There are many indicators I use when analyzing a stock. One is unusual option activity. Another indicator I look for are relatively cheap dividend stocks. Finally, another indicator is insider activity, such as the ones described here. Moreover, following recent transactions of very well-run investment firms, such as Greenlight Capital, is a great way to get some ideas.
Greenlight is run by well-known and outspoken investor, David Einhorn. He is most famously known for correctly calling and shorting Lehman Brothers prior to its collapse. The firm began in 1996 with $1 million under management and has since grown incredibly to $4.6 billion under management with annual net returns in excess of 22% annually. The firm simply knows how to pick winners so let us look at its largest holdings and see if we see value as well.
Pfizer (PFE), a bio-pharmaceutical company, offers prescription medicines for humans and animals worldwide. This is Greenlight's largest holding at 23.45 million shares. The stock just reported a great quarter this past week and has great valuations at a 13.8x trailing P/E, 8.6x forward P/E, approximately $10 billion in FCF this past year, comparatively cheap 1.7x P/B, and consistently growing 4.1% dividend yield. I'd be a buyer of PFE as well.
Apple (AAPL), together with its subsidiaries, designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players. The firm owns 1.08 million shares making it its second largest holding. This fast-growing company can actually be viewed as a value stock, surprisingly enough, as it trades at just 14.3x trailing P/E, 10.3x forward P/E, .6x PEG, no debt, approximately $26 billion in net cash, and incredible $33.2 in FCF this past year. The iPhone 4s is selling well, balance sheet is fantastic, I'd be a buyer of AAPL here.
Microsoft (MSFT) develops, licenses, and supports a range of software products and services for various computing devices worldwide. The firm owns 14.82M shares. I wrote favorably about MSFT recently here, and still see this company as a great buy at a 9.5x trailing P/E, 8.5x forward P/E, .9x PEG, 5.9x EV/EBITDA, well over $40 billion in net cash, approximately $24.5 billion in FCF this past year, and attractive 3% dividend yield.
The Travelers Companies (TRV), through its subsidiaries, provides various commercial and personal property and casualty insurance products primarily in the United States. Greenlight owns 4.20 million shares. This Dow component is attractively prices at a trailing 14.8x P/E, forward 9.9x P/E, .95x P/B and P/S, 1x EV/S, and respectable 2.8% dividend yield. A very nicely run insurance firm that makes for a quality holding in most portfolios.
CareFusion (CFN), a medical technology company, provides various healthcare products and services in the United States and internationally. The firm owns 9.52 million shares. This company doesn't have exciting value trading at a trailing 23.3x P/E, 12.3x forward P/E, 1.6x P/S, 1.1x PEG, and no dividend. This company isn't definitely expensive and has a great operating history, so I wouldn't sell, but don't see any glaring reason to buy as well. I'd rate it as neutral.
Ensco plc (ESV), together with its subsidiaries, provides offshore contract drilling services to the oil and gas industry. Greelight owns 4.22 million shares. The company looks reasonable at a trailing 17.6x P/E, forward 8.6x P/E, .8x PEG, 1.1x P/B, and nice 2.7% dividend yield. I think if looking for an energy name, this great yielder is worth a look.
Seagate Technology (STX) designs, manufactures, markets, and sells hard disk drives for enterprise, client compute, and client non-compute market applications worldwide. Greenlight owns 11.51 million shares. STX is sitting right near a 52-week high, but still has some compelling valuations at a trailing 16.5x P/E, forward 7.3x P/E, .6x PEG, .7x P/S, .75x EV/S, and very nice 3.9% dividend yield. Moreover, this stock is largely moving higher on a great earnings report and the yield is still great, I'd be a buyer.