In a recent episode of CNBC’s Mad Money, Jim Cramer dug into some of Leon Cooperman’s top picks at the Delivering Alpha Conference: SUPERVALU INC. (NYSE:SVU) and Atlas Energy LP (NYSE:ATLS).
According to CNBC, Cooperman’s $9 billion Omega Advisors posted net returns of 30%, following up on a 25% net gain in 2012. These returns were driven by the rigorous analysis of each company in which the fund invests; so, the stocks that Cooperman pitched in the Conference are not to be overlooked. Let’s further explore them.
SUPERVALU INC. (NYSE:SVU) is a $2.45 billion market cap US grocery channel that “was fighting for its very existence less than two years ago” (Cramer). However, the company has been on a tear lately, and Cooperman seems to see value in Supervalu –pun intended. Early last year, the company brought in a new management, which includes a new CEO, Sam Duncan. Duncan had previously served as Chairman, CEO and President at OfficeMax, one of the largest office supplies retailers in North America, where he asserted his reputation as a turnaround guru –a reputation that he had gained in his time at ShopKo Stores.
The new management has taken “aggressive action to stabilize the business: right sizing the company; selling four brands: Albertsons, Acme, Jewel-Osco and Shaw’s and Star Market (…) in a $3.3 billion deal [that] did wonders for the balance sheet.” The company “can now focus on growing and improving its operations, rather than merely struggling to survive.” In addition, Cooperman believes that SUPERVALU INC. (NYSE:SVU) could sell its grocery retail business over 2014, creating additional value.
After analyzing all the parts of Supervalu’s business, Cooperman arrived at a –conservative- price target of $11.00 per share, which implies a 16% upside potential from the current stock price – $9.42. Currently, SUPERVALU INC. (NYSE:SVU) offers a cheap stock, a turnaround story, potential for value creation, fairly limited risk and terrific upside potential. At the end of March, Cooperman held over 2.6 million shares of Supervalu, but the stake was decreased by around 1.06 million shares over the quarter.
Cooperman also recommended Atlas Energy LP (NYSE:ATLS), a $2.47 billion market cap MLP the focuses on producing, transporting and processing natural gas and oil in the U.S. He owns around 3.86 million shares of the company, according to the latest 13F filing, the stake being increased by 15% on the quarter. The basic factor behind this recommendation is the stock price; Atlas Energy LP (NYSE:ATLS) trades at a 25% discount to its peers. Distribution is also expected to grow at a 24% annual rate, thru 2016; this is particularly impressive, given that the stock has already yielded more than 4% (for 2014). Additional growth opportunities derive from the fact that Atlas Energy LP (NYSE:ATLS) is a general partner of a Pipeline MLP and a Production MLP.
Based on a net asset calculation, Cooperman believes that Atlas Energy LP (NYSE:ATLS) should be worth about $59.00 per share –up from the current $47.69. In addition, the high dividend yield will certainly make the investors’ wait worthwhile.
Disclosure: Javier Hasse holds no position in any stocks or funds mentioned
