“If I could buy a company selling below its net asset value and getting a decent yield, I’ll buy it.”
The stocks he recommended are only those he is prepared to buy or is currently buying, he said. They are: Linn Energy (NASDAQ:LINE), Express Scripts (NASDAQ:ESRX), Halliburton (NYSE:HAL) and Sandridge (NYSE:SD).
Linn Energy (NASDAQ:LINE)
Linn Energy is Cooperman’s fourth largest holding, at a 4.2% weight. He increased the position size by 68% or 2,886,300 shares in the first quarter to 7,158,488 shares total, and he has bought and sold the company’s shares since before 2008.
Linn Energy is a top-15 U.S. independent E&P company and the first publicly traded independent oil and natural gas limited liability company in January 2006. It has paid a consistent dividend since then and has operations in the mid-continent, Permian Basin, Hugoton Basin, Rockies, Michigan and California.
In February, Linn announced it would purchase all of Berry Petroleum Company (BRY)’s outstanding shares for $4.3 billion, in the first-ever acquisition of a public C-Corp by an upstream LLC or MLP. Acquiring the company gives Linn greater exposure to oil in California, the Permian Basin, East Texas and the Rockies, and a new core area in the Uinta Basin. It will also increase Linn’s estimated proved reserves by 34% and current production by 30%. The deal is expected to close by June 30, 2013.
In the first quarter, Linn reported a 69% increase in average daily production year over year, both through acquisitions and organic growth. It reported a $222 million net loss, compared to a net loss of $6.2 million the previous first quarter. It attributed the decline to a change in fair value of hedges covering future production, an impairment from long-lived assets, merger transaction costs and the sale of assets.
Also in the first quarter, Linn also moved from a quarterly cash distribution of dividends to a monthly distribution policy. It raised its dividend payout to $2.90 annually, a 2% increase from the first quarter of 2012.
Linn Energy’s long-term price, revenue and earnings history:
Linn has a P/B of 1.6 and P/S of 3.77.
Express Scripts (NASDAQ:ESRX)
Cooperman has been adding to his Express Scripts position each quarter since he established it in the second quarter of 2012 and owns 2,74,727 shares as of the first quarter 2013. It has a 2.4% portfolio weight.
Express Scripts is a pharmacy benefits manager handling more than a billion prescriptions annually for clients including employers, health plans, government health programs and unions. The company helps them cut down on prescription costs using its unique program to select the best drugs, pharmacy and health decisions for each individual.
In the first quarter, Express Scripts’ financial results were positively impacted by its April 2012 merger with Medco Health Solutions. The combined company had revenue of $26.1 billion, a jump from $12.1 billion in the first quarter of the previous year. Net income equaled $373 million, up from $267.8 million the previous year.
The company also repurchased $5.1 million shares costing $300 million, and repaid $1.4 billion in long-term debt during the quarter.
Express Scripts’ long-term price, earnings, revenue and P/E history:
Express scripts currently trades at a P/E near its 10-year high at 35.7, a P/B of 2.2 and P/S of 0.50.
Halliburton Company (NYSE:HAL)
Cooperman added 252,500 shares to his Halliburton stake in the first quarter, bringing the total to 4,009,900, or 2.5% of his portfolio. He has had a position in the company since the fourth quarter of 2011.
Halliburton, through its drilling and evaluation, and completion and production divisions, is one of the largest providers of products and services to the energy industry in the world. It recently established a second headquarters in Dubia to expand its presence in the Eastern Hemisphere. It derived 58% of its revenue from North America and 42% from international markets in 2011.
Houston-based Halliburton in the first quarter reported revenue totaling a first-quarter record $7 billion, up slightly from $6.9 billion in the first quarter of 2012. It had a net loss of $16 million, compared to net income of $630 million the previous year. The company said it faced a rig count decline and pricing headwinds in North America, more than made up for by growth in its international operations.
Halliburton’s long-term price, revenue, earnings and P/E history:
While Halliburton trades near its one-year high price, it has a P/E of 19.9, P/B of 2.6, and a near one-year high P/S ratio of 1.4.
SandRidge Energy (NYSE:SD)
Cooperman raised his stake in SandRidge Energy by 2,217,065 shares to a total of 26,595,610 in the first quarter. He first bought shares the previous quarter and the size is 2.2% of his portfolio.
SandRidge Energy has transitions from a natural gas company to an oil company, focused on shallow, conventional, domestic on-shore and off-shore oil basis, particularly in the Mississipian Oil Play of Oklahoma and Kansas, and in West Texas, the Gulf Coast and the Gulf of Mexico.
On June 19, the company promoted a new CEO, James Bennett, who previously served two and a half years as CFO, and a new interim non-executive chairman, Jeffrey Serota. Bennett replaces Tom Ward, the former chairman and CEO.
In the first quarter, SandRidge reported a net income decline to $2 million, from $21.2 million in the first quarter 2012. Oil and gas revenue increased 40% to $478 million on increases in oil and natural gas production. Production increases were due to its Mississippian play and properties it acquired in the second quarter of 2012, while its Permian properties production was down due to a divestiture in first quarter 2013. Closing that sale contributed significantly to a $2.1 billion debt reduction during the first quarter.
The 10-year price, revenue and earnings history of SandRidge Energy:
Currently, SandRidge’s price is near a two-year low, it has a near three-year low P/B of 1.02 and near three-year low P/S ratio of 0.8.
See more of Leon Cooperman’s stocks here. Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Leon Cooperman.
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