We recently published a list of 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman. Since Cigna Group (NYSE:CI) ranks 2nd in the list, it deserves a deeper look.
Billionaire Leon Cooperman made headlines in April when he predicted during an interview with CNBC that the US is headed for a financial crisis. Cooperman, who calls himself a “capitalist with a heart,” said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. Still, the 81-year-old billionaire sees no signs that the economy is “restrictive,” as he pointed to stock market highs and speculation. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
This isn’t the first time Cooperman warned the market about recession. In February last year, the billionaire said that the market was headed for a recession, and noted that the S&P 500 high of about 4,800 recorded in 2022 could “stand for some time.” In July 2022, while talking to Bloomberg, Cooperman said that he was “shocked” that interest rates were so low.
“I am of the view that equities are the best house in the financial asset in the neighborhood, but I don’t like the neighborhood, for a lot of reasons.”
Cooperman in the Bloomberg interview in 2022 had categorically said that sooner or later the strong dollar, prices of oil and the Fed would “lead us into a recession.” He went on to add that recession would be a “2023 event” and predicted that the market would bottom somewhere near 35% to 45% below its peak of 4800.
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The billionaire had said that he would be “very surprised” if we were to see another bull market anytime soon, given his view that we’ve had one of the biggest bull runs driven by FAANG, SPACs, and speculation. The AI revolution that started in 2023 was indeed a shocker for Cooperman as his recession predictions were proven wrong.
For this article, we scanned billionaire Cooperman’s Q1’2024 portfolio and chose his top 10 dividend stock picks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Leon Cooperman of Omega Advisors
Cigna Group (NYSE:CI)
Number of Hedge Fund Investors: 61
Billionaire Leon Cooperman’s Stake: $98,299,189
According to data from Yahoo Finance, Cigna Group’s (NYSE:CI) estimate EPS for 2025 is $32.08. Assuming the insurance sector’s P/E ratio is 19 and using Cigna Group’s (NYSE:CI) current stock price of around $338, the stock is looks undervalued. This assumption is also backed by data compiled by Yahoo Finance, which says the average analyst price target set by the Wall Street for Cigna Group (NYSE:CI) is $391. Cigna Group (NYSE:CI) is a giant in the insurance industry, with 200 million total customer relationships. Over the past 20 years, Cigna Group (NYSE:CI) managed to grow its earnings in 18 years. Wall Street estimates expect Cigna Group (NYSE:CI) to grow 11.97% per annum over the next five years, while its growth this year is expected to hit 13.7%. The stock’s forward P/E ratio is 12.11, much lower than the sector median multiple of 19.70.
Here is what Davis New York Venture Fund has to say about The Cigna Group (NYSE:CI) in its Q3 2023 investor letter:
“In the attractive healthcare sector, we look beyond the obvious to identify businesses that simultaneously have exposure to this growth industry and also trade at low prices. We’re especially drawn to companies like Cigna Group, whose products or services play a part in helping to mitigate healthcare’s constantly rising costs. The healthcare industry has been a growing part of the U.S. economy for decades. As a result, many companies in this sector trade at high valuations reflecting their robust but well-known reputation for growth. For value-conscious investors like us, investing in healthcare requires looking beyond the obvious to identify businesses that have exposure to this growth industry but which trade at low prices. Furthermore, recognizing that the constantly rising cost of healthcare cannot go on forever, we have been particularly drawn to companies whose products or services play some role in managing or reducing the cost of care. As a result, we have positions in Cigna Group, a well-regarded provider of managed care.
Cigna Group (NYSE:CI) ranks 2nd in Insider Monkey’s list of the 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman. You can visit the 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman to see the other Billionaire Leon Cooperman’s 2024 stocks that are on his radar. While we acknowledge the potential of Cigna Group (NYSE:CI), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Cigna Group (NYSE:CI) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
