We recently published a list of the 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. Since Vertiv Holdings Co (NYSE:VRT) ranks 7th 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).
Leon Cooperman of Omega Advisors
Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 73
Data center company Vertiv Holdings Co (NYSE:VRT) is featuring in Leon Cooperman’s portfolio since 2020. Vertiv Holdings Co (NYSE:VRT) is flying high as data center demand continues to skyrocket amid the AI boom.
The stock jumped in April after Vertiv Holdings Co (NYSE:VRT) increased its guidance, citing AI-related data center growth. For the full-year 2024, Vertiv Holdings Co (NYSE:VRT) expects its revenue to come in the range of $7.54 billion and $7.69 billion, compared to the previous estimate of $7.52 billion to $7.66 billion.
Vertiv Holdings Co (NYSE:VRT) is a market leader in the data center power and cooling market, which has nowhere to go but up from here since companies are hungry for data center solutions as they begin to deploy AI software. During the first quarter the company saw a 60% increase in organic orders. For full-year, the company plans to increase its CapEx to $200 million, which is high, but still in the company’s CapEX margin range between 2.5% to 3%. Vertiv also upped its revenue guidance. Here’s what the management said during the latest earnings call:
“We are expecting organic sales growth of approximately 12% with Americas up mid-teens, APAC high single digits and EMEA low double digits. We anticipate an $18 million year-over-year foreign exchange headwind in the second quarter as the U.S. dollar has strengthened against most foreign currencies over the last several months. We expect second quarter adjusted operating profit between $315 million and $335 million and adjusted operating margin of 16.9%, up 240 basis points at the midpoint with expected benefits from price/cost partially offset by continued growth investments.
Based upon a favorable start to the year and visibility into a strong sales pipeline for the rest of the year, we are increasing estimates for organic sales growth from 10% at the midpoint to approximately 12% with higher expectations across all 3 regions. In addition, we are increasing the midpoint of adjusted operating profit guidance from $1.3 billion in our prior guidance to $1.35 billion primarily driven by contribution margin on incremental sales. And as a result, we are increasing midpoint guidance for adjusted operating margin to 17.7% with the primary driver there being fixed cost leverage.”
Vertiv Holdings Co (NYSE:VRT) earnings are expected to grow 35% this year, while the Wall Street expects a 28% growth next year. Based on these growth estimates, Vertiv’s forward P/E ratio of 37.45 looks attractive.
Leon Cooperman’s Omega Advisors owns a $172 million stake in Vertiv Holdings Co (NYSE:VRT) as of the end of the first quarter of 2024.
ClearBridge SMID Cap Growth Strategy stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its first quarter 2024 investor letter:
“Stock selection in the industrials sector was also a positive contributor to performance, led by Vertiv Holdings Co (NYSE:VRT) and XPO. Vertiv, a global manufacturer of power, precision cooling and infrastructure management systems for mainframe computer, server racks and critical process systems, rallied on continued demand for AI-related companies and beneficiaries and anticipation of greater demand for data center systems.”
Overall, Vertiv Holdings Co (NYSE:VRT) ranks 7th on Insider Monkey’s list titled 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. While we acknowledge the potential of Vertiv Holdings Co (NYSE:VRT), 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 Vertiv Holdings Co (NYSE:VRT) 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.
