According to current portfolio statistics, Leon Cooperman's (Trades, Portfolio) top five holdings as of March 31 are First Data Corp. (FDC, Financial), Alphabet Inc. (GOOGL, Financial), United Continental Holdings Inc. (UAL, Financial), Chimera Investment Corp. (CIM, Financial) and Cigna Corp. (CI, Financial).
The Omega Advisors founder and chairman closed his hedge fund to outside investors at the end of 2018, citing in a shareholder letter he “does not wish to spend the rest of his life chasing the Standard & Poor’s 500 index and generating returns on invested capital.” Despite this, Cooperman still invests in the stock market according to his market views and fundamental valuations.
Guru comments on market rally as S&P 500 hits new all-time high
Cooperman said on CNBC Thursday morning that the U.S. stock market is at a “zone of fair value” at current levels, even though the Standard & Poor’s 500 Index closed at a new all-time high of 2,954.18.
During the interview, the investor said his “normal view” of the market calls for approximately 1.5% productivity growth and 0.5% labor force growth, giving a real gross domestic product growth rate of 2% and a nominal GDP growth rate of 4%. In such a scenario, Cooperman believes the federal funds rate should be 3% instead of 2% and that the market is expected to support a multiple of 17 times earnings.
Based on Cooperman’s S&P 500 earnings estimate of $170, the fair value of the index is approximately 2,890, suggesting the current index value of 2,954.33 is still considered fair value. However, should the S&P 500 Index increase to approximately 3,100, the market would be “knocking on the door of euphoria.” While Cooperman said he would “reduce his exposure” in stocks in that scenario, he is “enjoying” the market rally with approximately 75% invested in stocks.
As of March quarter-end, Cooperman’s $1.64 billion equity portfolio contains 56 stocks, with high exposure to the industrials, energy and technology sectors. The portfolio weights of these three sectors are 24.87%, 15.03% and 11.82%.
First Data
Cooperman owns 6,919,681 shares of First Data, giving the stake 11.12% weight in the equity portfolio.
New York-based First Data provides e-commerce solutions like payment, transaction and credit services. GuruFocus ranks the company’s profitability 5 out of 10: Although the profit margins and returns are outperforming over 85% of global competitors, First Data’s three-year total revenue decline rate of 6% and three-year total Ebitda growth rate of 9.30% underperform over 70% of global business service companies.
Other gurus with large holdings in First Data include Larry Robbins (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
Alphabet
Cooperman owns 109,000 shares of Alphabet, dedicating 7.85% of his equity portfolio to the holding.
The Mountain View, California-based company operates several businesses, including search engine giant Google and video-sharing platform YouTube. GuruFocus ranks Alphabet’s profitability 9 out of 10: operating margins of 23.02% are outperforming 84.96% of global competitors even though margins have contracted approximately 2.3% per year over the past five years.
Other positive signs contributing to strong financial strength and profitability include robust interest coverage, a strong Piotroski F-score of 7 and a GuruFocus business predictability rank of 3.5 stars out of five.
Gurus with large holdings in Alphabet include PRIMECAP Management (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).
United
Cooperman owns 1,160,802 shares of United, giving the position 5.66% equity portfolio weight.
GuruFocus ranks the Chicago-based airline’s financial strength 5 out of 10: Although United has a moderately-strong Piotroski F-score of 6, its debt-to-equity ratio of 1.46 underperforms 75.38% of global competitors. Additionally, United’s Altman Z-score of 1.41 suggests possible financial distress.
Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) owns 21,938,642 shares of United as of March quarter-end.
Chimera
Cooperman owns 4,822,500 shares of Chimera, giving the stake 5.53% equity portfolio space.
The New York-based real estate investment trust invests in a portfolio of mortgage assets on a leveraged basis, with investments ranging from residential mortgage-backed securities and agency commercial mortgage-backed securities. GuruFocus ranks the REIT’s financial strength 3 out of 10 on several week signs, which include equity-to-asset ratios and debt-to-equity ratios that are underperforming over 92% of global competitors.
Cigna
Cooperman owns 545,000 shares of Cigna, giving the holding 5.36% weight in the equity portfolio.
The Bloomfield, Connecticut-based company provides health insurance services to individuals mainly in the group, employee market. GuruFocus ranks the company’s financial strength 4 out of 10: Although the debt-to-equity ratio of 0.96 outperforms 68.42% of global competitors, Cigna’s equity-to-asset ratio of 0.28 underperforms 77.78% of global companies that provide health care plans.
Disclosure: No positions.
Read more here:
- Joel Greenblatt’s Top 5 Holdings
- 6 Chinese Stocks Gurus Broadly Own in June
- Leon Cooperman’s Top 5 Buys in 1st Quarter
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