Billionaire Leon Cooperman of Omega Advisors is one of the most influential investors in the world, and also one of the wealthiest, with Forbes currently ranking him as the 514th richest person in the world with a net worth of $3.4 billion. Cooperman has been the chairman and CEO of Omega Advisors since founding it in 1991, and the firm has delivered a 1,536.2% cumulative return since then, through the middle of October. We recently covered Cooperman’s latest investor letter in some detail, including the firm’s top picks as of October 16. In this article, we’ll cover some of his biggest moves of the third quarter, based on data from Omega’s recent 13F filing with the SEC.
We’ll start with Alphabet Inc (NASDAQ:GOOGL), which we previously covered in the aforementioned article. Nonetheless, it’s worth covering again, as it was arguably Cooperman’s biggest move of the quarter. Omega’s investor letter revealed that Alphabet now occupied a 4.4% chunk of its equity portfolio, which put the holding’s worth at about $344.22 million based on our estimates (that data was not included in the letter) and made it the firm’s top stock pick. The 13F filing reveals the full details of the position now, though as of September 30. It contained 482,749 class A Alphabet Inc (NASDAQ:GOOGL) shares worth over $308 million at that time, and represented a 125% quarter-over-quarter increase. It was also the only position in Cooperman’s top-six holdings that was increased in size during the quarter. Alphabet Inc (NASDAQ:GOOGL) has been a strong performer in the second half of the year, gaining around 40% so far. The reorganized Alphabet attracted a lot of attention in the third quarter from investors that we track, as ownership of the company’s class A shares rose to 129 from 115, while class C share ownership was up by 12 to 119. Those investors held over $21 billion of the company’s shares.
Cooperman also made a big move in another tech giant, Facebook Inc (NASDAQ:FB), during the third quarter. The billionaire added 484,100 Facebook shares to his portfolio, an 84% increase to the position. Omega estimates Facebook Inc (NASDAQ:FB)’s forward P/E at 35.5, which might seem like a steep price to pay, but Facebook is just beginning to tap into its revenue potential, as it begins to monetize WhatsApp and Instagram, two of the most popular apps in the world, and readies other potential cash-cows for release, like Oculus Rift. Facebook Inc (NASDAQ:FB) is up by about 20% in the fourth quarter, so the enhanced position is another winner for Cooperman so far. Billionaire Stephen Mandel added over 940,000 shares to his own Facebook position during the third quarter, lifting it to over 10.70 million shares.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activity. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds partly underperformed because they aren’t 100% long. Hedge funds’ fees are also very large compared to the returns generated, which reduces the net returns delivered to investors. We uncovered through extensive research that historically, hedge funds’ long positions in certain stocks actually outperformed the market greatly, and it has held true to this day. For instance, the 15 most popular small-cap stocks among funds has beaten the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. less than a 49% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying, particularly in the small-cap sector, rather than what their net returns are, which the media primarily focuses on.
We’ll dig into Cooperman’s moves on GM, Valeant, and Pfizer on the next page.