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Billionaire Leon Cooperman’s Top Long-Term Holdings

Leon G. Cooperman, the manager of New York City-based hedge fund Omega Advisors, is one of the most well-known value-oriented investors of the current generation of money managers. Mr. Cooperman continues to follow in the footsteps of Benjamin Graham and David Dodd, seeking to buy securities at the right price. Leon Cooperman started his Omega Advisors in 1991, after serving as the head of research and a top strategist at Goldman Sachs. His flagship Omega Overseas fund generated a net-of-fees average return of 14.6% since inception in January 1992 through June 2014, outperforming the 9.3% average return generated by the S&P 500 Index over the same time span. Nonetheless, Mr. Cooperman has suffered his second consecutive down year in 2015, generating a negative return of approximately 10% across his funds. It is true that value investors have underperformed in recent years, as value investing has been ignored at the expense of growth-oriented investing. Even so, the history shows that value stocks have outperformed growth stocks on aggregate, so value investing is likely to come back into full force again. For that reason, Insider Monkey decided to lay out a list of five long-term stock picks owned by Leon Cooperman, which may represent attractive value investing opportunities for the years ahead.

Leon Cooperman
Leon Cooperman
Omega Advisors

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5 Sirius XM Holdings Inc. (NASDAQ:SIRI)

– Shares Owned by Omega Advisors (as of December 31): 32.15 Million

– Value of Omega’s Holding (as of December 31): $130.87 Million

Billionaire Leon Cooperman trimmed his fund’s stake in Sirius XM Holdings Inc. (NASDAQ:SIRI) by 9.79 million shares during the December quarter, ending 2015 with 32.15 million shares valued at $130.87 million. Mr. Cooperman firstly acquired a stake in the company during the first quarter of 2012, with the investment paying off quite handsomely in the subsequent years. Sirius XM is a satellite ratio provider that transmits music, sports, news, and other channels in the United States on a subscription fee basis. The company primarily distributes its satellite radios through the sale and lease of new vehicles, as it has agreements with most major automakers to offer radios in their vehicles. Sirius has been shifting focus on the used car market lately, a move that is anticipated to drive up earnings and cash flow. Even though the new car industry has been growing at a higher rate than the used car industry, the former is substantially lower in size than the latter. Thus, the used car market can trigger a new wave of subscriber growth at the company. Sirius XM’s subscriber revenue, which accounted for approximately 84% of total revenue last year, reached $3.82 billion in 2015, increasing by 8% year-on-year. The increase was mainly driven by higher daily weighted average number of subscribers and an increase in particular self-pay subscription rates, which was partly offset by subscription discounts. Shares of Sirius XM are up by 3% in the past 12 months and trade around 22.2-times expected earnings, versus the forward P/E multiple of 17.6 for the S&P 500. Peter Adam Hochfelder’s Brahman Capital reported ownership of 90.91 million shares in Sirius XM Holdings Inc. (NASDAQ:SIRI) through its 13F filing for the December quarter.

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#4 Citigroup Inc. (NYSE:C)

– Shares Owned by Omega Advisors (as of December 31): 2.98 Million

– Value of Omega’s Holding (as of December 31): $154.31 Million

Citigroup Inc. (NYSE:C) was Mr. Cooperman’s tenth-largest equity position at the end of December 2015, being valued at $154.31 million. Omega Advisors cut the stake in Citigroup by a mere 50,100 shares during the October-December period, ending the year with 2.98 million shares. The renowned money manager went long the stock during the first quarter of 2012. The fourth-largest U.S. bank has seen its shares decline by 19% in the past 52 weeks and they are currently priced around 7.4-times expected earnings, significantly below the forward P/E ratio of 13.0 for the Financial sector. Citigroup’s stock underperformance and cheap valuation are mainly attributable to the bank’s relatively high exposure to the energy industry as compared to other industry peers, and high exposure to Europe. Just recently, analysts at Keefe, Bruyette & Woods (KBW) argued that Citigroup should consider a breakup, saying that “One of the primary benefits of becoming smaller is escaping the vise that is the current regulatory environment”. The possible break-up involves selling the international consumer businesses, excluding Mexico, selling the Mexico franchise, and separating the remaining company’s U.S. consumer business and global corporate bank. The aforementioned break-up plan could yield an approximate market value of $198 billion, which represents an upside of 61% from the current market value. Boykin Curry’s Eagle Capital Management upped its stake in Citigroup Inc. (NYSE:C) by 4% during the December quarter to 25.26 million shares.

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#3 HRG Group Inc. (NYSE:HRG)

– Shares Owned by Omega Advisors (as of December 31): 12.16 Million

– Value of Omega’s Holding (as of December 31): $164.85 Million

The New York City-based hedge fund owns 12.16 million shares of HRG Group Inc. (NYSE:HRG) as of the end of the final quarter of 2015, down 202,900 shares quarter-on-quarter. The 12.16 million-share position was worth $164.85 million at the end of 2015. Omega Advisors went bullish on HRG during the final quarter of 2012, an investment that has also turned out to be a successful bet. HRG Group is a diversified holding company that owns businesses in four segments, which involve: branded consumer products and related businesses; insurance and reinsurance services; financing and asset management services; and oil and natural gas properties. The company’s revenues for the first quarter of fiscal 2016, ended December 31, totaled $1.23 billion, increasing $84.4 million or 7.4% year-on-year. The increase in the company’s top-line figure was mainly driven by growth from acquisitions and organic sales in its Consumer Products segment, which were mainly offset by foreign currency headwinds and lower sales in the Energy segment due to lower oil and natural gas prices. The company’s net consumer product sales for the quarter increased by 14.1% year-on-year to $1.22 billion, mainly due to a number of acquisitions and higher sales of pet supplies, consumer batteries, home and garden control products, and other products. HRG’s shares have advanced 10% in the past 12 months, after gaining slightly more than 1% year-to-date. Jason Karp’s Tourbillon Capital Partners owns 9.53 million shares of HRG Group Inc. (NYSE:HRG) as of December 31.

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#2 Chimera Investment Corporation (NYSE:CIM)

– Shares Owned by Omega Advisors (as of December 31): 13.37 Million

– Value of Omega’s Holding (as of December 31): $182.41 Million

Omega Advisors reduced its exposure to Chimera Investment Corporation (NYSE:CIM) by 687,285 shares during the final quarter of 2015, ending the year with 13.37 million shares valued at $182.41 million. According to a Schedule 13G filing submitted with the SEC in early February, Leon Cooperman owns 18.74 million shares of Chimera, which account for 9.9% of the company’s outstanding common stock. It should be noted that Mr. Cooperman acquired the initial stake in Chimera during the second quarter of 2012, a bet that has not been overly successful if ignoring the company’s dividend payments. Chimera Investment is a real estate investment trust (REIT) that primarily invests in a diversified portfolio of mortgage assets such as Agency RMBS, Non-Agency RMBS, Agency CMBS, residential mortgage loans, and real estate related securities. The REIT’s 2015 interest income grew $185 million or 27% year-on-year to $873 million, mainly due to the purchase of seasoned sub-prime residential mortgage loan pools during the second half of 2014 and 2015. The interest income figure for 2015 was also impacted by an increase in agency holdings, which contributed with an additional $12 million in interest income. Chimera Investment pays out an annualized dividend of $1.92 per share, which equates to an attractive dividend yield of 13.96%. The REIT’s shares have declined 14% over the past year. Israel Englander’s Millennium Management had 1.52 million shares of Chimera Investment Corporation (NYSE:CIM) in its portfolio at the end of 2015.

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#1 American International Group Inc. (NYSE:AIG)

– Shares Owned by Omega Advisors (as of December 31): 4.10 Million

– Value of Omega’s Holding (as of December 31): $253.86 Million

American International Group Inc. (NYSE:AIG) represented Mr. Cooperman’s second-largest equity position at the end of the December quarter, accounting for 5.54% of his fund’s equity portfolio. Omega Advisors upped its position in AIG by 731,200 shares in the fourth quarter to nearly 4.10 million, which were valued at $253.86 million on December 31. AIG shares landed on the fund’s equity portfolio for the first time during the first quarter of 2012. The insurer has been under pressure from activist investors lately, including billionaires Carl Icahn and John Paulson, who have been urging the company to break-up into three separate companies that would focus on life, property-casualty and mortgage coverage insurance. The so-called de-conglomeration may enable AIG to avoid the systemically important financial institution (SIFI) designation, which is associated with high regulatory costs. In early February, AIG announced that its Board of Directors agreed to increase the size of the Board to 16 seats from 14, with John Paulson of Paulson & Co. and Samuel Merksamer, a Managing Director of Icahn Capital LP, being added to the Board. The insurer plans to reduce expenses by $1.6 billion through 2017, and has already taken steps to achieve this target; AIG recently announced plans to cut 242 jobs in five locations in New York City. AIG shares have plummeted by nearly 14% since the beginning of 2016 and it does not look like they are on track to recover in the foreseeable future. Nonetheless, the new AIG Board additions might serve as an additional catalyst for the company’s financial and stock performance in the short-term future. Icahn Capital LP owned 42.24 million shares of American International Group Inc. (NYSE:AIG) at the end of the previous year.

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Disclosure: None