Ellington Financial acquires and manages mortgage-related and other financial assets. The company invests in residential and commercial mortgage-backed securities, residential and commercial mortgage loans, consumer loans and asset-backed securities. A total of 11 hedge funds tracked by Insider Monkey held stakes in Ellington Financial entering the fourth quarter. Omega Advisors owns 760,000 shares of the company, worth $9.32 million.
4. First Eagle Alternative Capital BDC, Inc. (NASDAQ: FCRD)
Forward P/E: 8.32
First Eagle operates lending and credit investment business, with $21 billion of assets under management and advisement, as of September 30, 2020. As of the end of the third quarter, 6 hedge funds tracked by Insider Monkey held stakes in First Eagle. The total worth of these positions is $9.3 million.
The stock was a new arrival in Omega Advisors portfolio, as the fund bought 2.86 million shares of the company, worth $7.1 million.
PE Ratio (TTM) 7.99
Athene Holding Ltd (NYSE: ATH) is a Bermuda-based retirement services company that offers retirement savings products. Leon Cooperman’s hedge fund loaded up on Athene Holding in the third quarter, buying a new stake in the company worth $33.45 million. In December 2020, Athene Holding shares gained value after General Electric (NYSE:GE) agreed to transfer $1.7 billion in pension obligations to the retirement services company. Athene will provide annuity benefits for about 70,000 retirees who are currently receiving benefits from GE’s pension plan.
As of the end of the third quarter, 31 hedge funds tracked by Insider Monkey held stakes in Athene. Lakewood Capital talked about ATH in its 2020 Q2 investor letter:
“We previously discussed our long position in Athene Holding in our third quarter 2019 letter, and the stock performed well over the next several months as management continued to execute on its competitively advantaged strategy in retirement services. However, Athene’s stock was punished by the pandemic-related sell-off, and at 60% of tangible book value, we believe it has the potential to double over the next 18 months.
While investors are justifiably concerned about future credit impairments, we think they are unlikely to amount to more than 10% of its tangible book value of $10 billion. Given that Athene typically generates pre-tax profits of nearly $1.5 billion, the company should still grow tangible book value in 2020. Athene has also capitalized on the significant disruption in the marketplace to improve its competitive position and increase its return profile. In June, the company, along with its co-investment vehicle ACRA, announced an accretive transaction with Prudential’s Jackson business, whereby it would reinsure $27 billion of fixed annuity and fixed indexed annuity reserves and acquire an 11% stake in Jackson’s remaining business. This deal will increase Athene’s earnings by nearly 10% and add 100bps to overall returns on equity by 2022. We estimate that Athene is paying just 3x pro forma earnings for this business, underscoring its unique ability to acquire complex assets at incredibly attractive prices. Furthermore, Athene continues to have significant dry powder to do additional deals, comprised of over $3 billion of excess equity capital on its balance sheet and nearly $2 billion of excess third-party capital in ACRA.
We are also encouraged to see KKR (a previous Lakewood long) recently announce that it is acquiring Global Atlantic, an Athene competitor (that is more levered but generates similar returns on equity) for 1x tangible book value. Applying the same valuation to our estimate of Athene’s book value at the end of 2021 yields nearly 100% upside in the shares over the next 18 months. At that level, the shares would be trading at just 6x forward earnings.”
2. Gamco Investors Inc (NYSE: GBL)
PE Ratio (TTM): 7.71
Led by known billionaire hedge fund manager Mario Gabelli, Gamco Investors offers investment advice and brokerage services to mutual funds, institutional and investors. Omega Advisors made no change to its position in the company in the third quarter, with 8,600 shares, worth $100,000. Just 6 hedge funds tracked by Insider Monkey held stakes in Gamco Investors entering the fourth quarter.
On Jan.22, Gamco said it expects Q4 EPS to fall in the range of $0.69 to $0.73 versus $0.91 reported in the year ago quarter.
1. Mr. Cooper Group Inc. (NASDAQ: COOP)
PE Ratio (TTM): 4.50
Mr. Cooper Group Inc (NASDAQ: COOP) is one of the largest home loan service providers. The company offers several lending products, services and technologies. In November 2020, Mr. Cooper shares rallied after Leon Cooperman recommended the stock in a TV interview. Omega Advisors upped its stake in the company by 13% in the third quarter, ending the period with 4.65 million shares of the company, worth $103.81 million.
Diamond Hill Capital stood by its COOP investment despite large losses during the March crash. Here is what they said at the time:
“Mortgage servicing company Mr. Cooper Group, Inc. underperformed amid fears over advance payments mortgage servicers are required to make to bondholders in the event of missed payments from borrowers. Investors worry that Federal programs encouraging borrowers impacted by the virus to delay mortgage payments will overwhelm the servicing industry’s ability to make payments to bondholders.”
COOP shares quadrupled since then. As of the end of the third quarter, 23 hedge funds out of the 816 tracked by Insider Monkey held stakes in the company. The net value of these stakes is $416.25 million.
Please also see Billionaire Cooperman’s Top 10 Stock Picks and 15 Best Undervalued Stocks To Buy Now.
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