Leon Cooperman (Trades, Portfolio) is the founder and chairman of Omega Advisors, a hedge fund with annualized returns of about 14% over the past 25 years. During the first quarter, Cooperman added 31 new stocks to the portfolio, with a 20% quarter-over-quarter turnover rate.
The majority of the portfolio’s assets are held in consumer cyclical stocks at 18.8%, followed by 16.9% in financial services, and 12.8% in energy.
As of the first quarter, Cooperman’s top five holdings were Actavis (ACT, Financial), Citigroup (C, Financial), Sirius XM Holdings (SIRI, Financial), American International Group (AIG, Financial) and SunEdison (SUNE, Financial).
The following are Cooperman’s five-largest new buys during Q1.
Targa Resources Corp (TRGP, Financial)
Cooperman purchased 1,960,664 shares of Targa Resources Corp for an average price of $93.78. The company owns general and limited partner interests, including Cooperman’s second largest buy. The partnership provides midstream natural gas, NGL, and crude oil gathering services in the U.S.
The stock declined 12% over the past year and is currently priced at $99.66, with a P/E ratio of 49.7 and P/S ratio of 0.5.
Over the past five years, revenue growth declined 33.3%, while EBIT declined 25.7% over the same time period. Last year, the company reported net income of $102 million, up from $65 million the year before.
The current dividend yield is 3%, which is close to the five-year high. However, the payout ratio is a high 143%, indicating little room for the dividend to grow in the future based on current earnings.
Targa Resources Partners LP (NGLS, Financial)
Cooperman bought 3,943,050 shares of the publicly traded partnership owned by Targa Resources Corp for an average price of $43.89 per share. The stock dropped 30% over the past year and is now priced at $45.86.
Revenue declined 5.1% over the past five years, though the EBIT growth rate was 6.9% over the same time period. A positive sign is the company’s operating margin has been increasing steadily over the years, and recorded at 7.58% in 2014.
The current dividend yield is 6.9%, while the payout ratio is 147%.
Cooperman purchased 593,400 shares of Humana for an average price of $158.27 per share. Humana is a health care company that offers insurance products and health and wellness services.
Over the past year, the stock price increased 43%, and currently trades at $178.41. The current P/E ratio is 23 and the P/S ratio is 0.55. GuruFocus rates Humana’s business predictability as 3 out of 5 stars. The DCF calculator estimates the stock is slightly undervalued with a fair value of $183.54 and a 3% margin of safety.
The company’s revenue grew 10.7% over the past five years, while EBIT grew by 6.7% over the same time period. In 2014, EBIT per share was $13.92, up from $12.07 the year before.
Humana’s dividend yield is 0.63%, which is close to the three-year low, while the payout ratio is 14%.
He also initiated a new position in Dow Chemical, purchasing 1,873,900 shares at an average price of $46.86 per share.
Dow’s Agricultural Sciences segment provides crop protection, seed/plant biotechnology products, and urban pest management solutions. The stock is priced at $51.57 with a P/E ratio of 16 and P/S ratio of 1.1.
In 2014, Dow reported EBIT per share at $4.61, up from $3.31 in 2013.
Over the past five years, the company’s net income increased by more than 16%, and recorded at $3,772 million in 2014. The current dividend yield is 3.1%, while the payout ratio is 49%.
Twenty-First Century Fox (FOXA, Financial)
Cooperman’s fifth-largest purchase during the quarter was 2,622,000 shares of Twenty-First Century Fox for an average of $34.70 per share. The entertainment company’s stock declined 4% over the last year and is now priced at $33.96, with a P/E ratio of 8.1 and P/S ratio of 2.4.
When comparing the price to the Peter Lynch earnings line, the stock appears to be undervalued.
The company saw its net income decline to $4,514 million in 2014, down from $7,097 million the year before. EBIT per share, however, increased from $2.30 in 2013 to $2.42 in 2014.
Twenty-First Century Fox’s dividend yield is 0.8%, and the payout ratio is just 6%.
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