- Cooperman is one of the great investors of the last 20 years, and he's out with his latest picks.
- He offers up picks from income and growth stocks to growth at a reasonable price plays.
- His Delivering Alpha Conference picks have been winners for the last two year.
At this year's Delivering Alpha conference, billionaire Leon Cooperman was again a heavyweight speaker, touting some of his top ideas. The 71-year-old hedge fund manager retired from Goldman Sachs at the age of 50. He started Omega Advisors after retirement, and his hedge fund has been a perennial outperformer.
More specifically, he has done great at the Delivering Alpha conference. In 2013, eight of his 10 picks were up for the trailing 12 months, and in 2012, all 10 of his picks were up. This year could prove to be another great year for Cooperman. Outlined below are five of his most interesting picks.
Actavis (NYSE: ACT) and Citigroup (NYSE: C) are a couple of his newest ideas. He calls these "growth at a reasonable price" stocks. Actavis is an Ireland-based pharma company that could become a part of the tax inversion M&A activity.
Actavis is one of the big players in the generic pharma market. Generics should prove to be big winners going forward, as insurance programs push for lower-cost generics, and an aging population leads to an increase in overall drug usage. Actavis trades at a P/E ratio of 13 based on next year's earnings estimates. Meanwhile, it's expected to grow earnings at a robust 20% during the next five years.
Cooperman said about Citi, "If you buy something out of favor, things seen to happen to make you right." Well, Citi is still out of favor. It trades at a valuation that's well below its peers, trading at a P/B ratio of 0.74. Meanwhile, JPMorgan Chase trades 1.1 times book value, and Wells Fargo at 1.7.
Citi completed the Fed's stress test back in March. In addition, its long-term plan is to divest non-core assets in an effort to focus on the fee-based businesses. One of the keys to this is winding down Citi Holdings, which are its legacy problem assets. Citi Holdings now only makes up 6% of the bank's total assets.
Cooperman outlines two income and growth picks, Atlas Energy LP (NYSE: ATLS) and KKR & Co. LP (NYSE: KKR). Atlas offers a 4% dividend yield, and KKR's yield is 6.2%. Cooperman notes, "Income is like sex, when it's bad it's good and when it's good it's really good."
Atlas Energy is a producer of oil and gas, operating primarily in the Appalachian Basin. Atlas Energy has ownership interests in one of Cooperman's 2013 Delivering Alpha picks, Atlas Resource Partners, which has an 11% dividend yield.
Atlas Energy's first-quarter earnings were a loss of $0.27 a share, which was well below consensus of $0.04. In the same quarter last year, it lost $0.25 a share. However, it's expected to grow earnings by 70% next year. The company should continue being a big benefactor of the energy boom in the U.S.
KKR is up more than 25% over last year as it continues to generate solid returns for pension funds and its other investors. It's done so by continuing to grow its business with geographical expansion, and tapping new areas of the market. KKR has a strong presence in fixed income, equity and real estate, but it's also increasing its hedge fund business. It raised $500 million for a stock-focused hedge fund in June. Then, earlier this month, it bought a near 25% stake in BlackGold Capital, which is an energy-focused fund.
KKR also appears to be somewhat of a value play, trading at a P/E ratio of nine based on next year's earnings estimates. The industry leader, BlackRock, trades at a forward P/E of 15.
High risk, high return
In this category, Cooperman reiterates his love for SandRidge Energy (NYSE: SD), which he has touted in the past. SandRidge is an oil and gas producer, with a focus on the Mississippian Oil Play. SandRidge has been cutting costs and increasing production during the last year or so. It has a three-year plan to grow production by upwards of 25% annually.
However, SandRidge could also be a takeover target, especially following the Kodiak Oil & Gas and Whiting Petroleum merger. TPG-Axon Capital, which has been pushing the company to sell itself, owns 7.3% of the company. And Cooperman owns right about 9.6% of SandRidge.
Cooperman notes that we haven't quite hit the "euphoria" point in the market; but he does think we're getting close. Investors should be prudent. His five stocks above are all strong plays, and worth a closer look for investors either looking for value, income, or growth.