Edited by Kate Boehme
Multibillionaire Leon G. Cooperman founded Omega Advisors, Inc. in 1991 after his retirement as general partner from Goldman, Sachs & Co and as Chairman and CEO of Goldman Sachs Asset Management. He lived in the South Bronx with his plumber father. He graduated from Hunter College and got his MBA from Colombia Business School on 1967. By working in Goldman Sachs (NYSE:GS), he supported his family, which included a wife and newborn baby. His is a classic story of rags to riches. Today, Omega Advisors is a $5 billion hedge fund based in New York City. Cooperman has an estimated net worth of $1.8 billion.
Recently, Cooperman's Omega Advisors filed its 13F with the SEC for the second quarter of 2012. Cooperman was always optimistic about the economy, and had a particular fondness for energy, high dividend, and financially outstanding stocks. Cooperman's top stock picks are still a strong point of reference in the financial market.
According to the latest filings of Omega Advisors, Cooperman initiated 21 new purchases, increased positions in 19 stocks, and reduced positions in 37 stocks. I examined his three major and most predominant buys and one unsettled sell from a fundamental perspective, utilizing my O-Metrix Grading System where possible. SLM, Linn Energy and Atlas Pipelines are Cooperman's essential hedge fund possessions. However, I think Cooperman's exit from Bank of America was a mistake. In the following section I will explain why this is the case.
SLM Corporation (NASDAQ:SLM) Cooperman's favorite stock for two consecutive quarters has been the top education financing company, Sallie Mae, which has a market capitalization of $7.55 billion. Of its total portfolio, Cooperman holds 5.39 percent in SLM stocks. The stock has a forward P/E and EPS of 9.67 times and 1.63 times, respectively. SLM also has a dividend yield of 3.11 percent, or $0.50 dividend paid. Meanwhile, SLM's payout ratio is 27.31 percent while its profit margin is 13.78 percent. The gross margin has a positive increase to 61.24 percent, and operating margin is 21.53 percent.
SLM also increased their share buyback program by an additional $400 million and continued to purchase both shares and FFELP portfolios. Operating expenses are reduced due to SLM's cost cutting measures. SLM targets under $1 billion operating expenses for the year. It has a quarterly earnings growth year over a year of 1554.28 percent. ROE is 18.70 percent, while ROI is 0.50 percent.
Cooperman's position on SLM is bullish, since analysts expect the stock to hit $19 this year. With ballooning student debt across the United States, Cooperman sees an opportunity in Sallie Mae. It is also noteworthy that, since the start of the year, SLM's charge-offs, delinquencies, and forbearance have been down, while the collections have been up. All this means that there was a sharp decline in the provision for uncollectible with Sallie Mae. Since December 2007, Cooperman maintained his conservative position in SLM because he sees an opportunity for SLM to expand not only its student loans but also its private lending business. Overall, SLM has a low price-to-earnings ratio, lots of cash, and a decent profit. In this case, I would support Cooperman's buy. SLM's O-Metrix score of 6.33 is also above the market average.
Linn Energy, LLC (NASDAQ:LINE) Linn Energy, LLC is an energy company founded in 2006, in Houston, Texas. The company operates and owns interests in the Mid-Continent, Michigan, the Permian Basin, the Williston Basin, and California. It showed impressive growth and has emerged as one of the top 10 independent exploration and production (E&P) companies in the United States, with a market cap of $7.86 billion. Linn consistently pays quarterly dividends since 2006. In 2007, the dividend was $2.07 per share, but now, the dividend stands at $2.90 per share. Cooperman is bullish on Linn. Of his total portfolio, Cooperman holds 4.05 percent in Linn stocks.
Linn has a P/E of 8.23. EPS growth for the year is 413.15 percent while quarterly revenue growth is 56.80 percent. Linn is highly profitable at gross margin, operating margin, and profit margin, with rates of 88.59 percent, 50.48 percent, and 36.73 percent, respectively. Linn also has an O-Metrix score of 5.20. Trading at forward P/B and P/S multiples of 7.43 times, 1.90 times, and 3.29 times, and offering one of the highest dividend yields of 7.36 percent, Linn is poised for growth and is the best energy stock to-date.
Linn has a gripping income story. This company has already shown fast and smart acquisitions as well as salient productivity. Linn also has the banks' vote of confidence because of its hedged oil and natural gas production. While Linn is affected by economic uncertainties, especially by the falling natural gas prices, the stock is still set to rise over the next few years. Linn is still making huge profits due to its fantastic risk and price management. The rate of return and dividend yield will be maintained due to these factors. I believe Linn is a great buy.
Atlas Pipeline Partners LP (NYSE:APL) Atlas Pipeline Partners, L.P. was founded in 1999 and is based in Moon Township, Pennsylvania. APL engages in collecting, processing and transporting natural gas and natural gas liquids [NGL] in the Mid-Continent region. The company owns and operates approximately 9,100 miles of intrastate natural gas gathering systems located in Oklahoma, Kansas, Texas, and Tennessee.
Atlas Pipeline Partners is a top dividend stock pick for the quarter. It performs resiliently in terms of valuation and profitability despite stock market fallout. APL has a market capitalization of $1.87 billion. Analysts' have a mean target price of $39.50. APL has an annual dividend of $2.24 and yields a striking 6.42 percent. APL also has an impressive EPS growth of 706.95 percent for the year and an outlook 55 percent growth for next year. Second quarter EPS is 893.79 percent compared to the same quarter last year.
In addition, Atlas's net income has shown an upward trend in recent years. Its gross margin, operating margin, and profit margin are 16.82 percent, 9.07 percent, and 9.63 percent, respectively. With a ROE of 8.93 percent, and a ROI of 6.95 percent, Atlas is certain to hold its ground as one of the hot dividend stocks of the quarter. Of Cooperman's total portfolio, 3.65 percent is held in APL stock. APL's exceptional stance absolutely merits a rating of "strong buy."
Bank of America (NYSE:BAC) Bank of America provides financial products and services to individual consumers, businesses, institutional investors, corporations, and governments both in the United States and internationally. Yet, Omega Advisors withdrew its 1.24 percent position in Bank of America for the second quarter. Cooperman was bearish on BAC for a while since the major crisis hit the world's financial institutions. This trend is particularly noticeable as Cooperman also slashed Omega's holdings in JPMorgan Chase (NYSE:JPM) and dumped Citi (NYSE:C) in the same quarter.
BAC's latest closing was $8.17 (as of August 23), and it has a market capitalization rate of $88.5 billion. BAC is currently a high risk, low return stock trading at a P/E of 8.70 times and a dividend yield of 0.50 percent. Meanwhile, the company's EPS is a plain 0.92, but it is expected to pick up 66.10 percent for the next year. Remarkably, EPS this year grew 101.23 percent, and quarter earnings are 120.79 percent higher, compared to the same quarter last year. BAC's ROA is 0.51 percent, and ROE is 4.67 percent. Furthermore, operating margin and profit margin are 14.07 percent and 11.62 percent, respectively.
Ultimately, I think that Cooperman made the wrong call, when he chose to exit BAC stocks. The banking system is being undervalued due to high uncertainty at the present. The Greek bailout and recent JPMorgan (JPM) incident are not helping the reputation of financials either. Yet, despite these negative factors, Bank of America recently hit one million users in online and mobile banking. This milestone is key to stimulating the market and cutting losses, and proves that BAC still has clients that are willing to risk their money in this volatile industry. Furthermore, Bank of America stock has recovered much of its earlier losses, and has kept an upward trend in both price and earnings. BAC's diversified products and broad market are great means of further increasing its stock value. My stance on BAC is bullish, and BAC is a resilient hold. I think it is one stock to watch for big moves in the second half of 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.