Billionaire Leon Cooperman’s Long Term Stock Picks Include Transocean LTD (RIG)

We maintain a database of quarterly 13F filings from hundreds of hedge funds, including billionaire Leon Cooperman’s Omega Advisors, as part of our work researching investment strategies (for example, we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). We also like to see which stocks top managers have owned for the last couple of years, on the basis that even though the information in 13Fs is a bit old by now (Omega’s most recent filing discloses many of its long equity positions as of the end of March) chances are the fund hasn’t made major changes to most of these long term holdings. Read on for our thoughts on the five largest positions in Cooperman’s portfolio from the most recent filing that he had owned at least $60 million of at the end of March 2011 (or see the full list of the fund’s stock picks over time).

Omega reported a position of about 15 million shares in SLM Corp (NASDAQ:SLM), or “Sallie Mae.” Markets are valuing the education lender fairly conservatively, with the stock currently trading at 10 times forward earnings estimates (this is with Wall Street analyst consensus calling for a decline in earnings per share in 2014). Sallie Mae has seen increased revenue and earnings, though some investors are worrying about potential delinquencies in the market. D.E. Shaw, a hedge fund managed by billionaire David Shaw, is another filer on our database which has a large position in the stock (check out more stocks D.E. Shaw owns).

Cooperman and other Linn Energy LLC (NASDAQ:LINE) shareholders (the stock was one of his five largest holdings at the end of the first quarter of 2013) are currently down over 30% year to date following the company’s announcement that the SEC is investigating its potential purchase of Berry Petroleum Company (NYSE:BRY). Linn Energy LLC (NASDAQ:LINE), a $6.5 billion market cap oil and gas company, also recently slashed its quarterly dividend to 24.2 cents per share. That makes for a 3.5% annual yield at current prices, but given the company’s troubles we would avoid it anyway.

The fund disclosed ownership of 5.1 million shares of Atlas Pipeline Partners, L.P. (NYSE:APL), which gathers and processes natural gas. U.S. natural gas infrastructure will have to be built out in the coming years due to high production in onshore shale plays. The company has generally been increasing its dividend over the past few years, though quarterly payments are still short of where they were in 2008 when net gas prices were much higher (the stock now yields about 6%). Renaissance Technologies, whose founder Jim Simons is now a billionaire, initiated a small position in Atlas Pipeline Partners, L.P. (NYSE:APL) between January and March (find Renaissance’s favorite stocks).

Atlas Energy LP (NYSE:ATLS) was another of Cooperman’s long term stock picks. The company maintains ownership stakes in natural gas and oil producing wells in the United States as well as gathering and processing facilities. With a beta of 2.9, Atlas Energy LP (NYSE:ATLS) tends to be highly sensitive to the movements of major market indices. We’d note that recent company reports have shown low profitability, and so we’d be concerned about how its business is going. Cobalt Capital Management, which is managed by Leon Cooperman’s son Wayne, owned about 680,000 shares of Atlas Energy LP (NYSE:ATLS) at the beginning of April.

According to the 13F, Omega had 3.2 million shares of offshore driller Transocean LTD (NYSE:RIG) in its portfolio at the end of Q1 2013. Billionaire Carl Icahn (research more stocks in Icahn’s portfolio) has taken an activist stake in Transocean LTD (NYSE:RIG), believing that the company is not returning enough cash to shareholders (though the current dividend yield is quite high, at 4.5%). Analysts are bullish on offshore drilling, and therefore expect high future earnings growth for Transocean LTD (NYSE:RIG): their forecasts imply a forward earnings multiple of only 9 and a five-year PEG ratio of 0.4. We wouldn’t take that at face value but would be interested in further researching the company.

Disclosure: I own no shares of any stocks mentioned in this article.