Student loans. For the second quarter in a row, Cooperman’s top holding was private education loans company SLM Corp (NASDAQ:SLM). Student lenders don’t have the best position in consumer sentiment at the moment as student debt continues to increase, and the federal government has increasingly taken shots at for-profit education companies. Yet SLM Corp (NASDAQ:SLM) is up 17% so far in 2012 despite a small earnings miss in its last quarter, and it trades at only seven times forward earnings estimates. We think this is a risky pick, and it says something about the stock that Cooperman is mostly sticking with it even as it has risen this year.
Oil & gas. As with student loans, Cooperman continues to bet heavily on oil and gas. Three of his top five positions are energy related: Kinder Morgan (NYSE:KMI) had purchased Omega holding El Paso during the second quarter in a combined cash and stock deal, explaining the rise in shares of stock in that company. Omega sold a small portion of its shares of other energy companies Atlas Pipeline Partners (NYSE:APL) and Linn Energy (NASDAQ:LINE), and its sales of Transocean were enough that that position dropped out of its top ten holdings, but the fund remains committed to oil and gas. We think energy is a good place to be as drilling for oil and gas in the U.S. continues its boom- though for many of these stocks an investor does have to worry about a macro slowdown in the U.S. or worldwide that would hit oil and natural gas prices.
AIG. This one was a big move as Omega tripled its position in American International Group (NYSE:AIG). The insurer is a value stock on a purely quantitative basis- trailing P/E of 3, forward P/E of 10, five-year PEG of 0.4, trading at about half the book value of its equity- but poor sentiment has tended to keep investors away. As with SLM, this is a cheap stock but one which carries a number of risks, though Cooperman’s commitment here could serve as a seal of approval for a retail investor to get into the stock.
Telecommunications. The fund nearly doubled its stake in Qualcomm Inc (NASDAQ:QCOM), a provider of communications equipment, and increased its position in phone company Sprint Nextel (NYSE:S) by about a third. Sprint’s business has been struggling recently, and it is expected to be unprofitable this year and next year, but its stock has more than doubled this year- most of that gain coming since the beginning of June- as investors perceive the possibility of a turnaround. Qualcomm Inc (NADAQ:QCOM) is a bit more stable: the business has been growing its revenue and earnings and trades at 18 times trailing earnings. Based on analyst estimates, it trades at 15 times forward earnings. Qualcomm Inc (NASDAQ:QCOM) is one of the 10 most popular technology stocks among hedge funds.
Cooperman’s primary macro stance in Omega’s portfolio continues to be oil and gas, which indicates bullishness at least on the U.S. if not also on the global economy. Aside from that, the fund appears to be taking its largest positions on cheap stocks with red flags- SLM and AIG.
