Leon Cooperman‘s Omega Advisors didn’t quite get the much needed kick-start in the first quarter to offset its subpar performance during the previous year, considering the annual 2% returns, though it was an improvement. According to our metrics, Omega’s 56 long positions posted weighted average returns of 1.6% in Q1. The holdings are as of the latest 13F filing and represent positions in companies with a market cap exceeding $1 billion. Since the filing doesn’t cover all the fund’s positions in various securities, our estimates could be different from the actual returns.
Cooperman is well-versed in all the ins-and-outs of the investment world owing to his profound experience in the industry. He served at Goldman Sachs for 25 years before retiring in 1991 to set up his own investment advisory firm, Omega Advisors. The largely successful investment manager was on the Forbes list of 25 Highest Earning hedge fund managers both in 2013 and 2014. Towards the end of 2014 the value of the fund’s equity portfolio stood at about $5.99 billion, with Finance stocks representing 28% of the holdings, the highest contribution by any single sector. Among the quarter’s prominent performers were Groupon Inc (NASDAQ:GRPN), eBay Inc (NASDAQ:EBAY), Sunedison Inc (NYSE:SUNE), Gaming and Leisure Properties Inc (NASDAQ:GLPI) and Actavis plc (NYSE:ACT).
Hedge funds and other big money managers prefer to hold the largest amounts of their invested capital in large and mega-cap stocks because these companies allow for a much larger capital allocation, which is important taking into account that the global hedge fund industry has swollen to nearly $3.0 trillion. That’s why, if we take a look at the most popular stocks among hedge funds (we track more than 700 in our database), we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds under-performed the market by 7 basis points per month, while in the last two years. However, we consider that we can combine the pricing inefficiencies among small-cap picks with hedge fund expertise and obtain significant results. This was confirmed through backtesting and in forward tests since 2012. This strategy, that involves imitating the most popular small-cap picks among hedge funds managed to provide gains of over 132%, beating the broader market by more than 80 percentage points (see the details here).
Groupon Inc (NASDAQ:GRPN)‘s 12.71% depreciation over the quarter anchored down the gains that the other above-mentioned positions posted during the quarter. Cooperman held some 12.02 million shares valued at $99.29 million of the company in his fund’s portfolio. The company’s performance has been marred by losses in the past, but the recent solid fourth quarter financial results might be signalling a change in that trend considering that the company’s targeted marketing has started to bear fruit. Ken Griffin‘s Citadel Investment Group and Israel Englander’s Millennium Management are two other prominent stockholders of Groupon Inc (NASDAQ:GRPN).
Next in line is eBay Inc (NASDAQ:EBAY) which rose by 2.78% in Q1. There are quite a few question marks surrounding eBay right now, which involve issues such as how much its core business be worth after the company spins off its payment arm PayPal. Investors also wonder how well PayPal will thrive in the payments space, which is getting more and more competitive with Facebook Inc (NASDAQ:FB) now jumping on the bandwagon with its Messenger. Piper Jaffray downgraded eBay Inc (NASDAQ:EBAY) to an ‘Underweight’ rating from ‘Neutral’ last month, and lowered the price target on the stock to $49 from $55 in light of the new competition brewing.
Omega held about 3.53 million shares valued at $198.07 million of the e-commerce and payment technology company. Another stockholder is the famous activist investor, Carl Icahn of Icahn Capital, who held 46.27 million shares valued at $2.60 billion as of the end of 2014.
Cooperman’s position in Sunedison Inc (NYSE:SUNE) was comprised of 9.03 million shares valued at $176.18 million at the end of 2014. The manufacturer of solar technology helped put Omega in green with 23.01% first quarter returns. Just yesterday, the company announced that it will construct three new solar power plants in southern Utah with a capacity of 262 MW. The project is scheduled to start this fall and completion is expected in 2016. David Einhorn’s Greenlight Capital is also betting on the company as it held about 24.95 million shares valued at $486.85 million at the end of the fourth quarter.
Gaming and Leisure Properties Inc (NASDAQ:GLPI)‘s 27.75% first quarter returns were the highest among the companies being discussed here. The REIT also offers a dividend yield of 5.93%. The company significantly outperformed many of its peers in the industry, which in itself was down by 5.29% over the quarter. Omega’s stake in the company amounted to 2.79 million shares valued at $81.78 million. Michael Novogratz’s Fortress Investment Group held 10.5 million shares valued at $308.09 million, according to the latest 13F filing.
Actavis plc (NYSE:ACT), which completed its takeover of Allergan last month, appreciated by 15.62% during the quarter. The company was Omega’s most valuable stock holding and consisted of just under 943,600 shares valued at $242.89 million. Among the funds that we track, billionaire Andreas Halvorsen‘s Viking Global held the highest stake with a 4.59 million share position valued at $1.18 billion at the end of 2014.
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