Below are Billionaire Lee Cooperman’s Top 5 Stock Picks. For a comprehensive list and our analysis of Lee Cooperman’s investment strategy, please see Billionaire Lee Cooperman’s Top 10 Stock Picks.
5. Trinity Industries, Inc. (NYSE:TRN)
Trinity Industries, Inc. manufactures transportation, construction, and industrial products. Cooperman’s hedge fund owns over 3 million shares of the company, worth $79.7 million. One of the top hedge funds having stakes in the company is Jeffrey Ubben’s ValueAct Capital which had $712 million invested in the stock at the end of December. A total of 22 hedge funds tracked by Insider Monkey held stakes in TRN at the end of December.
Shares of Trinity rallied almost 49% over the last twelve months. In addition, the company also offers a hefty dividend yield of 2.65%. Despite the challenges brought about by the COVID-19 pandemic to the economy, TRN reported a total company revenue of $459 million during the third quarter of 2020.
4. Cigna Corporation (NYSE:CI)
Cigna Corporation is a health insurance provider. The company is the fourth largest stock holding of Omega Advisors, accounting for 6.37% of the hedge fund’s overall portfolio. At the end of the fourth quarter, a total of 57 hedge funds tracked by Insider Monkey held stakes in Cigna. In 2020, Cigna reported total revenue of $160.4 billion.
Avenir Capital mentioned CI in its Q3 2020 investor letter:
“The only material detractor for the quarter was Cigna, a U.S. healthcare stock, which declined 9.7% as the U.S. moved closer to the election and Joe Biden’s chances of winning the presidency increased, along with the possibility of the Democrats gaining control of the senate. Investors sold U.S. healthcare stocks due to increased fears of unfavourable policy change and following a well-established pattern of healthcare stocks underperforming leading up to an election and then materially outperforming after the election. While we generally don’t comment on current quarter events in these letters, given the timing and significance of the U.S. election, it is, perhaps, worth pointing out that Cigna’s share price jumped 15% the day after the election. We think the probability of dramatically unfavourable policy outcomes is low and prefer to hold this proven compounder through the volatility.”
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3. Alphabet Inc (NYSE:GOOG)
The parent company of Google, Alphabet ranks 2nd on our list of billionaire Lee Cooperman’s top 10 stock picks. The fund owns 60,000 shares of the company, worth $105 million, at the end of December 2020. GOOG accounts for 7.57% of the Omega Advisors’ overall portfolio. In the fourth quarter, Alphabet’s revenue grew 23% on an annualized basis. Ads revenue in the period jumped 22% to $46.20 billion. The results were helped by a sharp increase in spending by advertisers who had pulled back from the market amid the coronavirus crisis.
Kinsman Oak Capital Parterns, Inc. generated a return of 6.4% for the fourth quarter and mentioned GOOG in its Q4 2020 investor letter:
“Our view on Alphabet (GOOG) may be somewhat controversial. The bear case for GOOG boils down to antitrust risk and valuation. Our thesis is predicated on the belief that real earnings power, especially for Alphabet, is higher than it appears on the surface. At first glance, Alphabet’s P/E appears to be 30.2x. Adjusting for net cash brings this down to 27.9x. Alphabet’s “Other Bets” segment generates de minimis revenues but reduces operating income by 13%. Adjusting for that (and assigning zero value to a segment that includes Waymo, Nest, and Verily) brings the multiple to 24.7x versus the S&P 500 trading at 22.3x.
Alphabet, at a 10% premium to the S&P 500, is one of the biggest relative value bargains hiding in plain sight we have seen. Alphabet has a much deeper moat, better margin profile, less capex requirements, and faster growth profile than the average company within the index (estimated 18% CAGR for the next two years versus 8% for the S&P 500).
Pushing the envelope, Alphabet’s multiple would be lower than the overall market if the company treated stock-based compensation as dilution and/or if research & development was capitalized instead of expensed. Internally we use a more detailed sum-of-the-parts analysis to more closely approximate intrinsic value. Further, Waymo provides significant upside optionality, especially if you believe Tesla’s “full self driving” technology justifies a large portion of its market cap.
In short, we believe the obfuscated earnings power makes Alphabet appears more expensive than it really is. After adjusting for factors like “Other Bets” in Alphabet’s case or net cash, stock-based compensation, and research and development treatment, it becomes clear that investors are being adequately compensated for the associated antitrust and regulatory risk.”
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2. Fiserv Inc (NASDAQ:FISV)
The financial services technology company Fiserv, Inc. ranks 2nd in our list of billionaire Lee Cooperman’s top 10 stock picks. Omega Advisors holds over 1 million shares of the company as of the end of the fourth quarter, accounting for 8.45% of the overall portfolio. One of the top hedge funds having stakes in the company is Gabriel Plotkin’s Melvin Capital Management which had $990 million invested in the stock at the end of December An insider recently purchased 9,100 shares at around $110 on February 16, 2020. The stock is up 2% since then. FISV was also mentioned as one of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
FISV’s acquisition of First Data Corporation in 2019 boosted their overall performance for 2020. Ending the year 2020, FISV reported total revenue of $14.85 billion.
1. Mr. Cooper Group, Inc. (NASDAQ:COOP)
Mr. Cooper Group, Inc. is one of the largest home loan service providers. During the fourth quarter, Omega Advisors had 4.9 million shares of the company, worth $155 million. Shares of Mr. Cooper Group soared 108% over the last twelve months.
Diamond Hill Capital was committed to its COOP investment despite the large loss during the March crash. Diamond Hill Capital mentioned the stock in its Q1 2020 investor letter:
“Mortgage servicing company Mr. Cooper Group, Inc. underperformed amid fears over advance payments mortgage servicers are required to make to bondholders in the event of missed payments from borrowers. Investors worry that Federal programs encouraging borrowers impacted by the virus to delay mortgage payments will overwhelm the servicing industry’s ability to make payments to bondholders.”
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Please also see 15 Best Micro-Cap Stocks To Buy Now and 15 Youngest Tech Billionaires.
