Inside Leon Cooperman’s portfolio
Leon Cooperman, Omega Advisors chairman & CEO, shares what sectors he likes and gives his best stock plays right now. Cooperman says he’s finding value in financials, energy and health care.
Transcript:
anyway, on the financial side i met recently about a week agowith the top manager of aig. aig sells around 80% of bookvalue. book value is around 60. we think over the next two orthree years there’s a strong argument to be made that aig will get to at least a 10% return on equity, which would imply earnings of well over $6 a share because book value will begrowing. we think a 10% r.o.e. ought to command one times book value at a minimum. so we could see aig going up 25%over the next 12, 18 months. the banks look attractively priced.citi corp. at 10 times, jpmorgan at 10 times, sally mae yields2.5% roughly. we like all those names i just mentioned. you feel like the banks are finally getting going here in 2014? well, yeah. you’re not going to get jp morgan and citi corp. by finingthem. the government is as much responsible for the fiasco asthese financial companies. and i think they’re overreacting and excessively disciplining them to the detriment of the economy.this too shall pass. let me ask you in honor of jim cramer being on an oil rig out in the gulf of mexico today, we’re going to have him on in a short period as well, let’s talk sandridge energy, you like it? yeah, it’s a big position for us. going into something i mention we owned i always say why would you mention it if you didn’t own it? when i was swimming with the turtles last week, sandridge had a meeting on march 4th. they presented their story including i understand from my partner who was at the meeting they thought their nav was somewhere between $10 and $15 a share. stock is trading at 6 and a fraction. we happen to agree with the low-end of that range. we see how they get there. a lot of people waiting for activists to show up.an activist showed up here in tpg, they got on the board,replaced mlgt. the new management is doing the right things.we think if you could buy something at six and change with an nevf o 10 where you could get the benefit of a possible takeout, they’re simplifying the company. they sold their offshore assetsboth in mexico, they’re an onshore land play. that’s very attractive. one that’s not done particularly well for us but we like this whole atlas energy complex which three mlps yields about 4.5%. sells big discount what we think the asset worth. atlas yields 8.5%. and atlas production yields about 11. we like halliburton and the oil service business. one that we’ve liked for a couple three years, i don’t think it’s a today stock, but the way i like to point out to people if everything you own is in a new high list, you’re a momentum player. and everything you own is low list, you’re out of business. so we like to have some mixture of new highs and some on the low list. of course we like to buy when they’re on the low list, not owning them going into being on the low list. but transition yields about 7%, steep discount to nev, another six months of bad in the news coming out of the deep water drilling area, but we think that market turns. six months from now and you’ve got something yielding 7% selling a discount to nev. rather than ask carl about e-bay, ask him about transocean because that’s about the only thing i think he’s involved in and he’s lost money. he’s having an unbelievable year, and i give him great credit, but i think he’sinvolved with transocean as
Why Cooperman agrees with Icahn on eBay
Leon Cooperman, Omega Advisors chairman & CEO, discusses his position in eBay and why he agrees with Carl Icahn’s stance that eBay should spin off PayPal
Transcript:
you’re a shareholder in e-bay, what? a reasonably good sizedposition. yeah, we have about 2% position in e-bay. i think we were there actually before carl. i have enormous respect for him. we happen to agree. i think they should spin out a portion of paypal, monetize that, create a value, should lower their cost of capital and give them some flexibility managing their capitalstructure. and so, you know, we’re not a public activist. we tend to make up known to management privately. we’re not shy, but i give carl a lot of credit for taking the time and showing the energy. and in this case we happen to agree with him. not as aggressive in buying back stock as you would be at say apple, which we’re not involved in presently. but he’s an enormous intellect. he knows what he’s doing. very sophisticated, very smart, very hard working. right. in this case we happen toagree with him. well, will you get more involved to show e-bay and mr. donohoe that you’re on carl icahn’s side? i mean, e-bay was out basically today rejecting his nominees for the board pretty swiftly and sternly as well. no, we’ll make our viewsknown. but we’re not like, i would say, a public activist. we’ll promote our views and our thinking directly to themanagement. and we’ll have to wait and see. at the end of the day the way we vote is we work with our feet. if we don’t like what’s doing on, if we don’t like the valuation proposition, thenwe’ll move on.
Cooperman: Highly doubtful market rages from here
Leon Cooperman, Omega Advisors chairman & CEO, looks back over the five-year span of the bull markets and explains how we arrived to the economic recovery we are currently in. “It does not look like a recession is in the cards anytime,” Coopeman says.
Transcript:
well, i think we have to thank mr. bernanke slowly growing economy to get where we’ve gotten. i mean, it’s very predictable in a sense that, you know, every economic recession sows the seed for the next business recovery and every business recovery sows the seeds for the next recession. so back then in march of ’09 the market figured out that monetary and fiscal policies were about to change and started to rise. and low and behold in june of ’09 we began the economic recovery we’re currently in. so i think it’s kind of very classical. so is it bull market aging? yes, is it over? no. is it likely to rage from here?i think highly doubtful. i think the market’s in a zone of fair valuation and really no reason for it to rage in my opinion. if the economy ultimately the stock market’s got a better relationship than what’s going on in the economy. if the economy’s growing 2 pblgt, 2.5% and profits are growing say 5, inflation is 1.5, and short rates is zero and the ten-year government is currently270, there’s no basis for the market to have a 30% year againlike it did last year. iem thinking the market’s in a fair zone evaluation. i think in a previous program, scott, i thought the debate raged around what’s the proper multiple for the market.my view, and others disagree, both sides by the way, but i think a proper multiple in the market all things weighed is about 16 times the earnings estimate that we’re using which is consensus about 117. so if you take 16 times 117, help me out, i think that’s something like 1870-something or other. for the end of this year the market is — the economy i should say is looking well for 2015. and we think it should be. then mark it up by another 6%. and that gives you a number close to the mid-1900s. and that’s kind of our central scenario. but i would be surprised if it rages. i think it will continue to age because most bear markets relate to recession. does not look like a recession is in the cards any time soon.
Investors hesitant, but still bullish
CNBC’s Jane Wells takes a look at retail investor confidence in this current bull market, 5 years after the stock market bottomed out. Trader Pete Najarian provides insight.
Transcript:
howard marks at oak tree capital said last week that while 1%feels the recovery, much of the rest of the country, still feels traumatized, particularly out west. remember this? as countrywide does what it has to to stay afloat, some people have floated the b word around. banking regulators jumped infriday to take over the mortgage lender after withdrawals bypanicked deposit tors. we talk about lehman and merrill lynch, washington mutual founded in 1889. i’m concerned about what’s happening with all these banks. the fear takes over.and it got me as good as the next guy. well, le mar jones wasn’t the only average joe investor who felt the fear as people lostjobs, homes and retirements. he’s back in the market with one foot because it’s the only place where returns can beat real inflation. but if he’s changed, does he think wall street’s changed? we also talk about changing and restructuring of wall street and the unfair advantage that they have. i just don’t see that that’s changed. i don’t think it ever will change. and i think it’s really the way it’s always been. but still he’s long-termbullish and an optimist because that’s how americans are.what’s the alternative? and t.d. ameritrade gave us interesting analysis, scott, while investors who are long are constantly nervous, options now make up 40% of daily trading volume, that’s compared to 12% five years ago. back to you. jane, thanks so much. pete, i’d be remissed if i didn’t get a comment.i’ve been preaching about it for years. leon cooperman will talk about the options he’s been using. it’s not just small retail, it’sthe big hedge funds. everybody is starting to adapt to the possibilities of not just speculative but just ways that can protect portfolios as well.
