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Following the "smart money" is one method used by investors to achieve strong returns. This strategy could be pursued in a number of ways, including watching what company insiders are buying and by following what highly successful hedge fund managers do, and what the very rich (billionaires) are buying. In some cases, billionaire investors are also hedge fund managers. While billionaire investors do make mistakes when investing, in general, they have been extremely successful in finding stocks that produce strong gains. With that in mind, here are a couple of stocks that "smart money" billionaires have been buying:

Metlife, Inc. (NYSE:MET) shares were trading around $28 last July, but the stock has been in a solid uptrend ever since. Even after this rally to about $37 per share, the stock still appears undervalued. For many years, Metlife has been a leader in life insurance, annuities, supplemental life insurance and other financial services. The insurance business has been challenged by low interest rates because it makes it harder to generate solid returns on capital. However, Metlife has been successfully facing these challenges and the stock looks attractive on pullbacks.

Billionaire and hedge fund manager David Tepper has recently been buying shares of Metlife. Mr. Tepper is the founder of Appaloosa Management which has billions of dollars under management. He has made a fortune for himself and his investors by focusing on undervalued stocks.

It's easy to see why Mr. Tepper likes this stock. It is now trading way below book value, which is about $59.04 per share. It is also trading for just around 7 times earnings. This is about half of the average stock in the S&P 500 Index (NYSEARCA:SPY), which is currently trading for about 15 times earnings. Even though this stock appears cheap, it has been prone to pullbacks, especially when the markets are down sharply. With this stock at the high end of the recent trading range, it makes sense to wait for another buying opportunity.

Here are some key points for MET:
Current share price: $36.96
The 52 week range is $27.60 to $39.55
Earnings estimates for 2013: $5.25 per share
Earnings estimates for 2014: $5.67 per share
Annual dividend: 19 cents per share which yields .5%

Iamgold Corporation (NYSE:IAG) shares have plunged recently as investor interest in gold stocks has turned ice cold. While it is true that gold prices have experienced weakness lately, it still trades for about $1575 per ounce which is an area where many mining companies are solidly profitable.

Iamgold has mines in various parts of the world, including Africa, North America, and South America. Since there can be political risks in some countries, it is good that Iamgold is geographically diversified. Another positive is that Iamgold recently announced plans to reduce operating expenses in 2013 by about $100 million. This could significantly boost profits in the coming quarters and act as a rebound catalyst for the stock.

Billionaire hedge fund manager John Paulson made huge gains for himself and investors during the financial crisis. Lately, some of his investments have not fared as well. However, sometimes it can pay off to buy stocks that have declined even below the cost basis of a leading hedge fund manager. Paulson has been buying Iamgold for his gold fund and the shares look very oversold and dirt-cheap after a major pullback. This stock was trading for about $10 earlier this year, but now is trading way below that level at just over $6.

The stock looks cheap when you consider that book value is around $9.90 per share. Plus, Iamgold has a strong balance sheet with about $832 million in cash and around $634 million in debt. Analysts expect the company to earn about 86 cents per share and that puts the price to earnings ratio at just around 6.5 times earnings. Like all companies in this sector, there are operational risks, and of course the risk that gold will keep dropping. However, plenty of positives exist for gold prices to remain elevated and possibly even rebound and that could cause this stock to jump. Plus, the stock offers a dividend of nearly 4% which will reward investors while waiting for a higher share price.

Here are some key points for IAG:
Current share price: $6.25
The 52 week range is $6.04 to $16.88
Earnings estimates for 2013: 86 cents per share
Earnings estimates for 2014: 99 cents per share
Annual dividend: 25 cents per share which yields 3.8%

General Motors (NYSE:GM) shares bottomed out at about $19 last August and have been in a solid uptrend. The stock went over $30 in early 2013, but a small pullback to just over $27 has created another opportunity to get on board. General Motors is one of the world's largest auto and truck makers and it has been reporting strong results in North America and even in emerging market countries like China.

General Motors received financial "bail outs" from the U.S. Government after the financial crisis. This seems to have created a "black cloud" for some investors, in particular because the government still owns a significant stake in this company. Some investors and consumers might prefer Ford (NYSE:F) since that company did not receive the bailouts and also because Ford even pays a dividend. However, GM should eventually be able to either purchase the shares owned by the government or those shares could be sold directly into the market. The other challenge for GM is the fact that sales in Europe are weak due to a very tough economic environment and high unemployment. It might take a couple more years before the economy in Europe improves, but once it does, this could reduce GM's losses in that region. Fortunately, GM has been reporting profits because strong sales in other regions have more than offset European losses.

In time, the overhang of European losses and the government ownership are likely to fade and possibly go away entirely if Europe improves and the government owned shares are sold. Those two factors could be a major catalyst for the stock. In the meanwhile, the shares look undervalued for longer-term investors. Analysts expect the company to earn $3.39 per share in 2013. That puts the price to earnings ratio at just over 8 times, which is significantly below the market average of around 15 times. Furthermore, analysts see a major jump in earnings to about $4.35 per share in 2014. While headwinds remain, patient investors (like Warren Buffett) could be poised to see strong gains from this stock.

Warren Buffett's Berkshire Hathaway (NYSE:BRK.B) has disclosed that it owns about 10 million shares of General Motors. Mr. Buffett is well known for buying undervalued stocks when many other investors have passed up the opportunity to buy. For example, just over a year ago, Mr. Buffett purchased a significant amount of stock in Bank of America (NYSE:BAC) when it was trading for just around $6 per share, and the stock has nearly doubled in value. These kinds of investments have made lots of money for Mr. Buffett and his shareholders. GM might also produce strong returns for Mr. Buffett and for investors who buy now.

Here are some key points for GM:
Current share price: $27.88
The 52 week range is $18.72 to $30.68
Earnings estimates for 2013: $3.39 per share
Earnings estimates for 2014: $4.35 per share
Annual dividend: None

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Source: Invest Like A Billionaire With These 3 Cheap Stocks