Billionaire Lee Cooperman’s Top 10 Stock Picks
In this article, we discuss Billionaire Lee Cooperman’s Top 10 Stock Picks. If you want to skip our detailed discussion of the investment philosophy of Lee Cooperman and the performance of his hedge fund Omega Advisors, go directly to Billionaire Lee Cooperman’s Top 5 Stock Picks.
Billionaire Leon “Lee” Cooperman had very humble beginnings as a plumber who grew up in a Jewish family in the Bronx. After graduating from the Columbia Business School in 1967, Cooperman joined Goldman Sachs and worked his way up to top roles like CEO of Goldman Sachs Asset Management, CIO and head of GS Capital Growth Fund. He left the firm after 25 years and founded Omega Advisors, a $3.4 billion hedge fund based in New York City. In 2018, Leon Cooperman converted Omega Advisors to a family office. An early riser, Cooperman spent most of his life in Short Hills, New Jersey.
Leon Cooperman is one of the most respected figures in the financial world today with over $2.5 billion net worth as of February 21. As of the end of the fourth quarter of 2020, Omega Advisors reported $1.39 billion in managed 13F securities. Its top 10 holdings account for about 61% of the total portfolio.
Leon Cooperman and GameStop (NYSE:GME) Cooperman sparked a stir recently following his angry comments during an interview with CNBC regarding the GameStop saga. The billionaire said that the GameStop crisis shows the weaknesses of the regulatory authorities. He also said that the “fair share is a bullshit concept” and a way of attacking wealthy people. The 77-year-old investor believes that there is “too much bullishness” in the market and he is also worried about the rising fiscal deficit and debt levels. In September 2016 the SEC charged the billionaire and Omega Advisors for insider trading related to Atlas Pipeline Partners. The hedge fund agreed to settle the charges for $4.9 million in 2017. Despite these controversies, Cooperman’s stock-picking strategy remains peerless. Omega Advisors generated more than 12% annualized returns since inception through 2018. Based on the 13F holdings data recently disclosed by Omega Advisors, let's first take a look at the fund's recent activity before diving into billionaire Leon Cooperman's top 10 stock picks.
Omega Advisors Sells Lee Enterprises and MVC Capital Inc
Omega Advisors recently disclosed its 13F holdings data for the fourth quarter of 2020. The fund sold its stakes in Lee Enterprises, Inc (NYSE:LEE) and MVC Capital Inc (NYSE:MVC)
Leon “Lee” Cooperman Slashes Stakes in AMCX, PE, MGY
Some notable companies in which the fund slashed its stakes include AMC Networks Inc. (-36%), Pioneer PE Holding Llc (-11%), and Magnolia Oil & Gas Corporation (-10%).
Omega Advisors is one of the biggest stakeholders of Mr. Cooper Group Inc. During the fourth quarter, the fund increased its stake in the company by 8%. COOP accounts for 11% of the overall portfolio of the hedge fund.
However, Omega Advisors significantly increased its stake in Gannett Co. Inc. (NYSE:GCI), upping its hold in the company by 47%.
While Leon Cooperman’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017 (see the details here). We launched our monthly newsletter’s activist strategy nearly 4 years ago and this strategy’s picks returned 187.5% since then and beat the SPY by 111 percentage points. Our short strategy was also launched 4 years ago and its short recommendations gained a cumulative 8% (that’s a good thing because we are shorting them) since then.
Let’s take a look at Billionaire Lee Cooperman’s top 10 stock picks based on Omega Advisors’ 13F portfolio. But before that, here's an interesting quote from the the billionaire:
"The way to be successful is do what you love and love what you do. I get paid normally a lot of money for basically doing something I enjoy doing. And what I enjoy is to hunt—finding something somebody else doesn't see, making a bet and having Mr. Market prove me right,” Cooperman said in a 2014 interview.
10. Ferro Corporation (NYSE:FOE)
One of the largest producers of performance materials, Ferro Corporation was founded by Harry Cushman in 1919. The company began global operations in the 1930s and continued expanding decades after WWII. By 1994, the company had net sales of $1.2 billion and was already operating in 21 nations worldwide.
Ferro Corporation ranks 10th in the list of billionaire Lee Cooperman’s top 10 stock picks. FOE accounts for 3.49% of Omega Advisor’s overall portfolio. Shares in FOE rallied 5% over the last twelve months. Leon Cooperman’s fund owns 3.32 million shares of the company, worth $48 million. Overall, 12 hedge funds tracked by Insider Monkey held positions in FOE as of the end of the fourth quarter.
Despite the negative impact of the COVID-19 pandemic on the economy, Ferro sales increased 18.1% over the second quarter of 2020.
9. WPX Energy Inc (NYSE:WPX)
One of the largest energy producers with core acreage positions in Permian and Williston basins, WPX Energy Inc is ranked as the ninth stock in our list of billionaire Lee Cooperman’s top 10 stock picks, accounting for 3.65% of Omega Advisors’ overall portfolio.
A total of 35 hedge funds tracked by Insider Monkey held positions in WPX at the end of the fourth quarter.
In January 2021, WPX announced the successful completion of their all-stock merger of equals with Devon Energy Corporation. The merger will operate under the name Devon Energy with headquarters located in Oklahoma. In line with the agreement, WPX shareholders received a fixed exchange of 0.5165 shares of Devon common stock for each share of WPX common stock owned.
Diamond Hill Capital mentioned that WPX underperformed in its Q1 2020 investor letter:
“Oil and gas exploration and production company WPX Energy, Inc. underperformed after OPEC failed to reach a deal on output cuts and the coronavirus crisis sapped global demand for petroleum products.”
8. Microsoft Corp (NASDAQ:MSFT)
MSFT stakes accounted for 3.93% of the Omega Advisors portfolio at the end of the fourth quarter. Leon Cooperman has been showing interest in MSFT since the 4th quarter of 2015. Omega Advisors owns 245,705 shares of MSFT as of the end of December, worth $54 million.
A total of 258 hedge funds tracked by Insider Monkey were long this stock at the end of the fourth quarter. Martin Taylor’s Crake Asset Management is one of the top hedge funds having positions in MSFT, which had $176 billion invested in the stock at the end of December.
Schroder Investment Group mentioned MSFT in its Q4 2020 investor letter:
“The fund added to its holding in Microsoft Corporation (“MSFT”) during Q4. We view MSFT as a ‘growth staple’ capable of generating low and mid double-digit revenue and earnings growth respectively for a number of years, and find its valuation – PEs of 27x and 23x 2022 and 2023 earnings – attractive in the context of stock markets, given the durability of its growth, its high percentage of recurring revenues and its strong balance sheet.
Satya Nadella, MSFT’s superb CEO, has reinvigorated the company, by investing heavily in its cloud service, Azure, and in the subscription version of Office, O365, which, in both cases, has involved the necessary cannibalisation of very high margin (90%+) license sales, for less, but still profitable, recurring revenues. The company is now highly aligned with current trends in IT and scores strongly on metrics such as its technology vision and trends in future wallet share.
MSFT’s last two sets of results have been less stellar than before. Growth in commercial cloud has remained strong, but declines in the Office Commercial licensing business have accelerated, growth in Office 365 has slowed and revenues in Server & Tools and Windows OEM revenue turned negative, all likely reflecting higher SMB churn, free introductory O365 offers and very tough comps in Server & Tools due to the end of life of Windows Server 2008 and SQL 2008 in FY 2020. The company faces ‘tough comps‘ in the upcoming quarter but, beyond that, we see revenue and EBIT growth accelerating.
More importantly, we see plenty of evidence that secular trends such as cloud adoption and digital transformation are accelerating while MSFT’s positioning for these trends is improving. We expect the IT spending environment to remain sluggish and enterprises to consolidate to fewer vendors. The company’s value proposition is very appealing in this environment.
7. Ashland Global Holdings, Inc. (NYSE:ASH)
The chemical provider, Ashland Global Holdings, Inc., ranks 7th in our list of billionaire Leon Cooperman’s top 10 stock picks, accounting for 4.57% in the overall Omega Advisors portfolio. Despite ASH underperforming in 2020, investors enjoyed significant dividends from the company. It currently offers a dividend yield of 1.28%.
At the end of the fourth quarter, 38 hedge funds in Insider Monkey’s database held long positions in ASH.
6. MP Materials Corp. (NYSE:MP)
The sustainable, low-cost supply chain of coveted materials, MP Materials Corp, is one of billionaire Leon Cooperman’s top 10 stock picks. MP accounts for 5.62% of the overall Omega Advisors portfolio with around $78 million invested in the stock.
Year to date, the stock is up over 30%. The increasing demand for electric vehicles is helping the company, as it is one of the major suppliers of rare magnets.
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Disclosure: None. The article Billionaire Lee Cooperman’s Top 10 Stock Picks is originally published on Insider Monkey.