For nearly two decades, investment pro Ken Fisher's stock picks have outperformed the overall market. So when money gurus like Fisher make sizable moves, investors big and small pay attention. Lucky for us, money managers must reveal their stock moves every quarter in their SEC 13F filings.
Let's take a closer look at three stocks Fisher recently bought, including drugmaker Gilead Sciences (NASDAQ: GILD ) , materials manufacturer Owens Corning (NYSE: OC ) , and financial services provider CapitalSource (NYSE: CSE ) .
Biopharmaceutical company Gilead Sciences not only boasts therapies in the HIV and hepatitis C markets, but also harnesses a great deal of opportunity in the oncology market. During the past few years, the drug powerhouse has acquired cancer drug companies to boost its presence in the oncology space. Gilead hasn't gained FDA approval for a cancer drug yet. However, the California-based company has several promising oncology drugs in the pipeline.
Owens Corning's building materials and glass fiber reinforcements span the commercial, residential, and industrial markets. Last month, the company completed its acquisition of insulation manufacturer Thermafiber, providing Owens Corning with a broad product portfolio encompassing fiberglass, foam, and now mineral wool insulation products. With its vast roofing and insulation product lines, Owens Corning is well positioned to benefit from the ongoing resurgence in the real estate market. Undoubtedly, Fisher likes that the company expects double-digit revenue growth as the market recovers.
CapitalSource provides commercial loans to small- and medium-sized businesses. Low borrowing rates have spurred loan activity for CapitalSource. For the most recent quarter, the California-based credit provider delivered 2.4% loan growth at CapitalSource Bank and posted a 24 basis-point increase in net interest margin. CapitalSource has repurchased 42% of its outstanding shares since December 2010, potentially making the company appear undervalued since profits are divided into a smaller number of shares. The stock is up roughly 46% since the company started aggressively buying back shares.
Gilead Sciences, Owens Corning, and CapitalSource possess forward price-to-earnings ratios of 20, 13, and 14, respectively. By comparison, the P/E ratio of the S&P 500 is currently 18, signaling that Owens Corning and CapitalSource may be undervalued. The Motley Fool CAPS community rates Owens Corning a three-star stock (out of five). Meanwhile, our CAPS community has a more favorable outlook for Gilead Sciences and CapitalSource, which are crowned four- and five-star stocks, respectively.
Foolish final thoughts
Of these stocks, I particularly like CapitalSource right now. The company impressively increased its net margin last quarter despite a rough environment, and its stock appears undervalued. But don't take Fisher's (or my) opinion as the final word. Conduct your own research and formulate your own thesis. You'll be a better investor for it.
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