Omega Advisors Inc. is a New York-based hedge fund founded by one of the most respected figures in the investment business, Leon Cooperman. In 1991, after twenty-five years at Goldman Sachs, Cooperman launched this hedge fund with self-funded money of $500 million. As of April 30, Omega Advisors has roughly $9.2 billion in assets under management and has enjoyed a strong long-term track record in spite of losses in 2014, which was a first for Cooperman. Despite that, Cooperman’s main fund has delivered a compounded annual net-of-fees return of 14% since its inception. Currently, Cooperman is the Chief Executive Officer at Omega Advisors and alongside his partners, manages a public equity portfolio valued at $6.27 billion as of March 31. In this article, we will discuss some of his largest new positions initiated during the first quarter, which include the following companies: Targa Resources Corp (NYSE:TRGP), HRG Group Inc. (NYSE:HRG) and Humana Inc (NYSE:HUM).
Professional investors like Cooperman spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. A portfolio of the 15 most popular small-cap stocks among funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012 in backtesting. The exceptional results of this strategy got even better in forward testing after the strategy went live at the end of August 2012, returning more than 144% and beating the market by more than 84 percentage points since then, and by 4.6 percentage points in the first quarter of this year (see the details).
Omega Advisors initiated long positions in both Targa Resources Partners LP (NYSE:NGLS) and Targa Resources Corp (NYSE:TRGP), the latter of which owns general and limited partner interests in the former. Cooperman’s fund acquired a 3.94 million-share stake in Targa Resources Partners LP (NYSE:NGLS) and a 1.96 million-share stake in Targa Resources Corp (NYSE:TRGP), the combined stakes being valued at $350.90 million as of the end of March. Despite the fact that Targa Resources Corp experienced a slump in its quarterly revenues and net income, the increase in distributable cash flow might have offset the effect of the two disappointing figures, as the stock price increased following its latest financial results. The company also reported a rise in its gross margin, reaching a figure of $411.4 million in the first quarter compared to $379.6 million reported a quarter ago. Jim Simons’ Renaissance Technologies is another major investor in both Targa Resources Partners LP (NYSE:NGLS) and Targa Resources Corp (NYSE:TRGP), owning a stake of 448,683 shares in the former and 351,700 shares in the latter.