Billionaire Leon Cooperman headed Goldman Sachs Asset Management before founding hedge fund Omega Advisors in 1991. Omega now has over $3 billion in assets under management and Cooperman is a widely followed investor. The fund recently filed its 13F for the fourth quarter of 2012, disclosing many of its long equity positions as of the end of December (effectively, Cooperman’s stock picks for 2013). We track 13F filings because imitating hedge funds, even with the lag imposed by the filing period, can help produce returns; the most popular small cap stocks among hedge funds, for example, generate an excess return of 18 percentage points per year (learn more about imitating hedge funds’ small cap stocks). Here are some themes that we noticed in Omega’s most recent 13F portfolio compared to previous filings:
Selling Apple. Apple Inc. (NASDAQ:AAPL) had been one of Omega’s five largest holdings at the end of the third quarter, with a position of about 270,000 shares but the fund had sold out completely by the end of December. We don’t know exactly when the fund started selling, but Apple Inc. (NASDAQ:AAPL) did decline by 19% over the course of Q4 and is down another 15% year to date. Apple Inc. (NASDAQ:AAPL) had been the most popular stock among hedge funds at the end of September (see the full top ten list). We do still like Apple at its current valuation of 11 times trailing earnings; while we are not as optimistic as Wall Street analysts we think that the company should be able to at least keep its earnings steady as market share declines thanks to the growth of the tablet and smartphone markets. Of course, given the recent fall in the stock price- which itself came from reasonable multiples- investors may well be less confident.
Sandridge. Apple was out, but natural gas, and possibly the potential for activism, was in. Omega initiated a position of over 24 million shares in SandRidge Energy Inc (NYSE:SD). Sandridge has become a battleground stock as some hedge funds- possibly emboldened by billionaire Carl Icahn’s ouster of fellow natural gas producer and aggressive expansionist Chesapeake Energy Corporation (NYSE:CHK) CEO Aubrey McClendon- have attempted to take greater control of the company’s Board of Directors. However, major shareholder Fairfax Financial Holdings (which is managed by “the Warren Buffett of Canada”, Prem Watsa) has stood by the company and management has not been favorable towards the campaign by other funds. In a January interview with CNBC, Cooperman was careful to express neutrality on the issue. Sandridge is expected to report net losses for 2013, primarily due to low natural gas prices. Read our latest analysis of Sandridge.
Check out two stocks that Cooperman was buying in Q4: