We recently compiled a list of the Billionaire Lee Cooperman Says The Market Is Expensive But These 10 Stocks Are Cheap. In this article, we are going to take a look at where Arbor Realty Trust, Inc. (NYSE:ABR) stands against the other cheap stocks.
Leon Cooperman recently shared his conservative outlook on the economy and discussed stocks that he is monitoring during a CNBC interview. He believes the U.S. is heading toward a fiscal disaster due to a lack of attention on rising debt. He also noted that nothing seems overvalued if a 10-year bond is valued at the current rate.
“My assumption is that we are headed into a fiscal disaster in our country. There’s nobody focusing on debt creation in the economy. My second assumption is that nothing is overvalued if a 10-year bond belongs at the current rate of 3.9%.”
Cooperman compared this to the 1972 Nifty Fifty period when government bonds were at 6.5%, and several companies which had high earnings multiples, eventually went bankrupt. He pointed out that these companies, despite their high valuations, were acquired by JP Morgan.
“In the Nifty Fifty period of 1972, the government bond went 6.5%, Avon products was 65x earnings, it has declared bankruptcy. Eastman Kodak went bankrupt with 48x earnings. IBM at 37x earnings got bankrupt. These are companies that are actively being bought by JP Morgan in the US trust.”
Cooperman emphasized that with the 10-year bond yield at 3.932%, nothing appears overvalued. He expects interest rates to remain low and anticipates a Federal Reserve rate cut in September, likely by 25 to 50 basis points. He expects that this will lead to a slow positive movement in the yield curve, with the 10-year bond yield increasing and its price declining.
Leon Cooperman also mentioned that he believes the current environment is more of a “market of stocks” rather than a unified stock market. Additionally, he expressed concern about the health insurance sector, noting that these companies are trading at low multiples, even though they have been generating excess capital and buying back their own stock. Cooperman then emphasized that he is motivated by valuation levels when assessing investments.
Leon Cooperman follows a value-focused investment strategy, concentrating on undervalued stocks and using a top-down approach to select sectors. He combines fundamental analysis with a bottom-up approach to build and manage portfolios. Omega Advisors, which handles over $3.3 billion in assets largely from Cooperman’s own wealth, has approximately $4.37 billion under management for seven clients. The firm’s Q1 2024 13F filing showed $2.4 billion in managed securities, with its top ten holdings making up 61.09% of the portfolio.
Our Methodology
In this article, we review Leon Cooperman’s latest CNBC interview and highlight ten stocks he owns and mentioned. We also provided analyst ratings, key details about each company, and the number of hedge funds investing in them.
Why focus on the stocks that hedge funds invest in? Our research shows that following the top picks of leading hedge funds can result in returns that beat the market. We use this strategy in our quarterly newsletter, where we choose 14 small-cap and large-cap stocks each quarter. Since May 2014, this approach has generated a 275% return, outperforming the benchmark by 150 percentage points. (see more details here)
Rows of neatly arranged, multi-family homes, symbolizing the company’s large-scale investing opportunities.
Arbor Realty Trust, Inc. (NYSE:ABR)
Number of Hedge Fund Investors: 24
Arbor Realty Trust, Inc. (NYSE:ABR)’s core business focuses on originating and servicing loans, particularly in the multifamily and commercial real estate sectors. Demand for these loans has stayed strong, and Arbor Realty Trust, Inc. (NYSE:ABR) has effectively managed its portfolio, consistently delivering solid performance, even in tough economic times.
Additionally, Arbor Realty Trust, Inc. (NYSE:ABR) offers an attractive dividend yield of about 10.4%, making it appealing to income-focused investors. Arbor Realty Trust, Inc. (NYSE:ABR)’s reliable track record of paying dividends further underscores its financial stability and commitment to shareholders.
Arbor Realty Trust, Inc. (NYSE:ABR) reported another profitable quarter, with GAAP earnings of $0.25 per share and distributable earnings of $0.45 per share. The distributable earnings are particularly important as they cover Arbor Realty Trust, Inc. (NYSE:ABR)’s quarterly dividend, which is currently set at $0.43 per share.
Arbor Realty Trust, Inc. (NYSE:ABR)’s President and CEO, Ivan Kaufman had this to say in its recent earnings call:
“We’re very pleased with the success we have had to-date and expect to remain extremely busy over the next few months and steadfast now approach as we continue to manage through the back balance of this downturn. Clearly in this environment having adequate liquidity is paramount to our success. As a result, we have focused heavily on maintaining a very strong liquidity position. Currently we have approximately $1 billion of cash between $800 million of corporate cash and $600 million of cash in our CLOs that result in additional cash equivalent of approximately $150 million. And having this level of liquidity is crucial in this environment, as it provides us with the flexibility needed to manage through this downturn and taking advantage of opportunities that will exist in this market to generate superior returns on our capital.
As you may recall a few months back, we allocated $150 million of our capital stock buyback to us through buyback stock, knowing full well that will be volatility in the market allow us to potentially repurchase our stock at discounts to book value and generate high double-digit returns on capital. In April, we repurchased approximately $11.4 million of stock at an average price of $12.19 with a 4% discount on book value and generating a current dividend yield of 14% and the yield of approximately 16% on distributable earnings. This is a tremendous return on capital and with around 138 million of remaining capital available for this strategy will continue to be opportunistic in our approach to buying back stock at a volatility process. We also continue to do an excellent job of deleveraging our balance sheet and reducing our exposure to our term debt.”
Overall ABR ranks 9th on our list of the cheap stocks to buy. While we acknowledge the potential of ABR as an investment, our conviction lies in the belief that under the radar 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 ABR 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.