland Inc. (ASH)
P/E ratio: 10.8
Tepper established an Ashland position in the first quarter of 2013 with 193,265 shares, trimmed the stake the following two quarters, and holds 169,665 as of the end of the third quarter. He has an approximate gain of 15% on his average buy price for the stock.
Ashland provides specialty chemicals, technologies and insights to clients which are used in a range of products. Its stock year to date rose 15% to $94.86 Wednesday, near a 10-year high. The company’s net income for fiscal year 2013 was $683, an increase from $26 million in 2012.
Ashland 10-year revenue and earnings:
Ashland had $346 million in cash and total debt of $3.27 billion as of Sept. 30, 2013. Its P/B is near a 10-year high at 1.61 and P/S is also near a 10-year high at 1.0. Its dividend yield is close to a two-year high at 1.3%.
For more David Tepper stocks, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of David Tepper.
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Guru Discussed: David Tepper: Current Portfolio, Stock Picks
Stocks Discussed: MPG, DF, LCC, AAL, HES, ASH,