Leon Cooperman (Trades, Portfolio)’s Omega Advisors acquired 24 new holdings during the third quarter. The top three new holdings are Hess Corp. (HES, Financial), Pandora Media Inc. (P, Financial) and Williams Companies Inc. (WMB, Financial).
Cooperman founded Omega in 1991 and currently serves as chairman. Before that, he spent 25 years at Goldman Sachs and eventually rose to serve as CEO and chairman.
The guru purchased 986,900 shares of Hess for an average price of $53.58 per share. The transaction had an impact of 1.6% on the portfolio.
Hess is involved in the exploration and production of crude oil and natural gas. The New York-based energy company has a market cap of $16.2 billion and an enterprise value of $21.03 billion. It has a price-book (P/B) ratio of 0.8 and a price-sales (P/S) ratio of 3.13.
GuruFocus ranked the company’s financial strength 5 of 10. The low Piotroski F-Score of 2 and Altman Z-Score of 1.11 suggest the company is in poor financial condition with the potential for bankruptcy in the near future. The company is destroying value as it grows because the return on invested capital (ROIC) underperforms the weighted average cost of capital (WACC). The cash to debt ratio of 0.5 is barely below the industry median of 0.6.
As for Hess’ profitability and growth, GuruFocus gave the company a ranking of 3 of 10. Both its margins are negative, as are its returns. However, the return on equity (ROE) and return on assets (ROA) outperform 55% and 59% of other companies in the global oil and gas exploration and production industry. Similarly, the return on capital (ROC) outperforms 56% of competitors.
Paul Singer (Trades, Portfolio) is Hess' largest shareholder among the gurus. He holds 5.9% of outstanding shares, which represents 8.3% of his total assets managed. In total 17 gurus hold positions.
The DCF Calculator gives the stock a fair value of $-112.69; it was trading at $49.34 on Tuesday.
Cooperman bought 2,722,900 shares of Pandora for an average price of $13.5 per share. The transaction impacted the portfolio by 1.2%.
Pandora provides Internet radio services. The California-based streaming service has a market cap of $2.7 billion and an enterprise value of $2.8 billion. It has a P/B of 4.5 and a P/S of 1.9.
GuruFocus ranked Pandora’s financial strength 5 of 10. The low Piotroski F-Score of 3 and moderate Altman Z-Score of 2.5 suggest the company is under some financial stress. As the company grows, it will destroy value because its ROIC underperforms its WACC. The cash-debt ratio of 0.7 is below the industry median of 1.4.
The company’s profitability and growth was ranked 3 of 10 by GuruFocus. The margins and returns are all negative and significantly underperform their competitors in the global broadcasting-radio industry. The company is saved by its three-year revenue growth, EBITDA growth and EPS growth. These values outperform competitors by 91%, 95% and 91%.
With his purchase, Cooperman became the company’s largest shareholder among the gurus. He holds 1.2% of outstanding shares, which is 1.2% of his total assets managed. Julian Robertson (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), RS Investment Management (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also hold positions.
The DCF Calculator gives the stock a fair value of $-12.73; it was trading at $11.36 on Tuesday.
Cooperman purchased 1,063,200 shares of Williams Companies for an average price of $26.54 per share. The transaction had an impact of 1.01% on the portfolio. He previously sold out of Williams in the first quarter of 2014.
Williams Companies is involved in energy infrastructure. The Oklahoma-based energy company has a market cap of $21.4 billion and an enterprise value of $54.4 billion. It has a forward price-earnings (P/E) ratio of 23.2, a P/B of 4.5 and a P/S of 3.
GuruFocus ranked the company’s financial strength 3 of 10. The Piotroski F-Score of 4 and Altman Z-Score of 0.08 suggest the company is stable but does have some financial stress. Since the ROIC underperforms the WACC, value is being destroyed.
In regard to Williams Companies’ profitability and growth, GuruFocus ranked it 4 of 10. Its margins and returns are negative. The ROE and ROA underperform 84% and 78% of other companies in the global oil and gas midstream industry. The ROC underperforms 82% of competitors.
Steve Mandel (Trades, Portfolio) holds 1.23% of Williams Companies’ outstanding shares, making him the largest shareholder among the gurus. This represents 1.3% of his total assets managed. In all, 13 gurus hold positions.
The DCF Calculator gives the stock a fair value of $-16.05; it was trading at $28.53 on Tuesday.
Energy stocks have a weight of 7.8% in Cooperman’s portfolio and consumer cyclical stocks have a weight of 14.7%. For all of Cooperman’s current holdings, view his portfolio.
Disclosure: I do not own stock in any companies mentioned in the article.
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