One of the classic ways of valuing a stock is calculating its

price-to-earnings ratio, which measures the price of the stock in relation to the company's net income per share. The lower the P/E ratio, the better the buy.

The P/E ratio is used along with other financial metrics to determine the valuation of a company compared with its competitors and the overall industry. Because Warren Buffett is one of the most successful investors, Stockpickr decided that it would be useful to review all of his stocks and break out the

stocks with the lowest P/E ratios


The Warren Buffett stock with the lowest P/E is



, a building materials distributor with a P/E of 8.8. The company is scheduled to report third-quarter earnings today. The stock, which happens to have the highest short ratio of all of Buffett's stocks -- 13.7 -- has a P/E-to-growth (PEG) ratio of 2.6.

USG is also owned by the "other Oracle of Omaha,"

Wally Weitz

, who manages the Weitz mutual fund family, which follows a value-disciplined approach to investing. Weitz also owns

UnitedHealth Group

(UNH) - Get UnitedHealth Group Incorporated Report

, which has a P/E of 15, and insurer

American International Group

(AIG) - Get American International Group, Inc. Report

, which has a P/E of 10.6.

Another low-P/E stock that Buffett holds is

Bank of America

(BAC) - Get Bank of America Corp Report

, with a P/E of 10. The company just last week reported a 32% drop in third-quarter earnings on a revenue drop of 12%, due to unfavorable results of its investment bank unit and higher consumer credit costs. The stock has a PEG of 1.4 and a yield of 5.1%.

BofA is also a favorite of

David Dreman

, the famous contrarian


columnist. He is also manager of the Dreman Large Cap Value Fund, which has generated an average annual return of 17%, and the Dreman Small Cap Value Fund, which has returned 16.5% a year, on average, for the past 16 years.

Dreman also likes tobacco giant

Altria Group

(MO) - Get Altria Group Inc Report

, which has a P/E of 14, and

Freddie Mac

( FRE), which has a forward P/E of 10.8.

TheStreet Recommends



is another low-P/E stock that Buffett also owns; it offers a P/E of 11.7. This life and health insurance company just reported a 10.2% earnings-per-share increase and a 3.1% increase in revenue. The stock has a PEG of 1.3 and a yield of 0.80%.

Torchmark is in the portfolio of

Tweedy Browne

, a $13.5 billion investment partnership that specializes in value investments. Tweedy Brown also owns shares of financial services firm

Lloyds TSB Group

(LYG) - Get Lloyds Banking Group plc Sponsored ADR Report

, which sports a P/E of 10, and

SK Telecom

(SKM) - Get SK Telecom Co., Ltd. Sponsored ADR Report

, a South Korean wireless company with a P/E of 13.7.

Check out Stockpickr for the rest of the

Top Warren Buffett Stocks by P/E Ratio

as well as for the entire

Warren Buffett portfolio

, which includes his long-held positions such as


(KO) - Get Coca-Cola Company Report


At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for

The Financial Times

and the author of

Trade Like a Hedge Fund


Trade Like Warren Buffett



. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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