We recently published a list of the 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. Since Fiserv, Inc. (NYSE:FI) ranks 8th on the list, it deserves a deeper look.
Billionaire Leon Cooperman predicted in April that the US is headed for a financial crisis. Cooperman said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
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.
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 Leon Cooperman’s Q1 portfolio and picked 10 stocks with the highest number of hedge fund investors. 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).
Fiserv, Inc. (NYSE:FI)
Number of Hedge Fund Holders: 73
Wisconsin-based fintech company Fiserv, Inc. (NYSE:FI) ranks 8th in our list of the best stocks in Leon Cooperman 2024 portfolio based on hedge fund sentiment. In April Fiserv, Inc. (NYSE:FI) posted solid Q1 results and boosted 2024 guidance. Fiserv, Inc. (NYSE:FI) now expects 2024 EPS in the range of $8.60-$8.75, vs. $8.63 consensus. This translates to earnings growth of 14%-16%.
Analysts believe the company’s legacy payment processing business is performing well while Clover, a POS solutions product for small businesses, has promising growth prospects. During the first quarter, Fiserv, Inc. (NYSE:FI) adjusted EPS jumped 19%, while revenue jumped 7% to $4.5 billion. Operating margins increased 180bp to 35.8%. SG&A came up below 6% to $1.7 billion, driven by growth investments. Fiserv, Inc. (NYSE:FI) bulls are also excited about the company’s digital payments business, as Zelle, Fiserv’s bid to compete with PayPal, saw a 20% growth in users during the period while number of transactions went up 455%. Clover’s revenue also jumped 30% while volumes rose by 19%. Fiserv generated $454 million in free cash flow during the first quarter and conducted $1.5 billion worth of buybacks. The company has about $24.4 billion of debt and $1.2 billion in cash, with over 92% debt pegged at fixed rates, removing sensitives to interest rates. Wall Street expects Fiserv, Inc. (NYSE:FI) earnings to grow 15.70% this year and 16% next year. Average analyst price target on the stock is $171.95, which presents a 15% upside potential to the current levels.
Omega Advisors owns a $77 million stake in Fiserv, Inc. (NYSE:FI) as of the end of the March quarter.
Here is what Madison Investments analyzed about Fiserv, Inc. (NYSE:FI) in its Q1 2024 investor letter:
“At payment processor Fiserv, Inc. (NYSE:FI), revenue and profits continue to steadily compound. In fact, 2023 marked the 38th consecutive year of double-digit earnings growth for the company, a remarkable accomplishment considering the wide range of economic environments experienced during that long period. It goes without saying that success over such a prolonged timeframe requires a combination of strong competitive advantages, dependable stewardship, and continuous investment in new products and services. In more recent years, Fiserv has rolled out the Clover payment platform for small-and-medium sized businesses. Clover has been very successful in large part, not only due to its superior functionality relative to legacy point-of-sale payment platforms, but also Fiserv’s distribution scale across financial institutions and independent sales organizations, an advantage that is difficult to replicate by upstart fintech competitors. Investments like Clover give us confidence that Fiserv will continue to build upon its impressive long-term track record.”
Overall, Fiserv, Inc. (NYSE:FI) ranks 8th on Insider Monkey’s list titled 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. While we acknowledge the potential of Fiserv, Inc. (NYSE:FI), 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 Fiserv, Inc. (NYSE:FI) 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.