5 New Buy Ideas From Jim Simons

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Includes: AAPL, GOOG, JPM, PG, PM
by: Vatalyst

As the CEO of what is one of the world’s most successful hedge funds, some of the stocks that Jim Simons selects are likely to end up being profitable for the trader. Below are five of his newest picks that could help further grow his company’s profits.

Apple, Inc. (NASDAQ:AAPL) – In the second quarter of 2011, Jim Simons more than doubled his position in AAPL. The purchase was an increase of 135.03% at an average of $337.64. The total impact to his portfolio was 1%. Looking back, AAPL would’ve been an attractive buy at the time, especially with the current price trading at over $400.00 per share. AAPL is sizably profitable with earnings per share off $27.68. This gives the company an earnings per share of 14.4, which is right in line with the industry at 14.0 and slightly under the S&P 500 at 17.9. For those who do not want a volatile stock, they find it in AAPL, which has been consistently profitable and has a beta of 0.87, making it less volatile than the market as a whole. The company’s biggest competitor is Google Inc. (NASDAQ:GOOG), which has similar numbers with an earnings per share of $29.34 and a higher price to earnings ratio of 19.99. Given that AAPL recently released the iPhone 4s on the Sprint (NYSE:S), network, the profits for AAPL do not seem to be slowing down any time soon.

Procter & Gamble Co. (NYSE:PG) – Simons added a new stock to his portfolio. The total amount of shares purchased was 3,981,629 and was at an average price of $64.73. The total impact on Simons’ portfolio was 0.99%. The company is profitable with earnings per share of $3.93. PG also has a dividend of $2.10 which is a yield of 3.26%. The company’s price to earnings ratio is 16.4 which is lower than the industry at 18.2. PG has an extremely low beta of 0.50. Looking at the company’s finances, there is lot debt to equity with a ratio of 0.48, although the quick ratio and current ratio are 0.30 and 0.80 respectively. In regard to PG’s competitors, Johnson & Johnson (NYSE:JNJ) and Kimberly-Clark Corporation (NYSE:KMB), both are ahead in earnings per share at $4.10 and $4.24 respectively, although both are close in earnings per share at 15.73 and 16.58. PG is currently looking to lower its workforce to offset the lost revenue from the sale of Pringles to Diamond Foods Inc. (NASDAQ:DMND). To help lower the staff without layoffs, the company is currently offering an early-retirement program. If it is able to successfully restructure after the sale, the company could become more efficient and profitable.

JPMorgan Chase (NYSE:JPM) – Another new purchase to Simons’ portfolio was the financial holding company JPM. At an average price of $43.33, Simons’ added 4,880,686 to his portfolio to have an impact of 0.78%. The stock does have a slightly higher beta of 1.21, but the company has positive earnings per share of $4.69. This gives it a price to earnings of 7.29, lower than the industry average of 9.4 and well below the S&P 500 of 17.9. The company does issue a dividend of $1.00, which gives it a yield of 3.00%. Compared to competitors such as Citigroup, Inc. (NYSE:C) and Barclays PLC (NYSE:BCS), JPM has the higher earnings per share as they report $1.33 and $3.75. Compared to its competitors JPM has a lower earnings per share, making it a candidate to be undervalued. Analysts also believe the stock price has room to grow as the mean target price is $46.83. One sign that JPM is headed in the right direction is that the company recently approached U.S. regulators about possibly buying back more of its shares. However, the big bank did not submit the formal application as it followed the Fed’s discouraging feedback.

Google, Inc. (GOOG) – At an average price of $527.63, Simons added a total of 182.37% to his current position on GOOG, bringing the total to 554,091. The earnings per share for the internet search king is a nice $29.34, translating into a price to earnings ratio of 19.99. This ratio is lower than the industry which is at 24.6. Although GOOG does not offer a dividend, it has very strong financials. The company has little to no debt with a quick ratio of 5.80 and current ratio of 6.00; GOOG’s total debt to equity ratio is 0.08. This means the company only has $0.08 of debt for every $1.00 of equity. Even with the company’s current high price, analysts still see the stock price rising with a mean target price of $730.70. GOOG is currently using acquisitions to add services and find new sources of advertising. The company spent $151 million dollars to purchase Zagat Survey LLC. If the company can continue to add growth opportunities, it is very likely that the stock could hit analysts’ target price.

Phillip Morris International Inc. (NYSE:PM) – One company that always seems to post a profit of PM. Simons added 160.53% to his position to now hold a total of 3,629,700 shares of the tobacco company. The purchase was made at an average price of $67.90, and has a total impact of 0.58%. The beta of 0.86 makes the stock less volatile than the market. Paired with the annual dividend of $3.08, a yield of 4.47%, the stock looks like an attractive one. PM currently has earnings per share of $4.73, which gives it a price to earnings ratio of 14.96. This is right around the industry average of 16.0. Looking at PM’s biggest competitor, British American Tobacco plc (NYSEMKT:BTI), PM trails in earnings as BTI has earnings per share of $5.18. However, analysts predict the price of the stock to rise with a mean target of $75.86. If the price does reach this level, Simons' purchase will make a nice profit to his portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.