Leon Cooperman Discusses His Favorite Picks: American International Group Inc (AIG), SandRidge Energy Inc. (SD) & Others
On Monday, Omega Advisors' chairman & CEO, Leon Cooperman, was invited to CNBC’s Halftime Report, where he shared his views on the present and future ongoing stock market. Cooperman pointed out three domains which have a quite good performance on the market and are interested in their value. These are financial, energy and health care stocks.
Omega Advisors is a notorious hedge fund, with over $10 billion in assets under management. A couple of weeks ago, we have taken a look at Omega's latest 13F, and analyzed Mr. Cooperman's largest bets, with Sprint Corporation (NYSE:S), representing the most valuable holding (40.6 million shares, worth $436 million). During his intervention on CNBC, among his favorite picks, Mr. Cooperman mentioned American International Group Inc (NYSE:AIG), which sells at 80% of the book value. The book value, as Mr. Cooperman pointed out is at around $60.
"We think over the next two or three years, there's a strong argument to be made that AIG will get to at least a 10% return on equity, which would imply earnings of well over $6 a share because book value will be growing. We think a 10% ROE ought to command one times book value at a minimum. So we could see AIG going up 25% over the next 12-18 months," Cooperman said.
Regarding the banks, the manager of Omega Advisors said that they also represent attractive investments. For example, Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) "sell at 10 times", Sallie Mae also sells at 10 times, yielding approximately 2.5%. In general, this positive slope will increase the lending opportunities. According to Omega's latest 13F, the financial sector amasses the largest share of the fund's equity portfolio. American International Group Inc (NYSE:AIG) is the second-largest position in terms of value, the stake amassing almost 5.9 million shares, worth $298.44 million. SLM Corp (NASDAQ:SLM) (aka Sallie Mae), and Citigroup are also among the top picks, both holdings amassing around 7% of Omega's $7.1 billion equity portfolio. In relation to energy stocks, Cooperman is pleased with Omega's big position in SandRidge Energy Inc. (NYSE:SD), which currently trades at about $6.4 per share, although, as Cooperman says, it has a Net Asset Value of at least $10 per share. Sandridge is also one of the largest holdings, Omega owns 40.5 million shares (worth $246.03 million).
"The new management is doing the right things. We think if you could buy something at $6 and change with an NAV of an excess of $10, where you could get the benefit of a possible takeout, they're simplifying the company, they sold their offshore assets, both in Mexico, they're an onshore land play. That's very attractive."
In addition, Mr. Cooperman mentioned Atlas Energy LP (NYSE:ATLS), about which he said “that's not done particularly well for us, but we like this whole Atlas energy complex,” with a yield of 4.5% and resource production yield of about 11%. Another interesting energy play, is Halliburton Company (NYSE:HAL), an oil-related services company. The whole video of Mr. Cooperman, discussing Omega Advisors' equity portfolio can be watched below:
In addition to discussing Omega's portfolio, Mr. Cooperman also provided his point of view about the markets and the economic situation. He considers that the market is in "a zone of fair valuation."
"In a slowly growing economy, every economic recession sows the seeds of a next business recovery, and every business recovery sows the seeds for next recession”
Asked about the future course of the market, Cooperman is quite optimistic and thinks that the economy is looking good for 2015, although there is a very small chance for a huge growth.
"I think it [the market] will continue to age, because most bear markets relate to recession. It does not look like a recession is in the cards any time soon," Mr. Cooperman concluded.
Watch the full sequence below:
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