Omega Advisors, Inc. chairman and CEO Leon Cooperman recently spoke at Columbia Business School, breaking down his expectations for the next year and why he thinks the current bull market has life in it yet. “There is a time and price left in this U.S. equity bull market and another year of a respectable S&P 500 return in 2014 is expected,” he wrote in one of the slides for his May 20 presentation.
While last year’s incredible US equity returns have left some wondering how much life is left in this bull-run, but the current 59-month expansion is still one month shorter than the 10-cycle average dating back to 1949, so it’s certainly not long in the tooth.
Cooperman also presented evidence that the US recovery should be self-sustaining since households, having already spent five years delevering, are increasing their liabilities and corporate America, with more cash as a percentage of assets than at any point in the last thirty-odd years, should start spending again to bring fixed investments back in line with long-term trends.
In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
Leon Cooperman expects plenty of central bank support
Most US bear arguments start with the idea that tapering will put pressure on companies with weak balance sheets as financing becomes more expensive, but Cooperman expects continued monetary accommodation from the US and other key central banks to support the market at least through the end of this year. While the European Central Bank has been reducing its balance sheet over most of the last year, comments from ECB head Mario Draghi give some reason to expect more aggressive policies in June.
‘Treasuries, corporate bonds uninteresting and unattractive’: Leon Cooperman
While monetary accommodation is good for equities, it has pushed bond yields to extremely low levels. While some investors are responding to this by focusing on high yield corporate bonds instead of Treasuries, Cooperman isn’t interested.
“Nearly all of U.S. fixed-income securities, with the exception of structured credit, are uninteresting and unattractive both in an absolute sense and relative to U.S. equities,” he writes. “This conclusion includes Treasuries, investment-grade corporate bonds and high yield bonds.”
Europe, Japan equity markets will ‘likely exceed’ the US: Leon Cooperman
While Cooperman is optimistic about US equity markets, he thinks that Europe and Japan will both probably outperform this year. At a 2014E PE of 16x, the S&P 500 is valued a full multiple higher than its long-term average, but Europe is currently at 14.3x and Japan is at 12.6x. If Europe continues to recover and Japan doesn’t start to slide once again into deflation, both equity markets have more room to expand than the US.