Billionaire Leon Cooperman Likes These Healthcare and Tech Stocks

Billionaire Leon Cooperman is one of the best value investors on the Street who scored high returns by betting on undervalued companies. Since 1991, when Cooperman founded Omega Advisors, the fund has returned a cumulative 1,536.2%, according to a recent investor conference call. In the third quarter, amid a broader market sell-off, Omega’s holdings lost around 15%, but the investor remained bullish on most of his positions. In previous articles we have discussed Cooperman’s top picks as of October 16, as well as his cheapest stocks in terms of forward P/E. In this article, we are going to take a look at two healthcare stocks and three tech stocks that Omega had among its top 25 holdings as of October 16.

Omega Advisors is one of some 730 hedge funds that we follow under our small-cap strategy. Through extensive research, we determined that the best way to imitate the hedge funds’ activity is to follow their 15 most popular small-cap stock picks. In backtests, this approach showed monthly returns nearly 1.0 percentage points above the market (read about our backtests). Our strategy has returned 102% since August 2012, and has outperformed the S&P 500 ETF (SPY) by some 53 percentage points.

Allergan PLC (NYSE:AGN) represents Omega’s largest healthcare holding as of October 16, amassing 3% of its assets. The fund reported ownership of 922,375 shares in its last 13F filing, the position being the largest in terms of value at the end of June. Allergan PLC (NYSE:AGN) ranked as the most popular pick among the funds from our database, being included in the equity portfolios of 151 funds, which held in aggregate over 17% of the company’s stock at the end of June. Allergan’s shares lost around 10% during the third quarter and are trading cheap at 11.3 times 2016 earnings, according to Omega. Another investor bullish on Allergan PLC (NYSE:AGN) is Larry Robbins of Glenview Capital (see his take on the company). Glenview held 1.98 million shares of Allergan at the end of June.

Just yesterday, it was confirmed that Allergan might be acquired by Pfizer Inc. (NYSE:PFE), which represents Cooperman’s second healthcare pick. Omega did not report holding shares of Pfizer in its latest 13F, but during the conference call, it revealed that the stake amassed 2.1% of its assets. Pfizer Inc. (NYSE:PFE)’s stock did not react much on the back of acquisition talks announcement, while Allergan’s shares closed 6% higher. The terms of the deal are unknown yet, but there is a high chance that it will include an inversion, with Pfizer moving its headquarters to Ireland in order to pay lower taxes. As a reaction, billionaire activist Carl Icahn said via Twitter: “The situation is much more dangerous than most people believe,” as he is trying to pursue the Congress to initiate an international tax reform. Meanwhile, billionaire Ken Fisher’s Fisher Asset Management disclosed ownership of 31.93 million shares of Pfizer Inc. (NYSE:PFE) in its 13F filing for the third quarter

Let’s move on to Omega’s top tech picks held as of October 16, Alphabet Inc (NASDAQ:GOOGL), Motorola Solutions Inc (NYSE:MSI), and Facebook Inc (NASDAQ:FB), which we will discuss on the next page.

Alphabet Inc (NASDAQ:GOOGL) represented Omega’s top holding, equal to 4.4% of its assets. The fund disclosed a new stake containing 213,659 class A shares of the company in its last 13F filing for the second quarter. Alphabet Inc (NASDAQ:GOOGL), which has recently changed its name from Google and undergone a restructuring in order to better combine its operations, reported solid financial results for the third quarter last week. Omega estimates that the shares are trading at a 19.1 forward earnings multiple, which is above the S&P 500’s average, but taking into account the 21% growth rate estimated by the fund for the next three to five years, the stock is still attractive. Fisher Asset Management inched up its stake by 5% to 915,214 class A shares of Alphabet Inc (NASDAQ:GOOGL) during the third quarter and reported ownership of 523,585 class C shares, down by 5% on the quarter, as of the end of September.

Omega also revealed during the conference call that its holding in Motorola Solutions Inc (NYSE:MSI) amassed 2.3% of its assets, while as of the end of June, Omega owned 2.65 million shares. Motorola Solutions was one of Cooperman’s biggest winners, the stock registering a 19% growth during the third quarter, which offset the decline in the first six months of 2015. Among the funds we track, Motorola Solutions Inc (NYSE:MSI) lost some popularity during the second quarter, as the number of investors with long positions went down by seven to 31, but they held in aggregate over 24% of its outstanding stock. It’s not surprising that Cooperman and other investors are bullish on the stock, since it trades at a forward P/E of 13.9 and Omega predicts a 15% growth rate in the next three to five years. Billionaire Jeff Ubben’s ValueAct Capital is also bullish on Motorola Solutions Inc (NYSE:MSI), reporting ownership of 17.59 million shares as of the end of the second quarter.

Finally, Facebook Inc (NASDAQ:FB) ranked as Omega’s 24th-largest holding as of October 16, while in its last 13F filing, the fund revealed a new stake of 573,300 shares as of the end of June. Facebook’s stock has been on a steady upward move since the beginning of the year, gaining 31% year-to-date. The company is doing fairly well, posting solid monthly average user growth for the last several quarters. It is also successfully monetizing on its acquisitions of WhatsApp and Instagram, both of which ranked among the five most downloaded iPhone and iPad apps in the third quarter, according to a recent report from Sensor Tower (Messenger and Facebook led the top). However, at a forward P/E of 35.5, estimated by Omega, Facebook Inc (NASDAQ:FB)’s stock may seem a bit overvalued. Another shareholder of Facebook Inc (NASDAQ:FB) is Fisher Asset Management, which owns 311,106 shares as of the end of September.

Disclosure: none