Billionaire Leon Cooperman headed Goldman Sachs Asset Management before founding Omega Advisors in 1991. The fund’s recent 13F disclosed many of its long equity positions as of the end of September (see the full list of stocks reported in the filing). We have gone though the 13F looking for stocks which were not only in the portfolio but also satisfy traditional value criteria; investors may be interested in more information on these companies before deciding if they are worthy of further research. Here is our quick take on five stocks in Cooperman’s portfolio with trailing and forward P/E multiples of 11 or lower where Omega had a position worth at least $100 million:
The fund’s largest position by market value was its 8.1 million shares of American International Group, Inc. (NYSE:AIG), after increasing its holdings by 76% during the quarter. AIG had leaped onto our list of the ten most popular stocks among hedge funds during the third quarter (see the rest of hedge funds’ favorite stocks) after not even being in the top ten three months earlier. Not only does it carry a forward P/E of only 10, the P/B ratio is 0.5 reflecting a large discount to the book value of its equity. AIG probably isn’t worth book value, but we think it deserves to trade closer to that level.
SLM Corp (NASDAQ:SLM), better known as Sallie Mae, manages and processes education loans. Omega owned a bit less than 16 million shares of the stock, which carries trailing and forward P/E multiples of 8 and 7, respectively. Wall Street analysts apparently believe that the company will have considerable earnings growth over the next several years, as the five-year PEG ratio is 0.7, but the market seems less sure and there have been concerns that student loans may prove an asset bubble. Fellow billionaire David Shaw’s D.E. Shaw increased its holdings of Sallie Mae last quarter (check out more of D.E. Shaw’s picks). We might look at the company more closely, as the valuation is appealing, but we’d want to be cautious of the business.
Cooperman and his team also liked Halliburton Company (NYSE:HAL), buying shares of the oilfield services company during the quarter. Despite a frenzy of oil and gas activity, particularly in the onshore U.S., earnings were actually down last quarter versus a year earlier. Halliburton trades at 11 times earnings, whether we consider trailing results or analyst consensus for next year, and the sell-side’s growth estimates imply a five-year PEG ratio of 0.6. We could consider it a value stock, though it might be worth paying a premium for peer Schlumberger. Halliburton was one of the most popular energy stocks among hedge funds.
$55 billion market cap health insurer UnitedHealth Group Inc. (NYSE:UNH) is another cheap stock at 10 times trailing earnings, even though revenue and earnings rose nicely in the third quarter compared to the same period in 2011. We think that the market may be worried about how federal health care policy will affect the insurers, as the industry in general trades at low multiples. Third Point, managed by billionaire Dan Loeb, owned 2 million shares at the end of September (find more stock picks from Dan Loeb). We do have concerns about the business but given the price we would at least consider buying somewhere in the insurance industry.
Omega owned 2.9 million shares of Energy XXI Limited (NASDAQ:EXXI), which is an oil and gas exploration and production company. Earnings plunged in the most recent fiscal quarter compared to the same period in the previous year, and the stock currently posts a trailing P/E of 9. Elliott Management reported a position of 3 million shares at the end of the quarter; Elliott was founded in 1977 by now-billionaire Paul Singer (see more stocks Elliott owned). We think that there are more stable oil and gas companies trading at similar multiples, and large oil majors like Exxon Mobil and BP might be better buys.
