We track quarterly 13F filings from hundreds of hedge funds, including billionaire Leon Cooperman’s Omega Advisors. We use the information in these filings to help us develop investing strategies; for example, we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). We also like to review individual funds’ filings for stocks seeing recent insider buying; studies generally show that insider purchases are weak bullish signals and so we think that these stocks can serve as additional investment ideas for further research. Here are five stocks from Cooperman’s most recent 13F that at least one insider has bought in the last three months (or see the full list of stocks Omega reported owning):
The fund reported a position of 7.7 million shares in American International Group Inc (NYSE:AIG), which lost its place as the most popular stock among hedge funds during the first quarter of 2013 (check out the full top ten list). A Board member bought 10,000 shares of American International Group Inc (NYSE:AIG) in May. The insurer trades at a significant discount to the book value of its equity with a P/B ratio of 0.7, and has at least some upside potential even after selling off some of its assets to create shareholder value. With analyst expectations implying a forward earnings multiple of 11, we’d be interested in further investigating the company.
Omega disclosed ownership of 7.2 million shares of Linn Energy LLC (NASDAQ:LINE) in the filing; we recorded an insider buying stock in the $7.8 billion market cap oil and gas company last month. Linn Energy LLC (NASDAQ:LINE) currently pays a quarterly dividend of 72.5 cents per share, which makes for an annual yield of over 9%, though it has had to borrow money in order to cover these payments as well as the company’s capital expenditures. We’d note that the forward P/E is 21, so in terms of value the stock is not cheap with earnings perhaps not being high enough going forward to cover current dividend payments.
Express Scripts Holding Company (NASDAQ:ESRX) was another common pick between at least one insider and Cooperman’s fund- specifically, the 13F showed a position of 2.7 million shares. With the company recovering nicely from its dispute with Walgreen Company (NYSE:WAG), earnings per share are expected to come in at $4.30 this year which would place the pharmacy benefit management company at a current-year P/E of 14. Wall Street analysts expect small increases in earnings after that, so Express Scripts Holding Company (NASDAQ:ESRX) could be a value play. Bain Capital’s long/short equity hedge fund Brookside Capital had 3.9 million shares in its portfolio according to that fund’s own 13F (research more stocks Brookside owned).
Between January and March, Cooperman and his team slightly increased their stake in SandRidge Energy Inc. (NYSE:SD) to a total of nearly 27 million shares. We’ve also tracked an insider purchase at the troubled natural gas producer, where low nat gas prices following the company’s rapid expansion in recent years have left analysts expecting net losses both this year and in 2014. The stock has fallen 18% in the last year, yet 15% of the float is still held short. Prem Watsa’s Fairfax Financial Holdings is another major shareholder in SandRidge Energy Inc. (NYSE:SD) (find Watsa’s favorite stocks).
Rounding out our list of stocks from Omega’s 13F with recent insider purchases is medical device company Boston Scientific Corporation (NYSE:BSX). Boston Scientific Corporation (NYSE:BSX) has also been a bit troubled recently, and in the first quarter of 2013 its revenue fell by 6% versus a year earlier. Markets are expecting the company to rebound strongly, judging by the fact that it is valued at 20 times forward earnings estimates. Renaissance Technologies, founded by billionaire Jim Simons, increased its holdings during Q1 to 8.4 million shares (see Renaissance’s stock picks) but we would still avoid it for now on valuation.
Disclosure: I own no shares of any stocks mentioned in this article.