Six to seven weeks after the end of each fiscal quarter, hedge funds are required to file 13Fs with the SEC. These filings disclose many of their long equity positions in U.S. stocks, with the most recent round of filings doing so for the end of December. Even with the inherent delay in these filings, the information included in them can still be useful to investors; we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about our small cap strategy). We can also narrow our focus to filings from top investors to see what they are thinking about different groups of stocks. Here are five stocks that billionaire Leon Cooperman’s Omega Advisors had over $100 million invested in and which pay a dividend yield of at least 4% according to current prices and recent dividend payments (or see the full list of Cooperman’s stock picks):
One of the fund’s five largest holdings by market value was Kinder Morgan Inc (NYSE:KMI), which pays a dividend yield of just over 4%. Omega owned 5 million shares of Kinder Morgan at the end of 2012. Bain Capital’s Brookside Capital had a similarly sized position in the pipeline company, which transports natural gas and refined petroleum products among other liquids and gases. The market has been bidding up the company’s earnings multiples, and Kinder Morgan actually trades at 26 times consensus earnings for 2014. Kinder Morgan acquired El Paso last year to grow its pipeline business.
Here are three more stocks Omega owned which pay high yields:
Linn Energy LLC (NASDAQ:LINE), an $8.9 billion market cap oil and gas exploration and production company, was another high yielding energy play in the fund’s portfolio. Omega cut its stake slightly but still owned 4.3 million shares according to the 13F. Linn’s business has not been performing well recently, likely in part because of natural gas prices: sales fell 23% in the fourth quarter of 2012 versus a year earlier. Renaissance Technologies, whose success since inception has made founder Jim Simons a multi-billionaire, was buying Linn last quarter (check out more stocks Renaissance was buying).
Omega disclosed a position of nearly 14 million shares in KKR Financial Holdings LLC (NYSE:KFN), which invests in high yield debt (including junk debt and mezzanine loans) as well as private equity. The dividend yield is above 7%, as the interest rates on many of the loans it holds as assets are high as well. Cooperman’s son Wayne is also a hedge fund manager, heading Cobalt Capital; that fund owned 3.3 million shares of KKR Financial Holdings according to its own 13F.
A third pipeline company, Williams Companies, Inc. (NYSE:WMB), was included among the fund’s income stock picks. Williams owns a number of midstream natural gas assets including gathering and transportation pipelines. The stock looks pricy at trailing and forward earnings multiples of 25 and 23, respectively, but as with the other pipeline companies we’ve discussed there is potential for growth as natural gas becomes a larger player in the U.S. economy as well as a good dividend yield (about 4% in this case). Billionaire Andreas Halvorsen’s Viking Global had over 19 million shares in its portfolio at the end of 2012 (research more stocks Viking Global owns).
Disclosure: I own no shares of any stocks mentioned in this article.
