Leon G. Cooperman is one of Wall Street’s most beloved sons. The Bronx, New York native began his financial career at Goldman Sachs following graduation from Columbia Business School in 1967.
After a splendid and fortuitous 25-year passage, Cooperman retired from Goldman in 1991 and founded Omega Advisors, a New York-based hedge fund which has grown to $8.1 billion AUM as of April 30, 2013. He is still active in the markets at the prime age of 70 years.
In my opinion, it would be impossible for the brightest of today’s graduates to replicate Cooperman’s success on Wall Street given his unique position as the founder of Goldman Sachs’ asset management unit. Forbes estimates his personal wealth to exceed $2.5 billion as of March 2013. Even compared to the 1990’s and 2000’s, the banking sector today has matured to a new normal with a difficult trading environment and a competitive M&A business, limiting firm payouts.
Nonetheless, I consider it a privilege for investors to learn and benefit from Cooperman’s wisdom in navigating today’s markets. Here are three stocks that the billionaire philanthropist is buying in large quantity:
Citigroup Inc. (NYSE:C)
Serving 200 million customers in more than 160 countries worldwide, Citigroup Inc. (NYSE:C) has a global footprint which gives international exposure for investors. The megabank posted first quarter 2013 earnings back on April 15, earning $1.29 per share on $20.8 billion in revenue. Tangible book value increased to $52.35 per share, higher than the $50.90 book value recorded during the year ago period.
Readers may be surprised to learn that the ongoing debt crisis in Europe is playing to Citigroup Inc. (NYSE:C)’s benefit. The bank’s European CEO recently told reporters that “universal” banks such as Citi are gaining market share at the expense of domestic rivals such as Deutsche Bank AG (USA) (NYSE:DB), which are disadvantaged by the higher cost of European regulation.
Shares of Citigroup Inc. (NYSE:C) have advanced more than 37% since Michael Corbat succeeded Vikram Pandit as CEO back in October 2012. Wall Street believes that financial earnings will continue to be the strongest of any sector in the S&P 500, in agreement with Leon Cooperman. Analysts at Credit Suisse raised their price target on Citigroup to a new $60 from a previous $53 as recently as May 22.
In addition to Cooperman, famed hedge fund manager David Tepper of Appaloosa Management maintains Citigroup as his top holding, with more than $375 million invested.
Sprint Nextel Corporation (NYSE:S)
Wireless carrier Sprint Nextel Corporation (NYSE:S) has remained at the forefront of financial news in recent weeks, given its evolving relationship with Japanese telecom giant Softbank, wireless spectrum provider Clearwire Corporation (NASDAQ:CLWR), and potential suitor DISH Network Corp. (NASDAQ:DISH).
Amidst the ongoing discussions, Leon Cooperman has made Sprint Nextel Corporation (NYSE:S) his largest investment. Shares of the 3rd largest wireless carrier rallied heavily on April 15, following a proposed buyout and merger with Dish Network for $7.00 per share. The announcement by Dish comes after Softbank disclosed its own intentions to acquire Sprint outright.
Sprint Nextel Corporation (NYSE:S)’s discussions with Dish Network are ongoing, while Softbank prepares its next course of action. Wall Street remains bullish on Sprint, and analysts at JPMorgan believe the stock has upside to $8 per share as a result of heightened negotiations.
The Softbank acquisition is more logical for Sprint Nextel Corporation (NYSE:S) in my opinion; the Japanese telecom giant has demonstrated that a marriage would result in up to $3 billion in annual cost savings for Sprint by 2017. While Dish has proposed a higher offer, evidence is lacking on potential business synergies.
Fellow hedge fund manager and billionaire John Paulson has publicly stated he supports Dish Network’s bid for Sprint, while Cooperman has made no disclosure for either party.
Transocean LTD (NYSE:RIG)
Shares of Transocean LTD (NYSE:RIG) have fallen more than 8% since I published Should You Follow Carl Icahn into Transocean’s Deep Waters back on January 28.
The offshore driller gained attention in January when activist investor Carl Icahn stated he acquired a majority ownership position in the embattled company. Icahn’s investment came following news that Transocean had reached a $1.4 billion settlement with the Department of Justice related to the 2010 Deepwater Horizon incident.
Icahn stepped in once a “safe path” had cleared for Transocean, and now the stock has become a hedge fund favorite. Mr. Icahn encountered a setback in his activist role on May 17, when shareholders defeated his proposal for a $4 dividend at the company’s annual meeting. More than 75% of total votes supported a financially responsible $2.24 dividend. Icahn, however, earned a small victory with 1 board seat for his proposed nominee.
Wall Street is less optimistic on Transocean when compared to Citigroup and Sprint Nextel. Analysts believe the firm’s organic growth is limited and the stock is fairly valued.
Cooperman is likely betting that Icahn’s involvement with Transocean will result in further upside. While Icahn lost the battle for a higher dividend, he still has “skin in the game” with a new board seat. I cannot recommend Transocean for this reason alone, when combined with lukewarm fundamentals.
Foolish takeaway
In conclusion, Leon Cooperman is considered one of Wall Street’s brightest minds and a “living legend” according to many high-profile investors. His track record of 14.3% average annual returns, after fees, compared to the S&P 500’s 8.6% average return since 1996 speaks for itself.
Cooperman recommends the purchase of Citigroup, Sprint, and Transocean based on solid long-term fundamentals. My analysis supports his bullish case on Citigroup and Sprint; however, I cannot recommend buying Transocean.
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The article Billionaire Leon Cooperman’s Top Stocks for the Rest of 2013 originally appeared on Fool.com and is written by John Macris.
John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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