2. OneMain Holdings, Inc. (NYSE:OMF)
Number of Hedge Fund Holders: 28
Dividend Yield as of November 2: 9.67%
OneMain Holdings, Inc. (NYSE:OMF) is an Indiana-based financial service holding company focused on consumer finance and insurance businesses. On October 26, OneMain Holdings, Inc. (NYSE:OMF) declared a quarterly dividend per share of $0.95, in line with previous. The dividend is distributable on November 14, to shareholders of the company as of November 7. The dividend yield on November 2 came in at 9.67%.
On October 28, Citi analyst Arren Cyganovich raised the price target on OneMain Holdings, Inc. (NYSE:OMF) to $39 from $38 and kept a Buy rating on the shares following the Q3 results. OneMain Holdings, Inc. (NYSE:OMF)’s credit tightening actions seem to be working to slow the steep risk in credit losses back towards the targeted levels, the analyst told investors in a research note.
Among the hedge funds tracked by Insider Monkey, 28 funds were long OneMain Holdings, Inc. (NYSE:OMF) at the end of June 2022, compared to 37 funds in the last quarter. Glenn Greenberg’s Brave Warrior Capital is the biggest stakeholder of the company, with 2.8 million shares worth $108 million.
Here is what Miller Value Partners specifically said about OneMain Holdings, Inc. (NYSE:OMF) in its Q3 2022 investor letter:
“We own OneMain Holdings, Inc. (NYSE:OMF) ($31.33), a subprime consumer credit company, which exemplifies the situation. It trades at 4x earnings with a 12% dividend yield, which we believe is secure through any recession. We estimate that in a severe 2008-style recession (which we don’t expect), it could earn $4 per share, 45% less than its 2022 estimated earnings. The stock is down 48% from its highs, close to a worst-case recession earnings hit. Not a coincidence in my view. It trades for 7x estimated worst-case trough earnings. It’s currently buying back its stock at highly accretive values, and we expect it to grow earnings per share in the high single digits through the cycle. You’re paid handsomely to be patient and take a long-term view.
People think you are crazy to mention a subprime consumer credit company heading into a recession. The market obsesses over marginal change. Gone are the days when incremental news no longer moves a stock because it was already discounted. This creates excess volatility. Most managers have adapted by minimizing or eliminating contrarian buy calls. This scarcity exacerbates volatility, but can also increase opportunity. Therefore, we believe volatility is the price you pay for outperformance.
We believe OMF will recover from any recession and trade at new highs within 3 years. If it just hits its previous highs, it will compound at 31% per year total return. Even if it goes nowhere, you make 12% per year on the dividend alone. Given it is already pricing in a dire recession, fundamentally the stock should find a floor soon. Given all the algorithms that trade on the next headline, I wouldn’t wager much on that. If our analysis is correct, lower near-term prices just amplify the ensuing recovery…” (Click here to read the full text)
