Leon Cooperman (Trades, Portfolio)’s Omega Advisors saw opportunity in several health care-related stocks during the third quarter, according to the fund’s 13F filing.
Cooperman added 13 new stocks to the portfolio and also started a position in a SunEdison yieldco called TerraForm Global. Despite SunEdison’s decline of 81% over the past year, Cooperman has said the fund has no plans to sell, and the TerraForm investment was evidence of the commitment.
The following are Cooperman’s five largest new buys.
Cooperman’s new stake in Pfizer is composed of 4,830,595 shares bought for an average price of $33.80 per share. Pfizer trades at 24.75x earnings at $32.96.
Pfizer reported third quarter EPS of 34 cents, down from 42 cents in the year-ago quarter. The annual EPS trend is depicted in the graph below.
The pharmaceutical company’s PE is at the highest level since 2005 when it last hit a PE of 20 or higher. The dividend yield is 3.37%, while the payout ratio is 83%.
Valeant Pharmaceuticals International (VRX, Financial)
Cooperman’s most intriguing new purchase is 484,915 shares in the beaten-down Valeant Pharmaceuticals. Cooperman bought the shares for an average price of $233.19 per share. In the past few weeks, Valeant has been accused of “immoral” business practices, as termed by Charlie Munger (Trades, Portfolio), through its model of acquiring drugs and hiking prices, as well as using a mail-order pharmacy called Philidor with questionable billing practices.
The New York Times reported, however, that Omega did not appear to hold the shares for long, as Omega’s vice chairman Steven Einhorn appeared at the Reuters Investment Summit Monday and said the fund had since sold the shares.
Walgreens Boots Alliance (WBA, Financial)
Cooperman also bought 987,400 shares of Walgreens Boots Alliance, which has made headlines recently after announcing plans to acquire Rite Aid (RAD, Financial). The merger would make Walgreens by far the largest drugstore chain the country.
Cooperman purchased the shares for an average price of $90.41 per share. The stock has risen 23% over the past year and now trades at $81.69, or 20x earnings.
After a decline in EPS from 2012 to 2014, Walgreens doubled its EPS in 2015 to $4.00, up from $2.00 the year before.
The trailing dividend yield is 1.76%, while the payout ratio is 34%.
TerraForm Global (GLBL)
Cooperman purchased 6,013,155 shares of TerraForm Global, which traded for an average price of $9.69 during the quarter. The stock dropped 52% over the last year and now trades at $6.73.
TerraForm owns and operates contracted clean power generation assets. Its portfolio consists of solar projects in China, India, South Africa, and Thailand among others.
TerraForm was formed by SunEdison (SUNE, Financial) as a “yieldco,” a separately traded unit that buys assets in renewable energy once they’re completed. The yieldco collects revenue from selling electricity to help purchase more power plants. TerraForm raised $675 million in its IPO in July.
Cooperman also bought 250,000 shares in Cigna, which traded for an average $145.17 during the third quarter.
Cigna provides medical, dental, disability, life and accident insurance and related products and services. Cigna’s stock has risen 31% over the past year and now trades at 16.8x earnings, or $134.55.
In the second quarter, Cigna reported EPS of $2.26, up from $2.12 in the year-ago quarter. The annual EPS trend over time is shown in the graph below.
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