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 Microsoft Corporation (NASDAQ:MSFT) 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)
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 293
Microsoft Corporation (NASDAQ:MSFT) is a top technology company known for its software, cloud services, and cutting-edge solutions. Microsoft Corporation (NASDAQ:MSFT) is a major industry player with a wide range of products, including Windows, Office 365, and its strong cloud platform, Azure.
Leon Cooperman highlighted his investment in Microsoft Corporation (NASDAQ:MSFT) as a key technology holding. He noted that while Microsoft Corporation (NASDAQ:MSFT) may not be cheap, the current market rotation is significant and suggests that the market’s optimism, particularly around extreme valuations in top tech stocks, might be overly optimistic.
“I own Microsoft. It’s my window into technology. While I wouldn’t say it’s a particularly cheap stock, I do believe this market rotation is real. Historically, markets that have experienced rotation often enter a corrective phase. The shift from extreme valuations in the ‘Magnificent 7’ suggests that something else is at play, and a flat market might be overly optimistic.”
For Q4 FY2024, Microsoft Corporation (NASDAQ:MSFT) achieved annual revenue of over $245 billion, marking a 15% increase from the previous year, with cloud revenue growing 23% to exceed $135 billion. Earnings per share (EPS) reached $3.06, surpassing the $2.98 forecast. Azure, Microsoft’s cloud service, saw a 20% revenue increase, reinforcing its top position in the cloud market. The $69 billion acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI) boosts Microsoft Corporation (NASDAQ:MSFT)’s gaming and entertainment offerings, further integrating these with its cloud services. New releases like Windows 12 and updates to Office 365 show Microsoft Corporation (NASDAQ:MSFT)’s ongoing innovation.
ClearBridge Sustainability Leaders Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“The Strategy trailed the Russell 3000 Index benchmark largely due to our diversified positioning, although we maintain a considerable portfolio allocation to large cap AI-related companies. These positions were indeed among our top contributors in the quarter, such as Microsoft Corporation (NASDAQ:MSFT). The company is finding more ways to deploy AI for sustainability objectives such as its ability to better measure, predict and optimize complex systems, which can help its partner communities reduce wildfire risk.”
Overall MSFT ranks 1st on our list of the cheap stocks to buy. While we acknowledge the potential of MSFT 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 MSFT 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.
