We recently compiled a list of the Billionaire Lee Cooperman Says The Market Is Expensive But These 10 Stocks Are Cheap. In this article, we are going to take a look at where Elevance Health, Inc. (NASDAQ:ATAI) stands against the other cheap stocks.
Leon Cooperman recently shared his conservative outlook on the economy and discussed stocks that he is monitoring during a CNBC interview. He believes the U.S. is heading toward a fiscal disaster due to a lack of attention on rising debt. He also noted that nothing seems overvalued if a 10-year bond is valued at the current rate.
“My assumption is that we are headed into a fiscal disaster in our country. There’s nobody focusing on debt creation in the economy. My second assumption is that nothing is overvalued if a 10-year bond belongs at the current rate of 3.9%.”
Cooperman compared this to the 1972 Nifty Fifty period when government bonds were at 6.5%, and several companies which had high earnings multiples, eventually went bankrupt. He pointed out that these companies, despite their high valuations, were acquired by JP Morgan.
“In the Nifty Fifty period of 1972, the government bond went 6.5%, Avon products was 65x earnings, it has declared bankruptcy. Eastman Kodak went bankrupt with 48x earnings. IBM at 37x earnings got bankrupt. These are companies that are actively being bought by JP Morgan in the US trust.”
Cooperman emphasized that with the 10-year bond yield at 3.932%, nothing appears overvalued. He expects interest rates to remain low and anticipates a Federal Reserve rate cut in September, likely by 25 to 50 basis points. He expects that this will lead to a slow positive movement in the yield curve, with the 10-year bond yield increasing and its price declining.
Leon Cooperman also mentioned that he believes the current environment is more of a “market of stocks” rather than a unified stock market. Additionally, he expressed concern about the health insurance sector, noting that these companies are trading at low multiples, even though they have been generating excess capital and buying back their own stock. Cooperman then emphasized that he is motivated by valuation levels when assessing investments.
Leon Cooperman follows a value-focused investment strategy, concentrating on undervalued stocks and using a top-down approach to select sectors. He combines fundamental analysis with a bottom-up approach to build and manage portfolios. Omega Advisors, which handles over $3.3 billion in assets largely from Cooperman’s own wealth, has approximately $4.37 billion under management for seven clients. The firm’s Q1 2024 13F filing showed $2.4 billion in managed securities, with its top ten holdings making up 61.09% of the portfolio.
Our Methodology
In this article, we review Leon Cooperman’s latest CNBC interview and highlight ten stocks he owns and mentioned. We also provided analyst ratings, key details about each company, and the number of hedge funds investing in them.
Why focus on the stocks that hedge funds invest in? Our research shows that following the top picks of leading hedge funds can result in returns that beat the market. We use this strategy in our quarterly newsletter, where we choose 14 small-cap and large-cap stocks each quarter. Since May 2014, this approach has generated a 275% return, outperforming the benchmark by 150 percentage points. (see more details here)
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Elevance Health, Inc. (NASDAQ:ATAI)
Number of Hedge Fund Investors: 79
Elevance Health, Inc. (NASDAQ:ATAI), formerly Anthem, is a major U.S. health insurer with a strong presence across individual, group, and government health plans. Elevance Health, Inc. (NASDAQ:ATAI) is expanding its market reach and improving its services by investing in technology, data analytics, and new products. These efforts have led to significant growth in its membership base and strengthened its competitive position.
In July 2024, Elevance Health, Inc. (NASDAQ:ATAI) acquired BioPlus, a top specialty pharmacy provider, to enhance its pharmacy services and manage complex drug therapies more effectively. Elevance Health, Inc. (NASDAQ:ATAI) also formed a partnership with LifePoint Health to improve access to quality care in rural and underserved areas by integrating its services with LifePoint’s network of hospitals. Additionally, in August 2024, Elevance Health, Inc. (NASDAQ:ATAI) launched Elevance Connect, a digital health platform offering personalized health management tools, virtual care services, and advanced data analytics, further advancing its service capabilities.
Analyst Marcel Knoop maintains a buy rating on Elevance Health, Inc. (NASDAQ:ATAI) despite a modest upside potential of 2%. Knoop is optimistic for two main reasons. First, Elevance Health, Inc. (NASDAQ:ATAI)’s 6% free cash flow yield and its projected growth of mid to high single digits could result in low double-digit returns for investors. He believes that for long-term investors, the stock’s valuation is less critical compared to the potential for future returns. Second, Knoop’s analysis uses conservative growth estimates, meaning there’s a good chance for better-than-expected performance.
Baron Health Care Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q2 2024 investor letter:
“We added to the position in Elevance Health, Inc. (NYSE:ELV), a leading managed care company. We think Elevance Health is well positioned to grow earnings double digits driven in part by its growing health care services business. Managed health care stocks continued to be weighed down by Medicare Advantage utilization and reimbursement concerns. Lack of near-term visibility on utilization trends was exacerbated by the Change Healthcare cyberattack, which disrupted payors’ normal utilization review and claims adjudication processes while new CMS rules are restricting the number of lower cost hospital observation stays in favor of full inpatient admissions. We believe our managed care holdings are likely to perform better in the second half of the year as investors look to 2025.
Elevance Health, Inc., with its more balanced member mix, has its own unique and unappreciated growth drivers which include the ongoing scaling of its PBM and Specialty Pharmacy and the continued growth of its Carelon Services. We note a Republican win in the upcoming election could result in a more favorable environment for Medicare Advantage companies after two years of adverse Medicare Advantage rate updates under the Biden administration.”
Overall ATAI ranks 4th on our list of the cheap stocks to buy. While we acknowledge the potential of ATAI as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ATAI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
