Billionaire Leon Cooperman’s “Best Ideas” Include QUALCOMM, Inc. (QCOM) and More

One of the most anticipated market players from this year’s Delivering Alpha conference on July 17th was billionaire Leon Cooperman of Omega Advisors. At last year’s conference, Cooperman had given ten names when asked for his “best idea” and all 10 performed strongly over the next year. As they say, past performance is no guarantee of future results but we think that investors can at least treat his picks as initial investment ideas and do further research on any interesting names. Read on for our quick take on five of the stocks Cooperman listed as his best ideas, or see the full list of stock picks from Omega’s most recent 13F filing (we track quarterly 13F filings from hundreds of hedge funds and other notable investors as part of our work researching investment strategies, including our market beating small cap strategy).

One of the billionaire’s picks was Express Scripts Holding Company (NASDAQ:ESRX), the pharmacy benefit management services company. Express Scripts Holding Company (NASDAQ:ESRX) has seen its financials recover now that its relationship with Walgreen (NYSE:WAG) has been repaired. The company continues to gain market share in its industry and is valued at a current-year earnings multiple of 15 based on sell-side estimates with earnings growth expected to continue in the future, and we think it is worth considering. Brookside Capital, Bain Capital’s equity hedge fund, reported a position of 3.9 million shares in Express Scripts Holding Company (NASDAQ:ESRX) at the end of Q1 2013 (research more stocks Brookside owned).

Cooperman also listed QUALCOMM, Inc. (NASDAQ:QCOM) as one of his “quality growth” picks. QUALCOMM, Inc. (NASDAQ:QCOM) has in fact been doing well: revenue rose 24% in its most recent quarterly report compared to the same period in the previous fiscal year, and earnings from continuing operations grew at a similar rate. In addition, the trailing earnings multiple is only 18- a reasonable valuation given this financial performance. Analysts also like it as shown by the five-year PEG ratio of 0.8. In the first quarter of 2013 QUALCOMM, Inc. (NASDAQ:QCOM) had made our list of the ten most popular stocks among hedge funds.

Thermo Fisher Scientific Inc. (NYSE:TMO), the $31 billion market cap medical instruments and equipment company, was also mentioned as a quality growth stock. There’s significant disagreement with Cooperman here: 11% of the float is held short according to the most recent data. Wall Street analysts expect Thermo Fisher Scientific Inc. (NYSE:TMO)’s earnings per share to rise considerably over the next year and a half, resulting in a forward P/E of 15. While recent earnings growth has been high, improvements on the top line have been limited. Billionaire Stephen Mandel’s Lone Pine Capital was buying Thermo Fisher Scientific Inc. (NYSE:TMO) between January and March (check out Mandel’s stock picks).

One of Cooperman’s “turnaround” picks was natural gas and oil exploration and production company SandRidge Energy Inc. (NYSE:SD), which replaced its controversial CEO earlier this year. SandRidge’s expanding production has caused it problems as natural gas prices remain low- revenue growth has failed to keep pace with rising production volumes – and analyst consensus is that it will not make profits either this year or next year. We think that Chesapeake Energy Corporation (NYSE:CHK) is worth considering as an alternative for investors who like natural gas long term. Value investor Prem Watsa’s Fairfax Financial owned more than 32 million shares of the stock as of the beginning of April.

Cooperman’s best ideas also included a number of income names, such as real estate investment trust Chimera Investment Corporation (NYSE:CIM). Real estate investment trusts receive favorable tax status conditional on paying out a large share of taxable income to investors, which often results in high yields. Chimera Investment Corporation (NYSE:CIM) in mortgage-backed securities and other mortgage loans, and with the riskiness of these investments the stock currently pays an annual yield of over 10%. However, quarterly payments were cut about a year ago and were also slashed during the financial crisis, demonstrating that potential income investors shouldn’t consider the high yield to be safe.

Disclosure: I own no shares of any stocks mentioned in this article.