Billionaire Leon Cooperman appeared at the CNBC Delivering Alpha conference last week to tout his top picks. His Omega Advisors hedge fund has nearly $6.5 billion in assets under management. Cooperman started out by reiterating his love for SandRidge Energy Inc. (NYSE:SD), noting that the company will not go bankrupt.
SandRidge Energy Inc. (NYSE:SD) is the controversial oil and gas company that Cooperman believes has mismanaged assets. The company operates various drilling rigs that focus on exploration and production activities in Texas and the Gulf Coast.
SandRidge Energy Inc. (NYSE:SD) still has a nearly $1 billion funding gap for 2013, although this has been shrinking. At the end of the last quarter, the company had over $2 billion in liquidity and no debt maturities until 2020.
The company managed to continue snatching up assets throughout the financial crisis, despite the steep fall in natural-gas prices. This has helped position the company as one of the purest plays on the Mississippi Lime shale.
Cooperman is alongside activist hedge fund TPG Capital as a supporter of SandRidge Energy Inc. (NYSE:SD). TPG owned some 36.2 million shares at the end of 1Q, compared to Cooperman’s 26.5 million. What’s more is that other notable hedge fund Fairfax Financial owns over 32 million shares and Highfields Capital owns 13 million.
During 1Q, TPG got four nominees elected to the board and was instrumental in getting former CEO Tom Ward ousted. Now TPG and the board is pushing for cost cutting and de-leveraging. I am a believer in Cooperman and TPG and like SandRidge Energy Inc. (NYSE:SD) as a long-term play on natural gas.
QUALCOMM, Inc. (NASDAQ:QCOM) is the chip-making giant. The company is seeing various pressures related to the PC decline, but Cooperman believes that there is just too much pessimism surrounding the stock. The company also has an ironclad balance sheet, with over $30 billion in cash and no debt.
QUALCOMM, Inc. (NASDAQ:QCOM)’s 2Q EPS came in at $1.06, compared to $0.84 for the same period last year and on the back of 24% revenue growth. Revenue is projected to be up an impressive 30% in fiscal 2013, after a 28% increase in 2012.
QUALCOMM, Inc. (NASDAQ:QCOM) gets around 66% from the sale of CDMA-based chips and system software. Qualcomm also leverages its technology by licensing its IP portfolio. Its license and royalty segment generated about 31% of revenues in the first half of fiscal 2013.
What’s more is that QUALCOMM, Inc. (NASDAQ:QCOM) generates a whopping 88% operating margin from its license and royalty fee segment. Its royalties are collected when manufacturers earn revenue from its CDMA equipment.
QUALCOMM, Inc. (NASDAQ:QCOM)’s equipment is used by various phone makers, including Samsung, LG and Motorola. I believe that Qualcomm is the leader in the industry, an industry that’s ripe with barriers to entry. This is in part thanks to the CDMA IP that Qualcomm holds.
Qualcomm also has opportunities beyond mobile, with the potential to tap other electronic markets by developing WiFi chips for televisions, video games, printers, and other home devices.
Express Scripts Holding Company (NASDAQ:ESRX) is another one of Cooperman’s big bets. He notes that the company is a high-growth and share-buyback story. Express Scripts Holding Company (NASDAQ:ESRX) is the largest pharmacy benefits manager (PBM) after having acquired Medco Health Systems in 2012. Revenue is expected to rise to $103 billion in 2013 from $93.8 billion in 2012.
One of the key drivers for the the PBM industry will be the flood of generics to the market. Express Scripts Holding Company (NASDAQ:ESRX) estimates that some $40 billion in specialty drugs will lose protection through 2020, creating a huge opportunity that it believes it’s well positioned to capitalize on.
Express Scripts Holding Company (NASDAQ:ESRX) also has plans to tap the mail-order market, where many people are moving to the segment to save money. This is a good thing for Express, as this segment tends to be higher margin.