In this article we present the list of 10 Best Finance Stocks to Buy Right Now According to Leon Cooperman. Click to skip ahead and see the 5 Best Finance Stocks to Buy Right Now According to Leon Cooperman.
Leon Cooperman, the Chairman and CEO of investment advisory firm Omega Advisors, is a titan of the hedge fund industry. The billionaire money manager rose from humble beginnings in the Bronx to become the leader of Goldman Sachs’ asset management division.
Cooperman retired in 1991 after 25 years with the company to launch his own hedge fund, the main fund of which generated annualized returns of 12.4% from inception through mid-2018, beating the S&P 500 by an average of about 2.9 percentage points annually during that period. Tired of chasing said S&P, Cooperman converted the fund into a family office at the end of 2018.
The 77-year-old Cooperman remains a prominent and respected figure in the finance world, being consulted regularly on CNBC and other media outlets and hasn’t shied away from making bold predictions in the coronavirus era.
Leon Cooperman of Omega Advisors
In a May interview on The Reopening podcast, Cooperman stated that capitalism was likely to be changed forever given the widespread government intervention in the economy during the pandemic, saying that if the government will protect us from that kind of downside risk, then it likewise has the right to regulate the upside. In that same vein, he suggested taxes will continue to climb higher as America shifts further to the left, especially if Biden won the presidency, which was eventually the case.
Cooperman further suggested that the stock market is now more expensive than credit, and stated later in a separate interview on CNBC that the market’s rapid growth from its pandemic lows has likely come at the expense of future gains, predicting that returns are likely to be “relatively unimpressive for a long time”.
Not all richly valued stocks are created equal however, as Cooperman noted during a September RealVision interview that tech giants Alphabet Inc. (NASDAQ:GOOGL), Amazon.Com Inc (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), were not expensive given interest rates.
Cooperman held all four of those stocks in his highly concentrated 13F portfolio as of September 30, though it was finance sector stocks that had the heaviest weighting in that portfolio at about 31%. We’ll take a look at the billionaire investing legend’s ten favorite finance stocks below.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. That doesn’t mean there isn’t money to be made off their consensus stock picks. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Now then, let’s check out the 10 Best Finance Stocks to Buy Right Now According to Leon Cooperman. Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
10. Associated Capital Group, Inc. (NYSE:AC)
We begin with Associated Capital Group, Inc. (NYSE:AC), which Leon Cooperman owned 8,600 shares of at the end of Q3, selling off 43 of them during the quarter. It’s the first of two stocks on this list with direct hedge fund ties, as Associated Capital was spun off from Mario Gabelli’s GAMCO in 2015.
AC is somewhat of an interesting pick of Cooperman’s given that it aims to use its capital in pursuit of private equity and late stage venture capital. Cooperman took a shot at the former last year, calling private equity a “scam” during an investment event in September and warning that the industry’s returns would evaporate as interest rates rose (which of course hasn’t happened).
Associated Capital managed $1.25 billion in assets at the end of Q3, down from $1.65 billion a year earlier. The investment manager’s Q3 revenue likewise declined to $1.95 million, down from $2.75 million in 2019, though its diluted net income per share held steady at $0.26.
9. Falcon Minerals Corporation (NASDAQ:FLMN)
FLMN ranks 9th in our list of the 10 best finance stocks to buy now. Leon Cooperman has owned a stake in Falcon Minerals Corporation (NASDAQ:FLMN) since the middle of 2019 and boosted that position by 245,648 shares in Q3. 20 hedge funds were long FLMN on September 30.
Cooperman revealed on CNBC in March that he was bullish on energy-related companies, expecting oil prices to rebound. Falcon Minerals is generally considered an energy company given its assets are all oil and gas related, but it’s also akin to a finance company given that it’s not involved in the production side of its assets (and thus has no capex requirements) and that its core strategy is to return the vast majority of its high-margin cash flow to investors through dividends.
Falcon Minerals owns 256,000 gross unit acres with over 3,000 potential drilling locations in the Eagle Ford Shale, as well as royalty assets covering 68,000 gross unit acres in the Marcellus Shale. Falcon generated pro forma free cash flow of $0.07 per share during Q3 and raised its quarterly dividend by 117% to $0.065 per share, returning 93% of that cash flow to investors.
8. First Eagle Alternative Capital BDC, Inc. (NASDAQ:FCRD)
FCRD ranks 8th in our list of the 10 best finance stocks to buy now. Cooperman made a large investment in First Eagle Alternative Capital BDC, Inc. (NASDAQ:FCRD) during Q3, buying 2.68 million shares to build a 9.5% ownership stake in the business development company, which is a separate, publicly traded division of First Eagle Investment Management.
FCRD has a portfolio of assets primarily comprised of 1st lien senior secured debt in middle market companies across a wide range of industries. The company earned $3.2 million in net investment income during Q3, down from $6.9 million a year earlier, declines which were attributed to portfolio contraction and an increase in non-accrual (unpaid) status loans.
The BDC was forced to slash its quarterly dividend from $0.21 to $0.10 earlier this year, though as the stock has cratered by 43% in 2020, shares still yield a hefty 11.08%.
7. MVC Capital, Inc. (NYSE:MVC)
MVC ranks 7th in our list of the 10 best finance stocks to buy now. MVC Capital, Inc. (NYSE:MVC) represents one of the oldest holdings in Leon Cooperman’s portfolio, dating back to early 2015. He owned 1.70 million shares of the business development company on September 30, unchanged throughout the third quarter.
In August, MVC Capital entered into a merger agreement with Barings BDC in a deal valued at approximately $177.5 million in cash and stock for MVC shareholders. Cooperman expressed his satisfaction with the deal and entered into a voting agreement that will see him vote his shares in favor of the transaction.
“We are pleased with the result and thank the board of MVC Capital for its hard work and success in delivering an excellent outcome for shareholders. We believe this transaction represents strong shareholder alignment and provides the best path forward,” Cooperman said.
The combined company will have more than $1.2 billion of pro forma investments and is estimated to earn net investment income of as much as $0.20 per share in the first full quarter following the deal’s completion, which was expected to occur during the current quarter.
6. Citigroup Inc. (NYSE:C)
Citigroup Inc. (NYSE:C) rounds out the first half of the list of Leon Cooperman’s top finance stock picks, with the billionaire maintaining his 370,000-share position in the company, which ranks as one of the 10 Best Bank Stocks To Buy Right Now.
Cooperman reopened a stake in Citigroup in late 2017 after selling off his previous position in the stock during 2016. At the time (late 2017) he expressed confidence in the financial sector as a whole given his expectation that interest rates would keep rising and boost banks’ profit margins. That was indeed the case throughout 2018 and Citi did indeed boost its earnings during that year, hitting a 10-year high with diluted earnings per share of $6.68, which it improved upon further last year.
Interest rates began falling again in late 2019 however and then plummeted to 0.25% in the wake of the pandemic, and Citigroup’s bottom line has understandably suffered again as a result. Cooperman has nonetheless maintained his position in Citi throughout 2020. The stock currently trades at a significant discount to its book value, offers a nice dividend yield of 3.44%, and could be poised for a nice run coming out of the pandemic.
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Disclosure: None. 10 Best Finance Stocks to Buy Right Now According to Leon Cooperman is originally published at Insider Monkey.
