Leon Cooperman (Trades, Portfolio), founder of Omega Advisors, has released his second-quarter portfolio. Major trades include selling out of Alphabet Inc. (GOOGL, Financial), adding to JPMorgan Chase & Co. (JPM, Financial) and Gray Television Inc. (GTN, Financial) and a singular new buy in Denbury Resources Inc. (DNRCQ)
Cooperman, who now heads a family office, combines his macro view and fundamental valuation in his investing strategy. He does try to predict the market direction, but pays close attention to valuations, too.
Portfolio overview
Cooperman's portfolio contains 41 new stocks, including the new holding in Denbury Resources. It was valued at $874 million with a turnover rate of 3%. Top holdings include Cigna Corp. (CI, Financial)(11.70%), Fiserv Inc. (FISV, Financial)(11.51%), Trinity Industries Inc. (TRN, Financial)(6.90%), Ashland Global Holdings Inc. (ASH, Financial)(6.10%) and Mr. Cooper Group Inc. (COOP, Financial)(5.91%).
By weight, the top sectors of the portfolio are technology (17.23%), financial services (17.21%) and health care (15.34%).
Alphabet
The second quarter saw Cooperman sell out of his holding in Alphabet, the parent company of Google. In the first quarter of this year, he reduced his position by a significant 44.95%. The guru sold his remaining 60,000 shares for an average price of $1,344.49. Overall, the sale had a -8.99% impact on the portfolio and GuruFocus estimates his total gain on the holding at 43.83%.
Alphabet is a holding company, with Google, the internet media giant, as a wholly-owned subsidiary. Google generates 99% of Alphabet's revenue, of which more than 85% is from online ads. Google's other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone and smart home products also contribute to other revenue.
On Aug. 17, Alphabet was trading at $1,518.13, with a market cap of $1.03 trillion. According to the Peter Lynch chart, the stock is trading well above intrinsic value.
GuruFocus gives the company a financial strength rating of 9 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 3 out of 10. Two severe warning signs are issued for declining gross and operating margin percentages. The company has steadily increased cash flows and revenue throughout its lifetime.
JPMorgan Chase
Cooperman added to his holding of JPMorgan Chase after re-establishing the holding in the first quarter of this year. He purchased an additional 130,000 shares to increase the holding by 72.22%. Shares were trading at an average price of $94.84 during the quarter and represented an impact of 1.40% on the portfolio. GuruFocus estimates the total loss on the holding at 2.22%.
JPMorgan Chase is one of the largest and most complex financial institutions in the United States, with more than $2.5 trillion in assets. It is organized into four major segments, including consumer and community banking, corporate and investment banking, commercial banking and asset and wealth management. JPMorgan operates, and is subject to regulation, in multiple countries.
Aug. 17 saw shares trading at $99.93 with a market cap of $303.69 billion. The Peter Lynch chart suggests the stock is trading close to intrinsic value.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 4 out of 10. One severe warning sign is issued for poor financial strength. A cash-to-debt ratio of 1.35 places the company higher than 50.59% of the industry. Debt has increased slightly over the last several years as cash levels have decreased significantly.
Gray Television
Making a massive boost to his holding in Gray Television, Cooperman purchased an additional 450,000 shares. The purchase represented an increase of 81.82% in the holding and an impact of 0.72% on the portfolio. The shares were purchased at an average price of $12.78 and GuruFocus estimates the total gain at 2.68% during the lifetime of the holding.
Gray Television is engaged in owning and operating television stations. It also owns video program production, marketing and digital business. The company has two segments, namely broadcasting and production companies. It generates revenue through direct and advertising agency intermediary sales channels.
On Aug. 17, shares were trading at $15.39 with a market cap of $1.47 billion. The Peter Lynch chart suggests that the stock is currently trading below intrinsic value.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 8 out of 10. There are six severe warning signs issued, including declining operating margin percentages and poor financial strength. The cash-to-debt ratio of 0.1 places the company lower than 86.17% of the industry. The Altman Z-Score of 0.9 places the company in the distress column with bankruptcy a possibility in the next two years. The weighted average cost of capital outweighs the return on invested capital.
Denbury Resources
Cooperman established a new holding in Denbury Resources for the first time since 2014. The guru purchased 10.00 million shares to establish the new holding. The stock traded at an average price of 30 cents per share during the quarter. The buy had an impact of 0.32% on the portfolio and GuruFocus estimates the total loss of the holding at 25.18%.
Denbury Resources focuses on injecting carbon dioxide to enhance production from mature, conventional fields. At the end of 2018, the company reported net proved reserves of 262 million barrels of oil equivalent. Net production averaged 60 thousand barrels of oil equivalent per day in 2018 at a ratio of 97% oil and 3% natural gas.
Aug. 17 saw share prices at 3 cents with a market cap of $13.54 million. The Peter Lynch chart shows that the stock was trading near intrinsic value in 2014 before the share prices took a dive.
GuruFocus gives the company a financial strength ratio of 2 out of 10 and a profitability rank of 6 out of 10. There are three severe warning signs issued for declining revenue per share, a poor Altman Z-Score and poor financial strength. The Altman Z-Score of -1.49 places the company well into the distress column with bankruptcy a possibility in the next two years. The cash-to-debt ratio of 0.08 places the company lower than 75.32% of the industry, but is better than historical averages.
Disclaimer: Author owns no stocks mentioned.
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