Should You Consider Buying OneMain (OMF) Shares?

ClearBridge Investments, an investment management firm, published its “All Cap Value Strategy” fourth quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge All Cap Value Strategy had a positive absolute return for the fourth quarter but underperformed the benchmark Russell 3000 Value Index. On an absolute basis, the Strategy posted gains in 10 of 11 sectors in which it was invested during the quarter. The main contributors to the Strategy’s performance were the materials and health care sectors. The sole detractor to the Strategy’s performance was the communication services sector. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

ClearBridge Investments All Cap Value Strategy, in its Q4 2021 investor letter, mentioned OneMain Holdings, Inc. (NYSE:OMF) and discussed its stance on the firm. Founded in 1912, OneMain Holdings, Inc. (NYSE:OMF) is a Evansville, Indiana-based financial services company with a $6.1 billion market capitalization, and is currently spearheaded by its CEO, Douglas Shulman. OneMain Holdings, Inc. (NYSE:OMF) delivered a -3.62% return since the beginning of the year, while its 12-month returns are down by -11.55%. The stock closed at $48.23 per share on April 04, 2022.

Here is what ClearBridge Investments All Cap Value Strategy has to say about OneMain Holdings, Inc. (NYSE:OMF) in its Q4 2021 investor letter:

“Similar to the energy sector, the financials sector is also trading at very depressed multiples relative to the market. While the sector’s strong fundamentals received some recognition in 2021, it was rewarded with substantially lower valuations than it should have had. Despite earnings growing over 30% and exceeding the overall market’s, financial stock multiples stayed flat and are currently selling at a discount of roughly 9x forward earnings.

Consumer lender OneMain is an excellent representation of the divide between perception and reality. Similar to the market’s outlook on natural gas prices for EQT, the outlook for consumer credit metrics are worse than the current reality. It is inevitable that record-low delinquencies and loss rates will rise. However, the market’s perception of these headwinds to future earnings growth has been excessive. Higher loan losses are just one piece of a larger pie, and we believe that accelerating loan growth and associated operating leverage provides a buffer to allow OneMain to continue to compound earnings for the foreseeable future. Concerns about credit have completely overshadowed these positive drivers and have resulted in the stock trading at just 5x its projected cash earnings for 2022.”

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Our calculations show that OneMain Holdings, Inc. (NYSE:OMF) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. OneMain Holdings, Inc. (NYSE:OMF) was in 44 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 41 funds in the previous quarter. OneMain Holdings, Inc. (NYSE:OMF) delivered a -7.73% return in the past 3 months.

In February 2022, we also shared another hedge fund’s views on OneMain Holdings, Inc. (NYSE:OMF) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.