Billionaire Leon Cooperman and Insiders Love These Five Stocks

Billionaire Leon Cooperman is one of the best-performing hedge fund managers on the Street, which is one of the reasons why he is widely followed by smaller investors and his opinion voiced during interviews, conferences, and in investor letters is scrutinized by everybody that has any interest in investing. Cooperman’s fund Omega Advisors is also always in the spotlight and during an investor conference call held less than two weeks ago, Omega provided some updates on its performance and outlined its top picks held as of October 16. We have already discussed the five largest holdings presented during the conference call (see article), as well as the five picks that sport the lowest forward P/E (see article). In this piece, we are going to present five stocks in which not only Omega, but also insiders of those companies, own sizable positions.

We follow Omega alongside more than 700 other hedge funds, whose quarterly 13F filings we use as part of our small-cap strategy, which has delivered 102% cumulative returns since August 2012, beating the S&P 500 ETF (SPY) by around 53 percentage points (read more details here). Through extensive research, we determined that the best way to imitate hedge fund activity is to follow their 15 most popular small-cap stock picks. In backtests, this approach showed monthly returns nearly 1.0 percentage point above the market, as compared to the top 50 overall holdings among hedge funds, which slightly lagged the broader indices.

On the first spot is AerCap Holdings N.V. (NYSE:AER), which is Omega’s fourth-largest stake as of October 16, amassing 3% of its equity portfolio’s assets. In its latest 13F filing (for the second quarter), Omega reported holding 5.78 million shares of the company, up by 43% on the quarter, while the position was its second-largest in terms of value at the end of June. The stock is also fairly cheap, according to the investor, who estimates a forward P/E of 6.3 based on 2016 earnings and a 10% growth rate in the next three-to-five years. In addition to that, over 14% of AerCap’s stock is held by insiders. Cooperman’s peers from our database seem to share the same bullish view, as during the second quarter the number of investors with long positions in AerCap Holdings N.V. (NYSE:AER) surged to 77 from 44 and they held a whopping 42% of its outstanding stock at the end of June.

Next is Chimera Investment Corporation (NYSE:CIM), in which Omega disclosed a 14.13 million-share position, which was increased by 17% during the second quarter. At the conference call, Omega presented Chimera as it’s seventh-largest holding, which amassed 2.3% of its assets. As a mortgage REIT, Chimera Investment Corporation (NYSE:CIM) also has a dividend yield of over 13.50% and for the next three-to-five years, Omega predicts a modest 3% growth rate. Insiders hold some 4.7% of Chimera Investment Corporation (NYSE:CIM), but the REIT is not very popular among the funds from our database, since only 17 reported stakes equal to 12% of its outstanding stock as of the end of June. Israel Englander’s Millennium Management was another shareholder of the company, with a stake of 4.0 million shares reported in its second quarter 13F filing.

Turn to the next page to see more details about three other stocks from our selection, namely Ashland Inc (NYSE:ASH), Sirius XM Holdings Inc. (NASDAQ:SIRI), and United Continental Holdings Inc (NYSE:UAL).

In Ashland Inc (NYSE:ASH), insiders own over 17% of the company, while Cooperman’s fund increased its stake by 32% during the second quarter to 1.08 million shares. As of October 16, Omega’s stake in Ashland Inc amasses 2.3% of its portfolio and the firm is likely to maintain its bullish stance since it projects a growth rate of 15% for the next three-to-five years. At a forward P/E of 11.8, estimates by the investor suggest the stock is cheap, especially assuming that the specialty chemicals company lives up to its growth expectations. Overall, 38 funds from our database held stakes equal to around 9% of the company’s common stock at the end of June. Mario Gabelli, another value investor like Cooperman, is also bullish on Ashland Inc (NYSE:ASH). Gabelli disclosed holding 140,200 shares through Gabelli Funds and 99,483 shares through GAMCO Investors as of the end of June.

Sirius XM Holdings Inc. (NASDAQ:SIRI) ranks on the tenth spot in Omega’s portfolio as of October 16, but it is the company in this article in which insiders own the most shares. According to Thomson Reuters data, insiders hold nearly 60% of Sirius’ float. Meanwhile, Omega reported ownership of 47.54 million shares of Sirius XM Holdings as of June 30, down by 14% on the quarter, while at the conference call, it revealed that the stake represented 2.2% of its current portfolio assets. According to the investor, Sirius XM Holdings Inc.’s stock sports a 2016 forward P/E of 13.2, which is higher than many of his other top picks, but the projected growth rate of 17% is also one of the greatest. Aside from Cooperman, four other billionaire investors were bullish on Sirius XM Holdings Inc. (NASDAQ:SIRI) heading into the third quarter, including John Griffin, who held 54.90 million shares through his fund Blue Ridge Capital.

Finally, United Continental Holdings Inc (NYSE:UAL) ranks on the 12th spot in Omega’s portfolio, amassing 2% of its portfolio assets as of October 16. Omega disclosed holding 2.81 million shares of the airline operator in its most recent 13F filing. The stock is very cheap, trading at 3.4-times earnings, below the industry average of 9.5, while its forward P/E stands at 6.2. Similar to other airlines, United Continental has benefited from the decrease in crude prices, which dragged down jet fuel costs and as a result, allowed companies to become more competitive by lowering prices. However, due to its exposure to foreign markets, United Continental Holdings is also facing some currency headwinds due to a stronger U.S dollar. As a suggestion, we advise you to take a look at our compilation of the 11 most profitable airlines and see where United Continental Holdings Inc (NYSE:UAL) ranks among them. Most analysts rate the stock as a ‘Buy’ and the sentiment among other investors is also strong, as a total of 72 among those we track held over 15% of the company’s outstanding stock in aggregate at the end of June.

Disclosure: None