Guru Leon Cooperman (Trades, Portfolio) rolled out on CNBC Dec. 6th to explain market turmoil.
The founder of Omega Advisers was quite bullish and said he thinks we are at the bottom in the market. He also thinks the Securites and Exchange Commission should explain why they allow algorithms to wreak havoc in the stock market. Algorithms, he believes, are responsible for recent volatility.
There are no signs of recession, according to Cooperman. The economy is growing, and maybe it will grow slower next year. Inflation is below the Fed's target. If anything, the Fed has been too easy. The 10-year bond is 2.85%. The S&P 500 multipe averages around 15x. The 10-year averaged 6% over that period. So relative to interest rates, the stock market is currently a bargain.
Cooperman sees no euphoria. He wants to buy his favorite stocks here.
He admits there are problems investors should be mindful of:
- Margins are high.
- The country is politically leaning to the left.
- We have an unconventional White House that is destabilizing.
Portfolio insurance caused the market to drop 20% in one day. The market is now down 10% from the high. It is just a market correction. There is no sign of a trend change. The market is just moving based on trend followers. They exaggerate the moves.Â
When to change your mind
Cooperman would change his mind if he thought a recession was coming up. But he just sees no signs of that. We are down 10% from the high that's long overdue.
"Everything that has worked for me in 50 years of investing suggests we are near a low," he said.
The market is heterogenous. There are stocks that trade at 20+ multiples and there are stocks that trade at low multiples.
Stocks Cooperman may be willing to buy:
AMC Networks (AMC, Financial) trades at 7x earnings.
Citibank (C, Financial) trades at 7.5x earnings.
Dow Chemical (DWDP, Financial) trades at 10.5x earnings.
First Data (FDC, Financial) trades at 11x earnings.
Alphabet (GOOG, Financial) (GOOGL, Financial) trades at 20x earnings, with a fortress balance sheet, and it is growing at 20%.
FANG stocks are trading better than the market, which may be a sign the market is near the end of a correction.
Outlook
The market could well be higher at Dec. 31. Cooperman is finding a lot of things at single digits multiples while we are at 3% interest rates! People have been looking for corrections for three to four years. Oil is down. Oil is only 6% or 7% of the market. It is a tax cut for the rest of the market. It is a positive.
"The bubble is fixed income not equities," Cooperman said.Â
Watch the interview below:
Disclosure: Author is short AMC.
