In this article, we examined Billionaire Leon Cooperman’s portfolio management strategy and why Billionaire Leon Cooperman is crazy about these 10 stocks.
The hedge fund manager and American billionaire investor Leon Cooperman recently stated in an interview that the stock market will be down from a year from now amid rising inflation, increasing taxes along with prospects for an interest rate hike. Though Omega Advisors chairman doesn’t see any immediate downside risk, he still believes the long-term US economic outlook is not favorable as the world’s largest economy is pulling the demand forward. He says that the recent stock market rally was supported by sentiments that the economy will rebound but he is concerned that how long stocks could move higher on recovery projections. He is also worried about the rising government debt levels as well as the strategy of supporting the labor market through multi-trillion dollar stimulus packages.
“If you spoke to a hundred economists today and he asked them what their view is of the potential real growth of the US economy, the response would be centered on 2%,” Cooperman said. “We’re growing this year four to five times potential, yet the Fed is persistent in keeping interest rates at near zero. That doesn’t make any great sense to me. It’s just pushing people out on the risk curve.”
He is also showing concerns over the rising inflation, with the expectation that the inflation number will move well over Fed’s expectations.
“I think that Mr. Powell will be surprised by inflation. It’s not going to be as quiescent and transitory as he thinks. I think the Fed will be forced to say something before the end of 2022,” Cooperman said.
Billionaire Leon Cooperman, who worked for Goldman Sachs for 25 years, remained busy last year in adjusting his portfolio to cope with rapidly changing market dynamics. He significantly expanded his focus towards financial stocks since the beginning of last year. As of the end of the first quarter, financial stocks accounted for more than 40% of $1.6 billion worth of Leon Cooperman’s 13F stock portfolio, up significantly from 17.88% of portfolio weighting at the end of 2019. Interestingly, instead of chasing big banking stocks, the billionaire investor invested heavily in small and mid-cap loan and mortgage companies. In the past couple of quarters, he also expressed confidence in business acquisition and development companies.
Leon Cooperman, who sits on a net worth of around $3.2 billion, believes in the portfolio diversification strategy instead of a concentrated portfolio. He has well-diversified his stock portfolio towards value and growth stocks such as Microsoft Corporation (NASDAQ: MSFT) and Alphabet Inc. (NASDAQ: GOOGL). Microsoft and Alphabet Inc may seem like growth stocks because of their growth rates, but we actually classify especially Alphabet Inc as a value play because of its huge discount compared to sum of its parts as well as its peer’s P/S multiples. The billionaire investor is also seeking to take advantage of the booming information technology, communications, and consumer discretionary sectors. Furthermore, Leon Cooperman invested millions of dollars in real estate and energy stocks to capitalize on the economic recovery period. At the end of the first quarter, the real estate sector represented 7.26% of the entire Leon Cooperman’s portfolio while energy stocks weighted around 8.96%.
Billionaire Leon Cooperman grew up in a Jewish family in New York City after immigration from Poland. After completing his MBA degree from Columbia Business School in 1967, he joined Goldman Sachs and spent 22 years in the Investment Research Department as partner-in-charge, co-chairman of the Investment Policy Committee, and chairman of the Stock Selection Committee. In 1989, he became chairman and chief executive officer of Goldman Sachs Asset Management. He also headed GS Capital Growth Fund for more than 1 year. After retiring from Goldman Sachs, he founded Omega Advisors and converted it into a family office fund in 2016.
While Leon Cooperman’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We launched our monthly newsletter’s activist strategy more than 4 years ago and this strategy’s picks returned 206.8% since then and beat the SPY’s 91% gain.
Despite several portfolio adjustments, billionaire Leon Cooperman is crazy about few stocks that he believes would perform well in 2021. Let start digging into 10 stocks billionaire Leon Cooperman is crazy about:
10. Energy Transfer LP (NYSE: ET)
Cooperman’s Stake Value: $51,744,000
Percentage of Leon Cooperman’s 13F Portfolio: 3.22%
Number of Hedge Fund Holders: 25
Leon Cooperman has been holding a position in Energy Transfer LP (NYSE: ET) since 2017 amid its strong dividend yield and steady share price upside potential. During the first quarter of 2021, Omega Advisors raised its stake in ET by 4% to 6.73 million shares valued at around $51.7 million. Shares of Energy Transfer LP rallied close to 90% since the beginning of this year, thanks to improving energy prices and economic reopening. The company offers a dividend yield of 5.61%, with a current quarterly dividend of $0.15 per share.
Energy Transfer L.P. was in 25 hedge funds’ portfolios at the end of the first quarter of 2020, flat compared to the previous quarter. The all-time high for this statistic is 36.
9. Ferro Corporation (NYSE: FOE)
Cooperman’s Stake Value: $55,990,000
Percentage of Leon Cooperman’s 13F Portfolio: 3.49%
Number of Hedge Fund Holders: 12
Leon Cooperman left his position unchanged in specialty materials company Ferro Corporation (NYSE: FOE) in the first quarter of 2020. Fortunately, shares of Ferro Corporation saw a stunning share price rally of almost 50% so far this year, driven by economic reopening. Furthermore, reports are showing that Ferro to be acquired by Prince International in a $2.1B deal.
Ferro Corporation was in 12 hedge funds’ portfolios at the end of the first quarter of 2021, flat compared to the previous quarter. The all-time high for this statistic is 28.
8. Microsoft Corporation (NASDAQ: MSFT)
Cooperman’s Stake Value: $57,930,000
Percentage of Leon Cooperman’s 13F Portfolio: 3.61%
Number of Hedge Fund Holders: 251
The tech giant Microsoft Corporation (NASDAQ: MSFT) is among the long-running stock holding of Omega Advisors. The firm first initiated a position in MSFT in 2015. At the end of the first quarter of 2021, Leon Cooperman held 245,705 shares of Microsoft, accounting for 3.61% of the overall portfolio. Shares of the tech giant are up 13% year to date followed by robust appreciation in the previous years. Moreover, the company has the potential to offer double-digit dividend increase to investors.
ClearBridge Investments, an investment management firm, mentioned a few stocks including Microsoft Corporation in the first quarter investor letter. Here is what ClearBridge Investments stated:
“We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks. The FAANGs and Microsoft delivered mixed results during the quarter and we continue to be mindful of our weighting to these mega cap growth stocks to ensure they are not limiting our ability to add diversity through new ideas. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
7. Devon Energy Corporation (NYSE: DVN)
Cooperman’s Stake Value: $68,174,000
Percentage of Leon Cooperman’s 13F Portfolio: 4.25%
Number of Hedge Fund Holders: 52
Billionaire Leon Cooperman is crazy about the oil exploration and production company Devon Energy Corporation (NYSE: DVN). He initiated a big position in Devon Energy during the first quarter by purchasing 3.12 million shares valued at around $68.17 million, accounting for 4.25% of the entire portfolio. In the past couple of quarters, Devon Energy’s stock price benefited from an improvement in oil prices. Its shares are up almost 95% since the beginning of this year. Devon’s dividend yield is close to 1.50%.
GoodHaven Capital Management, a concentrated portfolio investment management firm, highlighted a few stocks including Devon Energy in the first quarter investor letter. Here is what GoodHaven Capital Management stated:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
6. Ashland Global Holdings Inc. (NYSE: ASH)
Cooperman’s Stake Value: $71,190,000
Percentage of Leon Cooperman’s 13F Portfolio: 4.44%
Number of Hedge Fund Holders: 36
Specialty chemical solutions Ashland Global Holdings Inc. (NYSE: ASH) is among the long-running stock holding of Omega Advisors. Billionaire Leon Cooperman left his position unchanged in Ashland during the first quarter. His firm held 801,965 shares valued at $71.1 million, representing 4.44% of the overall portfolio.
Ashland Global Holdings investors should pay attention to a decrease in support from the world’s most elite money managers recently. Ashland Global was in 36 hedge funds’ portfolios at the end of the first quarter of 2021 compared to 38 positions in the previous quarter. The all-time high for this statistic is 46.
This article is originally published at Insider Monkey.
5. MP Materials Corp. (NYSE: MP)
Cooperman’s Stake Value: $87,215,000
Percentage of Leon Cooperman’s 13F Portfolio: 5.44%
Number of Hedge Fund Holders: 29
Omega Advisors initiated a position in MP Materials Corp. (NYSE: MP) during the third quarter of last year and left the position unchanged in the first quarter of 2021. The firm held 2.4 million shares of MP at the end of the first quarter, weighted around 5.44% of the overall portfolio. The company does not offer dividends to investors. However, its share price appreciated 11% since the beginning of this year.
Prominent investors were in a less optimistic mood. MP Materials was in 29 hedge funds’ portfolios at the end of the March quarter compared to 32 positions in the previous quarter.
4. Athene Holding Ltd (NYSE: ATH)
Cooperman’s Stake Value: $87,526,000
Percentage of Leon Cooperman’s 13F Portfolio: 5.46%
Number of Hedge Fund Holders: 44
Billionaire Leon Cooperman is crazy about Athene Holding Ltd (NYSE: ATH) as he raised his stake in the insurance company by 57% to 1.73 million shares, accounting for 5.46% of the overall portfolio. Cooperman’s strategy of adding more ATH shares moved in the right direction. This is because the share of Athene Holding grew 45% year to date, extending the twelve-month gains to 76%.
Prominent investors were turning bullish. The number of long hedge fund bets moved up by 8 in recent months. Athene Holding was in 44 hedge funds’ portfolios at the end of the first quarter of 2021 compared to 36 positions in the previous quarter. The all-time high for this statistic is 50.
3. Cigna Corporation (NYSE: CI)
Cooperman’s Stake Value: $102,740,000
Percentage of Leon Cooperman’s 13F Portfolio: 6.4%
Number of Hedge Fund Holders: 53
Omega Advisors held a big stake in Cigna Corporation (NYSE: CI) at the end of the first quarter of 2020, accounting for 6.41% of the overall portfolio. Shares of Cigna contributed to Omega Advisors’ performance during the first quarter. Its share price soared 15% year to date. In addition, the company offers a dividend yield of 1.67% and its quarterly dividend is at $1 per share.
Prominent investors turned less optimistic. The number of long hedge fund bets declined by 4 in recent months. Athene Holding was in 53 hedge funds’ portfolios at the end of the first quarter of 2021 compared to 57 positions in the previous quarter.
2. Fiserv, Inc. (NASDAQ: FISV)
Cooperman’s Stake Value: $122,683,000
Percentage of Leon Cooperman’s 13F Portfolio: 7.65%
Number of Hedge Fund Holders: 75
Leon Cooperman is crazy about Fiserv, Inc. (NASDAQ: FISV) over the last two years. The firm held 122 million worth of stake in Fiserv, accounting for 7.65% of the overall portfolio. The share price of the financial services company is struggling to trade in green this year.
Madison Funds, an investment management firm, highlighted a few stocks including Fiserv in the first quarter investor letter. Here is what Madison Funds stated:
“This quarter we researched several new stock ideas, but because of high prices, acted on only one. Thus, a new portfolio name is Fiserv, with corporate headquarters in Brookfield, WI, just down I-94 from us. Fiserv is a technology company serving financial institutions (“FIs”) and retail merchants. It has two main business lines. In the first, it’s a market leader in outsourced IT solutions for banks and credit unions, online and mobile banking technology, digital money movement solutions, and card issuing services. Fiserv’s second core business is merchant acquiring and processing, where it’s a leader in providing a variety of solutions to help all types of merchants accept digital payments. They entered this business through the acquisition of First Data in 2019.
Within the first business, Fiserv’s software is critical to the daily operations of FI clients. Their solutions not only provide the vital central processing systems, but also enable services such as electronic bill pay and digital money transfers at both large institutions and local banks and credit unions alike. As such, it is an incredibly sticky business that is resilient through economic cycles. On the merchant acquiring side of Fiserv, they process trillions of dollars annually for millions of merchant clients. Their solutions cater to all types of merchants and optimize for seamless acceptance and high authorization rates while also limiting fraud. Similar to the IT outsourcing business, Fiserv’s merchant solutions are critical to their customers’ daily operations. Furthermore, we are especially encouraged by their investments in new solutions, particularly Clover and Carat. Clover is a small and midsize business merchant acquiring platform and Carat is an e-commerce acquiring platform. Both these products hit the bullseye in terms of the way people are interacting with the retail industry, and both are growing at above market rates, which we believe will sustain into the future.
In addition to Fiserv’s favorable business characteristics and competitive positioning, the management team, led by CEO Frank Bisignano, has a track record of successfully investing for growth, improving profitability, and intelligently allocating excess capital. We believe these value-creating activities will continue going forward.
Financial institutions are increasingly making investments to digitize their customer facing products and digital payments are increasingly taking share from cash as a form of payment. As a result, demand for Fiserv’s solutions, should continue to grow nicely in the coming years. In our view, Fiserv offers a nice combination of above average growth, high profitability, business resiliency, and shareholder-friendly management. We do not believe these characteristics were fully reflected in Fiserv’s share price when we made our investment during the quarter at a discount to the market’s 2021 price-to-earnings (P/E) multiple, a valuation level well below Fiserv’s historical premium.
An offsetting trade was the sale of Cognizant Technology Solutions, which was sold around the time Fiserv was added to the portfolio. Cognizant had been held since 2018, and we had expected it to perform similarly to another portfolio holding in the same industry, Accenture. Alas, multiple years of below industry growth challenged the investment, and despite our belief that CEO Brian Humphries could materially improve operations, recent metrics regarding elevated employee turnover and still below-average revenue growth led us to conclude that there was more heavy lifting required at the company. We decided that our investors would be better served by being invested in Fiserv rather than Cognizant.”
1. Alphabet Inc. (NASDAQ: GOOGL)
Cooperman’s Stake Value: $123,751,000
Percentage of Leon Cooperman’s 13F Portfolio: 7.72%
Number of Hedge Fund Holders: 185
Billionaire Leon Cooperman has been holding a position in Alphabet Inc. (NASDAQ: GOOGL) since 2015 and he left his position unchanged in the first quarter of 2021. At the end of the first quarter of 2021, he held 60,000 shares of Alphabet. The company’s stock price is up 36% since the beginning of this year, enlarging twelve-month gains to 65%.
Artisan Partners, a high value-added investment management firm, mentioned a few stocks including Alphabet in the first quarter investor letter. Here is what Artisan Partners stated:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
You can also take a peek at 10 Best Stocks to Buy According to Warren Buffett and 10 Best Stocks to Buy Now According to Bill Gates.
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This article is originally published at Insider Monkey.
