Unlike some of the other 140 Biggest and Most Famous Activist Hedge Funds, which have seen their assets under management dwindle due to poor performance, billionaire Leon Cooperman‘s Omega Advisors returned 8% in 2016, yet the fund’s AUM was cut nearly in half last year, to $3.4 billion from $6.7 billion. Since the start of 2015, Omega’s AUM is down by over 60%, with a large part of that decline coming in the final quarter of 2016, when the SEC filed a lawsuit against the fund alleging insider trading in securities of Atlas Pipeline Partners.
The effect of this severe fall in AUM can be seen in the fund’s 13F portfolio as well. According to Omega’s latest 13F filing, its portfolio contained holdings worth $2.27 billion at the end of December, 30% less than the $3.24 billion in holdings it contained at the end of September. The filing also revealed that during the fourth quarter the fund reduced its holding in 41 stocks and sold out of its stake in 21 stocks, while making additional purchases in only nine stocks and initiating a stake in just 17 stocks. Moreover, Omega’s 13F portfolio was considerably top-heavy, with its top-10 equity holdings amassing 42.53% of the value of its portfolio. Having discussed the broad changes in the fund’s portfolio during the fourth quarter, let’s proceed to take a look at five major moves made by Omega Advisors as it prepared to head into 2017.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see details here).
Motorola Solutions Inc (NYSE:MSI)
Let’s begin with Motorola Solutions Inc (NYSE:MSI), in which Omega Advisors liquidated its entire stake during the fourth quarter, which had comprised 1.03 million shares at the end of September. A part of Omega Advisors’ portfolio since the first quarter of 2012, Motorola Solutions Inc (NYSE:MSI)’s stock has risen by almost 70% in the last five years. During that same period, the company hiked its quarterly dividend every year, with its payout currently sporting an annual yield of 2.34%. Earlier this month, the company’s stock took a beating after short seller Citron Research published a report in which it argued that the company’s gross margins on handsets in the U.S were significantly higher than they were in Europe (83.5% vs. 9%) largely because of selling overpriced handsets into single-sourced government contracts. On the same day that Citron Research published its report, analysts at Gabelli upgraded the stock to ‘Buy’ from ‘Hold’ while keeping their price target on it unchanged at $96, suggesting 20% upside. The number of hedge funds tracked by Insider Monkey that were long MSI declined by three to 28 during the fourth quarter, while the aggregate value of their holdings in the company fell by $49 million to $1.12 billion.
Follow Capri Holdings Ltd (NYSE:CPRI)
Follow Capri Holdings Ltd (NYSE:CPRI)
On the next page we’ll see how Omega Advisors was trading two prominent stocks in Q4 amid its declining AUM.
