We have gone through the most recent 13Fs from billionaire Leon Cooperman’s Omega Advisors and compared it to previous ones (see a history of the fund’s stock picks), and here are some things we noticed:
Buying up underperforming Freeport McMoRan and SandRidge. Among the earlier things that stands out when analyzing Cooperman’s third quarter 13F is his bullishness on a couple underperforming, heavily discussed companies: Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and SandRidge Energy Inc. (NYSE:SD). In Freeport, the billionaire established a $94 million position that sits in his top 30 stock picks overall. SandRidge represents a larger stake, worth about $200 million; it’s his seventh largest equity holding now.
A bet on SandRidge indicates that on the whole, Cooperman is bullish on a rebound in natural gas prices, which the company is heavily reliant on. With most analysts forecasting natural gas supplies to still boom in the coming years, increased demand can occur in the longer-term once domestic export facilities are up and running. Over the shorter-term, SandRidge can reward investors if it can capitalize on the Mississippian Lime shale. The company did beat earnings significantly last quarter, so there is momentum here.
Freeport McMoRan, meanwhile, is a clear bet on rebounding metals prices, and asset sales in higher cost mines have improved the company’s long-term outlook. Shares of Freeport are up 15% over the past three months and are very cheap at 11 times forward earnings.
Trading out Wells Fargo for more Citigroup. Another interesting move Cooperman and Omega made in the third quarter was the decision to buy shares of Citigroup Inc. (NYSE:C) while selling out of Wells Fargo & Co (NYSE:WFC) completely. While Wells has the obvious advantage in the mortgage segment and its underwriting business is improving, Citigroup has better growth prospects due to its international exposure. Wall Street expects Citi to generate earnings expansion of 20% a year over the next half-decade, while estimates for Wells Fargo clock in around 7%. Additionally, Citi sports a PEG ratio near 0.6, about one-third the value of Wells, so it’s clearly cheap.
Cutting communications. Another trend that’s evident here is Cooperman’s decision to reduce his holdings in two major communications companies, Sprint Corporation (NYSE:S) and QUALCOMM, Inc. (NASDAQ:QCOM). Sprint and Qualcomm were both in the billionaire’s top 5 at the end of the second quarter, and with cuts of 60% and 25%, respectively, but it’s difficult to know if this is profit-taking, or part of a broader bearishness toward the sector. Both stocks have generated solid gains in 2013, and both are fairly valued. We’ll be watching Cooperman here for more updates.