In this piece we will take a closer look to the most recent 13F filing of Leon Cooperman’s hedge fund Omega Advisors, and we’ll focus on its five largest new positions undertaken in the first quarter of 2013.
Even though these holdings do not represent a very large value in the 13F portfolio of Omega Advisors, it is still important to see which stocks have been on Cooperman’s mind lately. There are many ways to track large hedge fund managers, but we at Insider Monkey have a few of the best strategies up our sleeve; discover the details here.
Top dog
LyondellBasell Industries NV (NYSE:LYB) is the leader among the top new equities in the Omega Advisors 13F, as the hedge fund reported ownership of 1.2 million shares, worth $76.9 million at the end of March. The Netherlands-based LyondellBasell Industries NV (NYSE:LYB) is one of the cheapest stocks in the specialty chemicals industry, at 9.2 times year-ahead earnings and a PEG of 1.1.
Hedgie peers Dan Loeb and Israel Englander are also bullish, as LyondellBasell Industries NV (NYSE:LYB)’s primary profitability driver has been its ethane business, a natural derivative of shale operations and a key ethylene ingredient. Rising prices in this space should be a boon to LyondellBasell Industries NV (NYSE:LYB) shares, which are already up 15.1% year-to-date.
Number two
In Occidental Petroleum Corporation (NYSE:OXY), Leon Cooperman’s fund disclosed a $76.6 million position, which contains 977,704 shares. In February, the company raised its dividend to $2.56 from $2.16 per share, which shows an overall growth of the annual dividend rate since 2002 of 412%.
Even though the net income of Occidental Petroleum Corporation (NYSE:OXY) fell to $1.4 billion in the first quarter of 2013 from $1.6 billion a year ago, augmented production capacity of net oil, gas and liquids (to 746 MBOE versus 745 year-over-year) was the number most analysts paid attention to. Increased capacity bodes well for Occidental Petroleum Corporation (NYSE:OXY)’s future; Wall Street predicts that shares have an upside of 11-12% from current levels, and a potential sale of its least profitable assets is icing on Occidental Petroleum Corporation (NYSE:OXY)’s proverbial cake.
A sale-spinoff scenario
Omega Advisors also included 887,300 shares of Covidien plc (NYSE:COV) in its most recent 13F. The value of the position amounts to about $60.2 billion. Covidien plc (NYSE:COV)’s stock has a year-to-date return above 13%, and despite financial results that missed expectations in its latest quarter, investors like Jim Simons and Donald Yacktman have also been bullish.
If logic holds, much of this upwards-moving price action is due to the company’s announcement that after the sale of its pharmaceuticals division to Mallinckrodt is completed later this year, shareholders will receive shares of the “new” Mallinckrodt in an 8:1 transfer (8 shares of Mallinckrodt for each 1 Covidien plc (NYSE:COV) share; no partial shares).
Covidien plc (NYSE:COV) has forecasted that the post-split Mallinckrodt will sport sales growth of 7% to 11% in its first fiscal year, and recent acquisitions of CNS Therapeutics—the producer of Gablofen—and Roxicodone from Xanodyne Pharmaceuticals should also benefit growth moving forward.
Final thoughts
Leon Cooperman is one of the most widely followed hedge fund managers out there, and aside from his love of lesser-known names like Monitise Plc (LON:MONI)—a mobile payments company—and Teknik Prima Solusi—an Indonesia-based L&G offshore business with strong potential—the aforementioned trio of companies are intriguing plays.
LyondellBasell Industries NV (NYSE:LYB) isn’t the first name most energy-focused investors think of when they ponder energy stocks, but its stranglehold on the ethylene space should continue to benefit from the shale boom. While it’s too early to tell if Occidental Petroleum Corporation (NYSE:OXY) will follow in Chesapeake Energy Corporation (NYSE:CHK)’s footsteps and undergo a barrage of asset sales, this is a situation to monitor, and may be a reason why Cooperman is long; the Mallinckrodt shares that Covidien plc (NYSE:COV) investors will receive post-spinoff are also too attractive to pass up.
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