Billionaire Leon Cooperman’s Stock Picks

Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

A former general partner of Goldman Sachs and CEO of Goldman Sachs Asset Management (GSAM), Leon Cooperman has been the Chairman and CEO of equity hedge fund Omega Advisors since 1991. Cooperman joined GSAM right after graduating from Columbia University’s MBA program, and stayed with the firm for 25 years before striking out on his own to found Omega. At 68, he remains active in the investing world, often giving interviews on Bloomberg and CNBC in addition to participating in panels like May’s SALT conference in Las Vegas. Recently, Cooperman has been reiterating his stance that US government bonds are overvalued.

Cooperman is also vocal in the political realm. Last December, he wrote an “Open Letter to the President,” that created quite a bit of controversy with some calling him a “whiny billionaire.” An excerpt of his letter: “…what I can justifiably hold you [Obama] accountable for is your and your minions' role in setting the tenor of the rancorous debate now roiling us that smacks of what so many have characterized as "class warfare" … the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them...”

Needless to say, amidst the cresting Occupy Wall Street movement, Cooperman’s words did not go over well. He went on to point out his own humble beginnings, “Just to be clear, while I have been richly rewarded by a life of hard work (and a great deal of luck), I was not to-the-manor-born. My father was a plumber who practiced his trade in the South Bronx after he and my mother emigrated from Poland. I was the first member of my family to earn a college degree. I benefited from both a good public education system (P.S. 75, Morris High School and Hunter College, all in the Bronx) and my parents' constant prodding. When I joined Goldman Sachs following graduation from Columbia University's business school, I had no money in the bank, a negative net worth, a National Defense Education Act student loan to repay, and a six-month-old child to support…”

Leon Cooperman’s Top 10 Holdings:

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p>Value ($000s)</p> </td> <td> <p>Activity</p> </td> </tr> <tr> <td> <p>S L M CORP</p> </td> <td> <p>SLM</p> </td> <td> <p>269,610</p> </td> <td> <p>-3%</p> </td> </tr> <tr> <td> <p>ATLAS PIPELINE PARTNERS L P</p> </td> <td> <p>APL</p> </td> <td> <p>189,740</p> </td> <td> <p>0%</p> </td> </tr> <tr> <td> <p>LINN ENERGY LLC</p> </td> <td> <p>LINE</p> </td> <td> <p>185,188</p> </td> <td> <p>21%</p> </td> </tr> <tr> <td> <p>APPLE INC</p> </td> <td> <p>AAPL</p> </td> <td> <p>175,647</p> </td> <td> <p>23%</p> </td> </tr> <tr> <td> <p>EL PASO CORP</p> </td> <td> <p>EP</p> </td> <td> <p>163,116</p> </td> <td> <p>7%</p> </td> </tr> <tr> <td> <p>TRANSOCEAN LTD</p> </td> <td> <p>RIG</p> </td> <td> <p>154,432</p> </td> <td> <p>11%</p> </td> </tr> <tr> <td> <p>WELLPOINT INC</p> </td> <td> <p>WLP</p> </td> <td> <p>154,110</p> </td> <td> <p>118%</p> </td> </tr> <tr> <td> <p>K K R FINANCIAL HOLDINGS L L C</p> </td> <td> <p>KFN</p> </td> <td> <p>142,118</p> </td> <td> <p>0%</p> </td> </tr> <tr> <td> <p>UNITEDHEALTH GROUP INC</p> </td> <td> <p>UNH</p> </td> <td> <p>133,873</p> </td> <td> <p>93%</p> </td> </tr> <tr> <td> <p>QUALCOMM INC</p> </td> <td> <p>QCOM</p> </td> <td> <p>126,476</p> </td> <td> <p>3%</p> </td> </tr> </tbody> </table>

Cooperman bought a number of financial services companies this quarter including Ocwen Financial (OCN), Citigroup (NYSE: C), Wells Fargo (WFC) and Bank of America (NYSE: BAC). Investors shy away from financial stocks because of the increased short-term risks. As a result of this Citigroup currently trades at a 2012 PE ratio of 7.3, Wells Fargo has a 2012 PE ratio of 9.8, and Bank of America’s 2013 PE ratio stands at 7.6. We have indicated before that we prefer JPMorgan (NYSE: JPM) to other bulge bracket banks including Goldman Sachs (GS) and Morgan (MS) due to overreaction from its ~$2 billion trading loss. JPMorgan’s 2012 PE ratio is 7.5. We think this is a great time to invest in banking stocks for the long term.

Other new buys are Google (NASDAQ: GOOG), and Sprint Nextel (S). Google is on its way of becoming the most favorite stock among hedge funds. Currently Apple (NASDAQ: AAPL) is the most popular stock among hedge funds with 134 hedge funds with bullish Apple bets. Google ranks second with a total of 115 hedge funds (see the 10 most popular stocks).

We like both stocks. Apple’s 2012 PE ratio is only 12 whereas Google’s 2012 PE ratio is 15.7. These are very low PE ratios for stocks growing their earnings at a rate of 20% or more annually. Google has a wider moat than Apple and deserves a higher PE multiple. These are historically very low PE multiples for stocks growing at high rates and with large cash holdings. Apple has more than $110 billion in cash and its PE ratio excluding cash is less than 10 right now. Even utility stocks with stagnant growth rates have higher PE ratios. Google has around $50 billion in cash and its 2012 PE ratio excluding cash is only 11.5. Billionaires Stephen Mandel and Chase Coleman are among the hedge funds with large Google positions.

On the top 10 side, Cooperman continued to show a vote of confidence in managed care companies Wellpoint (WLP) and UnitedHealth (UNH). Between WLP and UNH, we would rather own UNH since we see considerable growth potential in its in-house PBM, OptumRx.


Fool blogger Meena Krishnamsetty has long positions in Citigroup and Apple. The Motley Fool owns shares of Apple, Bank of America, Citigroup Inc , Google, and JPMorgan Chase & Co. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus