Leon Cooperman founded Omega Advisors, a hedge fund, in 1991. Before setting up the fund, Cooperman worked for Goldman Sachs. He served for 25 years as CEO and Chairman. Furthermore he graduated from Columbia Business School. Most importantly he founded Omega Advisors with $450 million in capital.
His investment strategy is a combination of his macro view and valuation. Although he tries to predict what will happen with the market direction, he is thoroughly focused on valuations.
Here are some of his top tech stocks:
Apple (AAPL, Financial): Apple is a leading company in the design of consumer electronic devices. Its products include PCs, tablets, phones and portable music players traded under the following branches: Mac, iPad, iPhone and iPod.
Apple does not only distribute and sell its products at its stores, but it also provides them through an online store. At the beginning of 2011, Apple launched the Mac App Store, which sells first and third-party applications for Mac desktop and notebook computers.
Recently, it has been announced that Apple will likely buy the TV rights to English soccer. Many think that the idea is to launch an iSoccer. The company is highly focusing on offshore deals. The reason is only one: the money is offshore. Indeed Apple bought patents from Nortel (the Canadian company), took over Anobit (Israeli) and now is contemplating the rights to British Soccer. I think that Leon Cooperman felt particularly attracted by this opportunity Apple is having of expanding even more. Furthermore, figures clearly show that investing offshore is profitable. $54 billion of its $82 billion in cash and investments come from off-shore. Foreign cash is growing faster too.
In the U.S. Apple operates with $27 billion together with the acquisitions, buybacks and dividends.
Qualcomm (QCOM, Financial): Qualcomm develops and licenses wireless technology and manufactures semiconductors for mobile phones. Its key patents are related to CDMA technology, a standard in wireless communications. The firm is also the world's largest wireless chipmaker.
I think Leon Cooperman decided to invest in Qualcomm because, although it is considered a growth company that focuses more on capital gains than on dividends, since 2003 it has been paying out them at a ratio that last year was $0.86 with a yield of 1.50% per share. Furthermore, figures speak for themselves. Shares are trading at $56 with a 12-month price target from analysts of $65.84 and EPS in the last year have been $2.52. For 2012 EPS are expected to reach $3.57. Based on this figure, the trailing price-to-earnings ratio stands at 22.33 with a forward multiple of 14.04. Most importantly, it surpasses the sector average of 13.32.
The current operating margin is 35.44%, and the profit margin is 28.48% with a return on assets of 9.89% and a return on equity of 19.05%. In the last quarter, QCOM reported a revenue growth of 22.10%, $11.56 billion in cash and only $1.16 billion in debt.
These better-than-average margins will protect the company should the prices soften. In addition, this reduction in prices will be offset by the increased volumes, as Qualcomm expects to increase device shipment to 900 million in 2012.
Microsoft (MSFT, Financial): Microsoft is engaged in developing Windows, the operating system for PCs, the Office suite of productivity software, and enterprise server products such as Windows Server and SQL Server. As regards the first two, Windows PC and Office, they represent 60% of revenue while the others contribute with 24%.
The firm also provides Xbox 360 video game consoles, owns the Bing Internet search engine, and software for mobile devices.
Financially speaking, MSFT is healthy. Recently, sales of Office and server products have increased by 7%. It seems MSFT is meeting analysts´ expectations.
In terms of quarter results, EPS stood at $2.75, the trailing price-to-earnings ratio at 9.34 and the forward multiple at 8.45. EPS are expected to reach $3.04 in the next fiscal year. Unfortunately, these ratios are below sector average of $24.02. Apple has exceeded Microsoft with 14.22 and Oracle and Google trade at forward price-to earnings ratio in double figures too.
In terms of dividends, MSFT yields at 3.1% thus, significantly surpassing its competitors, such as Apple (APPL) and Google (GOOG), which reported 0.8%. It has been paying dividends since 2003 while its competitors have paid no dividend at all. It is clear that Leon Cooperman saw an advantage in this regard at the moment of investing.
Current operating margin at MSFT is 38.78%, and profit margin is 33.01%, with a return on assets of 17.33% and a return on equity of 44.16%. Last but not least, revenue grew 7.30% and the company enjoys of $55.94 billion of cash with a debt standing at just $13.107.26 billion. The debt to equity ratio of 22.05 is under control particularly with operating cash of $27.29 billion per year.
Research in Motion (RIMM, Financial): Research in Motion designs and markets wireless handsets, software, and services. Handsets are the primary revenue driver as they are sold to carriers across the globe promoting the company´s BlackBerry line of devices. Furthermore, RIMM generates access service fees from carriers for each BlackBerry subscriber. Revenue from software licensing also comes from corporate clients who have started to use the BlackBerry enterprise server software.
Lately, it has been reported that Amazon (AMZN), Microsoft (MSFT) and Nokia (NOK) have shown interest in purchasing RIMM. However, no deal has materialized. The purpose of these companies is to increase and secure their position in the smartphone market and think acquisitions are a good opportunity to progress in that sense. However, there are certain drawbacks that may turn the deal into one not so good: the patent portfolio is difficult to value and management has shown preference to push forward with their bet-the-company wager on the QNX platform. RIMM is facing serious challenges but its Board of Director is not open to offers at this time.
What did Leo Cooperman see in RIMM? Shares have been trading at $13.50 each. They are somewhat undervalued. However, book value stood at 19.45 per share and cash at 2.49 per share. Furthermore, the company´s balance sheet is strong with $1.4 billion in cash and investments against no debt.
Citrix (CTXS, Financial): Citrix is involved in the Web 2.0 movement. This movement includes cloud computing, social networking, virtualization and other technological advances. CTXS is a leader in on demand IT services.
Citrix has been affected by the last economic downturn. Actually its shares are trading at $56.14 each after reaching a pick of $88.49 and P/E ratio is 31.83. Although these figures are not compelling, I think Leon Cooperman decided to invest in CTXS because the stock has ample room for growth and it is expected that the company will increase to the same levels as competitors VMware (VMW) trades at a P/E ratio of 68.8, and Red Hat (RHT) trades at a P/E ratio of 62.72. Citrix current EPS is $1.76 but it is expected to reach $2.76 in 2012, an increase of 56.8%. If shares trade at the same price, they will have a P/E ratio of 20.34 by the end of 2012.
There is no doubt that Citrix has potential to become a leader in cloud computing and virtualization. Its products are well designed and the company will certainly expand to new ones. It will surely become a stock among the high-priced ones in the Web 2.0 environment.
His investment strategy is a combination of his macro view and valuation. Although he tries to predict what will happen with the market direction, he is thoroughly focused on valuations.
Here are some of his top tech stocks:
Apple (AAPL, Financial): Apple is a leading company in the design of consumer electronic devices. Its products include PCs, tablets, phones and portable music players traded under the following branches: Mac, iPad, iPhone and iPod.
Apple does not only distribute and sell its products at its stores, but it also provides them through an online store. At the beginning of 2011, Apple launched the Mac App Store, which sells first and third-party applications for Mac desktop and notebook computers.
Recently, it has been announced that Apple will likely buy the TV rights to English soccer. Many think that the idea is to launch an iSoccer. The company is highly focusing on offshore deals. The reason is only one: the money is offshore. Indeed Apple bought patents from Nortel (the Canadian company), took over Anobit (Israeli) and now is contemplating the rights to British Soccer. I think that Leon Cooperman felt particularly attracted by this opportunity Apple is having of expanding even more. Furthermore, figures clearly show that investing offshore is profitable. $54 billion of its $82 billion in cash and investments come from off-shore. Foreign cash is growing faster too.
In the U.S. Apple operates with $27 billion together with the acquisitions, buybacks and dividends.
Qualcomm (QCOM, Financial): Qualcomm develops and licenses wireless technology and manufactures semiconductors for mobile phones. Its key patents are related to CDMA technology, a standard in wireless communications. The firm is also the world's largest wireless chipmaker.
I think Leon Cooperman decided to invest in Qualcomm because, although it is considered a growth company that focuses more on capital gains than on dividends, since 2003 it has been paying out them at a ratio that last year was $0.86 with a yield of 1.50% per share. Furthermore, figures speak for themselves. Shares are trading at $56 with a 12-month price target from analysts of $65.84 and EPS in the last year have been $2.52. For 2012 EPS are expected to reach $3.57. Based on this figure, the trailing price-to-earnings ratio stands at 22.33 with a forward multiple of 14.04. Most importantly, it surpasses the sector average of 13.32.
The current operating margin is 35.44%, and the profit margin is 28.48% with a return on assets of 9.89% and a return on equity of 19.05%. In the last quarter, QCOM reported a revenue growth of 22.10%, $11.56 billion in cash and only $1.16 billion in debt.
These better-than-average margins will protect the company should the prices soften. In addition, this reduction in prices will be offset by the increased volumes, as Qualcomm expects to increase device shipment to 900 million in 2012.
Microsoft (MSFT, Financial): Microsoft is engaged in developing Windows, the operating system for PCs, the Office suite of productivity software, and enterprise server products such as Windows Server and SQL Server. As regards the first two, Windows PC and Office, they represent 60% of revenue while the others contribute with 24%.
The firm also provides Xbox 360 video game consoles, owns the Bing Internet search engine, and software for mobile devices.
Financially speaking, MSFT is healthy. Recently, sales of Office and server products have increased by 7%. It seems MSFT is meeting analysts´ expectations.
In terms of quarter results, EPS stood at $2.75, the trailing price-to-earnings ratio at 9.34 and the forward multiple at 8.45. EPS are expected to reach $3.04 in the next fiscal year. Unfortunately, these ratios are below sector average of $24.02. Apple has exceeded Microsoft with 14.22 and Oracle and Google trade at forward price-to earnings ratio in double figures too.
In terms of dividends, MSFT yields at 3.1% thus, significantly surpassing its competitors, such as Apple (APPL) and Google (GOOG), which reported 0.8%. It has been paying dividends since 2003 while its competitors have paid no dividend at all. It is clear that Leon Cooperman saw an advantage in this regard at the moment of investing.
Current operating margin at MSFT is 38.78%, and profit margin is 33.01%, with a return on assets of 17.33% and a return on equity of 44.16%. Last but not least, revenue grew 7.30% and the company enjoys of $55.94 billion of cash with a debt standing at just $13.107.26 billion. The debt to equity ratio of 22.05 is under control particularly with operating cash of $27.29 billion per year.
Research in Motion (RIMM, Financial): Research in Motion designs and markets wireless handsets, software, and services. Handsets are the primary revenue driver as they are sold to carriers across the globe promoting the company´s BlackBerry line of devices. Furthermore, RIMM generates access service fees from carriers for each BlackBerry subscriber. Revenue from software licensing also comes from corporate clients who have started to use the BlackBerry enterprise server software.
Lately, it has been reported that Amazon (AMZN), Microsoft (MSFT) and Nokia (NOK) have shown interest in purchasing RIMM. However, no deal has materialized. The purpose of these companies is to increase and secure their position in the smartphone market and think acquisitions are a good opportunity to progress in that sense. However, there are certain drawbacks that may turn the deal into one not so good: the patent portfolio is difficult to value and management has shown preference to push forward with their bet-the-company wager on the QNX platform. RIMM is facing serious challenges but its Board of Director is not open to offers at this time.
What did Leo Cooperman see in RIMM? Shares have been trading at $13.50 each. They are somewhat undervalued. However, book value stood at 19.45 per share and cash at 2.49 per share. Furthermore, the company´s balance sheet is strong with $1.4 billion in cash and investments against no debt.
Citrix (CTXS, Financial): Citrix is involved in the Web 2.0 movement. This movement includes cloud computing, social networking, virtualization and other technological advances. CTXS is a leader in on demand IT services.
Citrix has been affected by the last economic downturn. Actually its shares are trading at $56.14 each after reaching a pick of $88.49 and P/E ratio is 31.83. Although these figures are not compelling, I think Leon Cooperman decided to invest in CTXS because the stock has ample room for growth and it is expected that the company will increase to the same levels as competitors VMware (VMW) trades at a P/E ratio of 68.8, and Red Hat (RHT) trades at a P/E ratio of 62.72. Citrix current EPS is $1.76 but it is expected to reach $2.76 in 2012, an increase of 56.8%. If shares trade at the same price, they will have a P/E ratio of 20.34 by the end of 2012.
There is no doubt that Citrix has potential to become a leader in cloud computing and virtualization. Its products are well designed and the company will certainly expand to new ones. It will surely become a stock among the high-priced ones in the Web 2.0 environment.
