Resource America has a $1.2 billion market cap and has had net losses and declining revenue for the last four years. For the quarter ended March 31, it reported a net loss of $2.3 billion, down from a net loss of $4.3 billion in the year-ago quarter, with growth in its Resource Opportunity REIT and Resource Capital Corp. real estate-related businesses.
In April, Resource America also purchased a 33% interest in a world-class global credit management business, CVC Capital Partners, from which it will collect incentive management fees worth more than $20 million possibly beginning in 2013.
Cooperman said in a May CNBC interview that his firm looks for companies trading at “multiples of earnings less than the growth rate or selling at a significant discount to what we perceive to be private market value [the price a strategic investor would pay for the entire business].”
Resource America has no P/E due to negative earnings, but at $6.19 per share it is trading near tangible book value of $5.98, a near all-time low.
The company also has $10.5 million in cash, down from $37.9 million in the year ago quarter, with $51 million in long-term liabilities and no debt, down from $216 million in long-term liabilities in the year-ago quarter. Resource America has paid a $0.03 per-share quarterly dividend for the last year, its lowest level since 2002, though it has paid a dividend for 17 years.
In an interview with Steve Forbes on July 2, Cooperman said he found the market moderately undervalued and called equities the best house in the financial asset neighborhood, though he was not sure whether it was “a good neighborhood or a bad neighborhood.” He believes people can actually lose money on the 10-year government bond at 2%, what he calls the least attractive investment class at the moment, while there are many cheap stocks of good companies that will yield more than bonds, with growth.
“I’m going against the grain, but I’m prepared to be patient,” he added.
His talent for choosing stocks that have advanced in an economy he called “okay, not great” have pushed his fund to the top in the first half of 2012. Omega Advisors is up 10% in the first six months of 2012, Reuters reports, a period in which the average hedge fund gained 1.7%. Cooperman’s return was helped by a long-term investment in his largest holding Sallie Mae, the student loan lender, which rebounded 21% year to date.
Cooperman’s top holdings below Sallie Mae are two oil and gas-related companies Atlas Pipeline Partners LP (APL) and Linn Energy LLC (LINE). Another two companies in his top-six holdings are in the oil and gas industry: El Paso LLC (EP) and Transocean (RIG). On Forbes, Cooperman named energy as an attractive asset class, saying it was still “a long-term issue.”
His third largest is Apple Inc. (AAPL), which he bought in the third quarter of 2010 at an average price of $260, earning almost double on the investment to date. On Forbes he commented, “It’s hard when something is up much to recommend it… we do like Apple.”
See Leon Cooperman’s stock portfolio is here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Leon Cooperman.