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 Energy Transfer L.P. (NYSE:ET) 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)
An aerial view of an oil rig at sunrise, emphasizing the power of the natural gas transportation industry.
Energy Transfer L.P. (NYSE:ET)
Number of Hedge Fund Investors: 32
Energy Transfer L.P. (NYSE:ET) manages a diverse range of midstream assets, such as pipelines, storage facilities, and terminals. This extensive network allows Energy Transfer L.P. (NYSE:ET) to capitalize on the rising demand for natural gas and liquefied natural gas (LNG), both in the U.S. and globally.
As the energy market moves toward cleaner fuels, Energy Transfer L.P. (NYSE:ET)’s infrastructure plays a crucial role in this shift. Additionally, Energy Transfer L.P. (NYSE:ET) has a strong track record of paying attractive dividends.
Analyst Steven Fiorillo notes that Energy Transfer L.P. (NYSE:ET) may still be undervalued, presenting a buying opportunity. He expects Energy Transfer L.P. (NYSE:ET), which has been trading within a certain range, could rise above $16.50 and approach $20 by the end of 2024. Fiorillo also highlights that the growth in AI and the associated need for new data center infrastructure could indirectly benefit Energy Transfer L.P. (NYSE:ET), making it a valuable investment linked to the AI boom.
Tom Long, the Co-CEO of Energy Transfer L.P. (NYSE:ET), shared the following during their latest earnings call:
“We had record volumes through our crude oil and NGL pipelines, as well as record NGL exports. We also saw strong performance from our NGL fractionators and our refined products pipelines and terminals. DCF a trivial to the partners of Energy Transfer as adjusted was $2 billion compared to $1.6 billion for the second quarter of 2023. And for the six months of 2024, we spent approximately $1 billion on organic growth capital, primarily in the midstream and NGL and Refined Products segments, excluding SUN and USA compression CapEx. Now turning to our results by segment for the second quarter and let’s start with NGL and Refined Products. Adjusted EBITDA was $1.07 billion, compared to $837 million for the second quarter of 2023. The increase was primarily due to growth across our transportation, fractionation and terminal operations including records in both Mariner East and Permian Pipeline volumes, as well as NGL exports.
In addition, we had higher gains from the optimization of hedged NGL inventory. For Midstream, adjusted EBITDA was $693 million, compared to $579 million for the second quarter of 2023. The increase was primarily due to the addition of the Crestwood assets as well as higher volumes in the Permian Basin. For our Crude Oil segment, adjusted EBITDA was $801 million compared to $674 million for the second quarter of 2023. The increase was primarily due to record crude oil transportation throughput. And increase in our total crude oil exports, which were up 11% as well as the acquisitions of the Lotus and Crestwood assets in May and November of 2023 respectively. Excluding these acquisitions, adjusted EBITDA and Crude Oil transportation volumes on our base business increased 4% and 8% respectively.
In our Interstate segment, adjusted EBA was $392 million compared to $441 million the second quarter of 2023. During the quarter, we saw higher contracted volumes on Trunk Line, Pebble, Gulf Run & MRT. This was offset by lower operational gas sales, maintenance project cost of $12 million, as well as a $35 million reduction in revenue for shipper refunds related to our Pebble rate case. For the Intrastate segment, adjusted EBITDA was $328 million, compared to $216 million in the second quarter of last year. The increase was primarily due to approximately $75 million of an increased gains related to pipeline optimization opportunities, as well as favorable storage optimization opportunities. “
Overall ET ranks 8th on our list of the cheap stocks to buy. While we acknowledge the potential of ET 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 ET 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.