After learning the asset management business at Goldman Sachs, Leon Cooperman started Omega Advisors in 1991. His annual returns have averaged around 16% since then.
Cooperman’s $6 Billion Omega Advisors is currently 80% long, one of the most bullish equity hedge funds around. In a recent interview on CNBC, Cooperman said the US is not another Japan and it will be growing at a 3.5% rate.
He favours equities over bonds because stocks’ earnings yield is better than bond yields and interest rates will probably go up in a few years. He’s not worried about the current optimism in the market because even though people are optimistic right now, they don’t invest that way. Most people aren’t in the market yet. He expects at least an 8% return in 2011, so he increased his stock holdings during the last three months of 2010.
Leon Cooperman says he made his money by picking stocks not by top down investing. Nevertheless, he says we’re early in an expansionary cycle and as employment expands, things will get better for the economy and the stock market. In his latest 13F filing, Leon Cooperman’s Omega Advisors had $4 Billion in stocks. Here are the 10 largest new stock picks:
Stock Return Value in Millions General Motors (GM) -1.2% 92036 PHH Corp (PHH) 8.0% 43395 Oshkosh Corp (OSK) 8.2% 35409 Blackstone Group (BX) 18.4% 31996 Encana Corp (ECA) 5.9% 27810 Hewlett-Packard (HPQ) 16.2% 24923 Genon Energy Inc (GEN) 7.6% 21762 Jabil Circuit Inc (JBL) 6.7% 20592 Metlife Inc (MET) 7.1% 8888 Abitibibowater (ABH) 23.4% 8263These new stock picks have performed spectacularly so far in 2011. Except General Motors, all of these companies managed to beat the SPY. The weighted average return for Cooperman is 7.1% since the beginning of this year, vs. 5.2% for the SPY. If Cooperman added equal amounts of each stock into his portfolio, his return would have been 10%. His biggest pick, General Motors, had the worst return among these 10 stocks.
Daniel Loeb has PHH and ABH in his portfolio. T. Boone Pickens increased his Encana (ECA) holdings during the third quarter of 2010. Lee Ainslie and David Tepper have big investments in HPQ. At the end of the fourth quarter, Cooperman had the largest positions in the following stocks:
Stock Ticker Return Value in Millions ATLAS ENERGY INC ATLS 2.4% 304 SLM CORP SLM 17.9% 224 KKR FINANCIAL HOLDINGS LLC KFN 12.6% 144 ATLAS PIPELINE PARTNERS LP APL 12.1% 139 LINN ENERGY LLC-UNITS LINE 3.6% 139 ENERGY XXI BERMUDA EXXI 15.6% 112 TEVA PHARMACEUTICAL INDS LTD TEVA -1.1% 111 PLAINS EXPLORATION & PRODUCT PXP 16.1% 105 FORD MOTOR CO F -4.2% 101 UNITED CONTINENTAL HOLDINGS UAL 11.8% 99 XL GROUP PLC XL 7.3% 99 3M CO MMM 5.2% 99 MICROSOFT CORP MSFT 0.2% 95 GENERAL MOTORS CO GM -1.2% 92 MGIC INVESTMENT CORP MTG -12.6% 91 These stocks had a weighted average return of 6.6% since the beginning of January, vs. 5.2% for the SPY. The equal weighted return for these stocks during the same time period was 5.7%, meaning that Cooperman’s weights added to his returns. His largest position, Atlas Energy, is actually a merger arbitrage play. In November, Chevron announced the $4.3 Billion takeover of Atlas Energy. Seth Klarman made a small investment in EXXI during the second quarter of 2010. Whitney Tilson is extremely bullish about Microsoft, which he thinks will increase to $35 in 2011.
During the fourth quarter, Leon Cooperman also significantly increased his holdings in the following stocks: CHARMING SHOPPES (CHRS), Citigroup (C), Time Warner Inc (TWX), Altisource Portfolio Solutions (ASPS), Microsoft (MSFT), and Transocean (RIG). Unfortunately, these stocks underperformed the SPY by one percentage point since the end of 2010.
Finally, Cooperman sold Pactiv Corp (PTV), SPDR Junk Bond ETF (JNK), McDonald’s Corp (MCD), Apollo Investment Corp (AINV), Cisco (CSCO), and Wells Fargo (WFC). He had more than $30 Million invested in each position at the end of September. These six stocks as a group underperformed the SPY by 1.1 percentage point, so Leon Cooperman’s sales were timely.
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