7 Low P/E Stocks Wellington Management Is Buying

The following is a list of seven low P/E stocks which Wellington Management bought last quarter as released in their latest 13F filing with SEC.

Stock	Symbol	Shares Held - 06/30/2011	Shares Held - 09/30/2011	Forward P/E
Walt Disney Co.	DIS	12340342	33379750	10.79
Microsoft Corporation	MSFT	88952028	113871549	8.58
Intel Corporation	INTC	35532870	55515935	9.98
Apple Inc.	AAPL	8285432	9388255	10.10
Citigroup Inc.	C	12213378	28465372	5.86
Occidental Petroleum Corporation	OXY	22777379	28178339	10.79
The Goldman Sachs Group Inc.	GS	9258075	12461933	6.88

I like Occidental Petroleum, Microsoft and Apple among the above stocks. Citigroup also might be a good bet for high risk-high reward investors. However, I would avoid Walt Disney Company. Although Walt Disney reportedstrong last quarter results, I am worried about the cuts in advertising budgets due to a slowing economy. Park attendance may also be adversely affected as consumers become more cautious towards discretionary spending.

Occidental Petroleum Corporation is one of the most profitable of the U.S. large cap oil companies. The company continues to report strong financial results with cash flow from operations of $8.6 billion for the first nine months of 2011 and annualized ROE of 20%. With 70% of its production linked to Brent, Occidental is expected to generate ~6% of FCF yield in 2012 at current oil prices. In the longer term, even if we adjust for company’s capex plan of ~$7bn annually, Occidental is likely to generate ~$20bn of cash by 2016. In the near to medium term, exploration and appraisal results in CA conventional and shale plays are likely to serve as catalysts for the stock.

Microsoft is trading at a forward P/E of 8.58. I believe Microsoft is a good medium-term investment in these uncertain times. Its cash cushion limits the downside as well as enables it to make opportunistic acquisitions if the valuations of target companies reach attractive levels. In addition, Microsoft is also taking a lot of new initiatives, which can drive meaningful growth over the next few years. Some of the major catalysts for the stocks are the Windows 8 launch, Office 365 gaining traction and a successful adoption of Nokia-WP7 phones. I think Microsoft offers an attractive risk/reward for investors who can hold the stock for one year.

Apple also looks good, trading at just 10x forward earnings despite ~$80 billion in cash and expected 29% growth in sales in the current year. Given the initial momentum iPhone 4S has seen, I believe Apple can post good December quarter earnings. Apple continues to remain a secular growth and market-share-gain story in the smartphone and tablet space. I would recommend buying the company's shares given its low valuations and several upcoming catalysts over the next few quarters; such as strong iPhone 4S sell-through, holiday sales, and anticipated iPad 3 and iPhone 5 launches next year.

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