Billionaire Leon Cooperman’s Big Moves On Valeant, Facebook, GM, More

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.

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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.

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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.

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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.

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We’ll dig into Cooperman’s moves on GM, Valeant, and Pfizer on the next page.

Shares of General Motors Company (NYSE:GM) are also up by about 20% in the fourth quarter, however Cooperman is not benefiting from those gains, as he closed his GM position during the third quarter, one of the largest positions he exited. On June 30, Cooperman held over 3.66 million General Motors Company (NYSE:GM) shares, which ranked the stock as one of his top-20 holdings. It’s somewhat surprising to see a value investor like Cooperman sell off a cheap stock like GM at a discount, as he had just doubled the position in the second quarter when it was trading much higher. Even after its fourth quarter rebound, shares still look cheap trading at just 6.6-times forward earnings and sport a dividend yield of nearly 4%. Billionaire David Tepper sold off some of his GM stake during the third quarter, but the stock still ranked as his top pick.

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Pfizer Inc. (NYSE:PFE) was the top addition to Cooperman’s portfolio during the third quarter, as he bought 4.83 million shares of the pharmaceutical giant. With shares of Pfizer taking a big dip in the third quarter amid both the broader market selloff and then the healthcare sector selloff that followed, it appears Cooperman felt the opportunity to invest in the maker of Viagra and Lyrica, among other drugs, at a discount was too good to pass up. Pfizer Inc. (NYSE:PFE) has one of the lowest price-to-book ratios among major drug producers at just 2.90 and one of the highest operating margins at 25.66%. Pfizer Inc. (NYSE:PFE) also ranks as one of the stocks that matter most to financial advisors, coming in at #11. D.E. Shaw, founded by billionaire David E. Shaw, bought 5.33 million Pfizer shares during the quarter, while Rob Citrone purchased 9.64 million shares, taking up a new position in the stock.

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Lastly, we come to embattled Valeant Pharmaceuticals Intl Inc (NYSE:VRX), in which Cooperman took a new stake during the third quarter, of 484,915 shares worth $86.50 million. Unlike Pfizer, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was at the center of the healthcare drug pricing storm that hit the sector, and has been unable to rebound from its horrendous losses thus far, which now amount to a staggering 71% over the past three months. The tumble has pushed the firm’s forward P/E down to a miniscule 3.5, which appears to make it quite the bargain. However, investors fear those forward earnings may be seriously impacted by future regulation because of Valeant’s business model of acquiring companies and raising the prices on their drugs, which is why they remain cautious towards the stock. Famed investor Bill Ackman has notably been clobbered by the Valeant Pharmaceuticals Intl Inc (NYSE:VRX) losses, which the mainstream media has gleefully reported on at every turn.

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