Leon Cooperman, former head of Goldman Sachs Asset Management and current manager of Omega Advisors, has had his net worth estimated at about $2 billion. Omega files a quarterly 13F with the SEC, giving market watchers the opportunity to review many of the fund’s long equity positions and decide whether or not each is appropriate for their own portfolio. In addition to that kind of name-by-name look, we can compare the filing from the end of September to previous filings (see more of Omega's reported positions) to see what the fund is thinking about the markets. Here are some points we picked up on:
AIG. Omega increased its stake in American International Group, Inc. (NYSE:AIG) by about 75% to a total of 8.1 million shares; according to the 13F, the bailed-out insurer is now the fund’s largest holding. AIG has been talked about as a value stock for several months, and even after rallying 38% over the last year it is valued at only half the book value of its equity. We certainly think that the books shouldn’t be treated as clean yet, and so that the stock should trade at a discount, but probably not one that low. At 9 times forward earnings estimates, it looks like a value play in those terms as well. The government is reportedly on the way out of the stock, and Wall Street analysts expect considerable growth in net income over the next several years that brings the five-year PEG ratio well below 1. See more of our analysis of AIG.
Dividends. None of them were a large change from the previous quarter, but the fact that Cooperman and his team kept Linn Energy LLC (NASDAQ:LINE), Atlas Pipeline Partners, L.P. (NYSE:APL), and Kinder Morgan Inc (NYSE:KMI) around near the top of its 13F portfolio suggested that they still think that it's a good idea to own high yield stocks. Linn is an exploration and production company operating across the U.S. while Atlas and Kinder Morgan are pipeline companies focused on the transportation of natural gas. Much of the focus among investors who like the prospects for natural gas development has been on producers such as Chesapeake, but Cooperman seems to like midstream opportunities at least as much due to the high yields they offer. Linn also pays a very high dividend yield- 8% at current prices- so income investors may want to take a look at it as well, even though in value terms it doesn’t look particularly attractive at 16 times consensus earnings for 2013.
Sallie Mae. SLM Corp (NASDAQ:SLM) had been Omega’s largest 13F position by market value at the end of June, and the fund actually bought additional shares in the student loan manager during the third quarter. SLM carries trailing and forward P/Es of 8 and 7, respectively, and so we can see why value investors might like it if they can accept the significant regulation in the market and other government policies which might impact the company. SLM had been one of Highfields Capital Management’s top picks at the end of June as well; Harvard Management had invested $500 million in the fund when its former employee Jonathan Jacobson founded Highfields in 1998. Find more stock picks from Highfields Capital Management.
We like Cooperman’s purchases of AIG, and think that it’s a good stock for investors to consider. Sallie Mae looks cheap as well but we’d have to do considerably more research into the student loan market going forward before buying. We do like energy, and while in the past we’ve been more favorable towards large exploration and production companies we may try to look more closely at pipeline stocks in the future given that the billionaire seems to consider them better investments.