(For other news from the Reuters Hedge Funds and Private Equity Summit, click
">hereNEW YORK (Reuters) - A number of large-cap U.S. blue chips, such as Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research, Stock Buzz) and Microsoft Corp. (MSFT.O: Quote, Profile, Research, Stock Buzz), are trading at a discount but are likely to return double their current stock price in five years, says the managing partner of hedge fund manager T2 Partners LLC.
Large-cap stocks are out of favor and investors prefer to chase names they feel offer greater growth, like Google Inc. (GOOG.O: Quote, Profile, Research, Stock Buzz) and Apple Computer Inc. (AAPL.O: Quote, Profile, Research, Stock Buzz), said Whitney Tilson of T2 Partners, which oversees about $120 million in assets.
Along with Wal-Mart and Microsoft, Tilson said he's held Anheuser-Busch Cos. Inc. (BUD.N: Quote, Profile, Research, Stock Buzz), McDonald's Corp. (MCD.N: Quote, Profile, Research, Stock Buzz) and Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile, Research, Stock Buzz) for about a year, although with little upside to those positions.
"We've been long and wrong so far on big-cap, blue chip stocks," Tilson said at the Reuters Hedge Fund and Private Equity Summit.
The share prices of the five companies, among the "greatest on earth," will not double this year and probably not in the next two, but will do so over the next five years, said Tilson, a producer of the Value Investing Congress. They are trading at historically low multiples to their intrinsic value, he said.
"When was the last time five of the world's greatest businesses traded at a discount to the market?" he said.
Tilson's upside to some of his blue-chip investments has the potential of being far greater than the typical shareholder, as he's bought special long-dated call options that could provide a return that far outstrips that of the common stock, he said.
© Thomson Reuters 2008. All rights reserved.
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