Billionaire Leon Cooperman’s Top Picks and Two Positions He Doubled

Billionaire Leon G. Cooperman, the founder and Chief Executive Officer of multi-billion-dollar hedge fund Omega Advisors, has been an exceptional stock picker for decades. Earlier this year, the billionaire hedge fund manager and his hedge fund received a Wells notice from the Securities and Exchange Commission notifying that the agency plans to pursue an enforcement action over trading violations. Mr. Cooperman, widely known for his appearances at public investment conferences and interviews, said the SEC investigation relates to trading securities of Atlas Pipeline Partners LP that happened in July 2010, but he asserted that his $5.2 billion New York-based firm “can definitely prove we’ve done nothing wrong”. “We care about our reputation, and I am not going to let these guys change my legacy”, said the billionaire during a 15-minute investor call. Leaving this discussion aside, value-oriented retail investors need to have a look at Omega Advisors’ portfolio of holdings considering the fund’s strong performance since inception in 1991. That being said, the following article will discuss Mr. Cooperman’s three top equity positions as of the end of March, as well as two positions whose size was more than doubled during the first quarter of 2016.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Targa Resources Corp (NYSE:TRGP)

– Number of shares owned by Omega Advisors as of March 31: 2.72 Million

– Value of Omega Advisors’ holding as of March 31: $81.11 Million

Omega Advisors upped its stake in Targa Resources Corp (NYSE:TRGP) by 1.46 million shares during the first three months of 2016, ending the first quarter of the year with 2.72 million shares. The increased position was worth $81.11 million at the end of March and accounted for 2.2% of the fund’s public portfolio. The provider of midstream services has seen its shares advance an impressive 62% since the beginning of 2016. The company’s revenues for the first quarter of 2016 were $1.44 billion, down from $1.68 billion reported a year ago. The decrease was mainly driven by lower commodity prices, partly offset by the inclusion of two additional months of operations of the aforementioned Atlas Pipeline Partners LP acquired in early 2015. There were 27 hedge funds tracked by Insider Monkey with stakes in Targa Resources at the end of March, as compared to only 18 recorded at the end of December. Dan Loeb’s Third Point LLC acquired a new stake of 1.80 million shares of Targa Resources Corp (NYSE:TRGP) during the March quarter.

Microsoft Corporation (NASDAQ:MSFT)

– Number of shares owned by Omega Advisors as of March 31: 1.76 Million

– Value of Omega Advisors’ holding as of March 31: $96.98 Million

The New York-based asset manager added 946,920 shares of Microsoft Corporation (NASDAQ:MSFT) to its existing position in the tech giant during the January-to-March period. The stake of 1.76 million shares held on March 31 was valued at $96.98 million and made up 2.6% of Omega’s entire portfolio. Amazon Web Services (AWS), a set of cloud computing services provided by e-commerce behemoth Amazon.com Inc. (NASDAQ:AMZN), dominates the public cloud industry with a market share of roughly 31%. Meanwhile, Microsoft Azure, Microsoft’s public cloud computing platform that offers a similar set of products focused on storage, networking and infrastructure, holds the second-largest market share in the public cloud market with a 9% cut. While Microsoft has been channeling massive amounts of capital into research and development to expand the reach of its cloud product, Microsoft Azure will have a hard time dethroning AWS as the ultimate leader in the cloud market. Microsoft’s shares have dropped 8% year-to-date. Ken Fisher’s Fisher Asset Management owns 18.22 million shares of Microsoft Corporation (NASDAQ:MSFT) as of March 31.

American International Group Inc. (NYSE:AIG)

– Number of shares owned by Omega Advisors as of March 31: 3.51 Million

– Value of Omega Advisors’ holding as of March 31: $189.90 Million

Leon Cooperman’s $5.2 billion-investment firm trimmed its stake in American International Group Inc. (NYSE:AIG) by 583,200 shares during the March quarter to 3.51 million shares. The reduced stake was worth $189.90 million on March 31 and constituted 5.1% of the fund’s portfolio, being the third-largest in terms of value. The insurer has been under pressure from activist investors Carl Icahn and John Paulson since the second half of 2015 to break up into three parts that would focus on life, property-casualty and mortgage coverage insurance. Just recently, AIG, keen on retaining operations in both life insurance and property-casualty coverage, elected Mr. Paulson of Paulson & Co. and a representative of Mr. Icahn’s firm to the Board in an attempt to avoid disturbing proxy fights amid an ongoing de-conglomeration process. The share price of AIG’s stock has declined 8% since the start of the year. The number of hedge funds monitored by Insider Monkey invested in AIG declined to 94 from 101 during the first quarter. Carl Icahn’s Icahn Capital LP owns 44.42 million shares of American International Group Inc. (NYSE:AIG) as of the end of March.

First Data Corp (NYSE:FDC)

– Number of shares owned by Omega Advisors as of March 31: 15.53 Million

– Value of Omega Advisors’ holding as of March 31: $199.98 Million

Omega Advisors increased exposure to First Data Corp (NYSE:FDC) by 114,800 shares during the first three months of 2016, ending the first quarter with 15.53 million shares valued at $199.98 million. The payment processor has seen its shares decline by 28% since the company conducted its initial public offering in mid-October 2015. A fresh report posted by financial publication Barron’s says that First Data’s shares “are too cheap to ignore”, after the company has strengthened its balance sheet, improved its technology and agreed with creditors to postpone $5 billion in debt payments to 2021 from 2018. First Data Corp is among the largest card processors in the world and its shares are currently changing hands at around 7.5-times expected earnings, significantly below the double-digit forward PE multiples boasted by most of its competitors. The forward PE ratio for the S&P 500 Index stands at 16.6. Israel Englander’s Millennium Management LLC had 558,920 shares of First Data Corp (NYSE:FDC) in its equity portfolio at the end of March.

Alphabet Inc. (NASDAQ:GOOGL)

– Number of shares owned by Omega Advisors as of March 31: 276,599

– Value of Omega Advisors’ holding as of March 31: $211.02 Million

Leon Cooperman’s investment firm owns 276,599 Class A shares of Alphabet Inc. (NASDAQ:GOOGL) as of the end of the first quarter, 151,020 shares less than at the end of the December quarter. The reshuffled stake, worth $211.02 million on March 31, represented 5.6% of Omega Advisors’ entire portfolio and was the largest position in terms of value. Alphabet’s Google may start selling its modular phones called Ara next year, two years later than initially anticipated. Just recently, the search giant showed how different replaceable parts on the Ara smartphone could be easily ejected and replaced to include various types of cameras or displays, sensors, battery and other smartphone components. The Ara project may be disruptive to the current smartphone market, as smartphones’ hardware could be as customizable as apps. Class A shares of Alphabet have lost 7% of their value since the beginning of 2016. Alphabet was the most popular stock among the hedge funds tracked by Insider Monkey at the end of March, with 155 smart money investors having positions in the company. Andreas Halvorsen’s Viking Global owns 2.05 million Class A shares of Alphabet Inc. (NASDAQ:GOOGL) as of the end of March.

Disclosure: None