Although perhaps not as well-known amongst investors as some of his peers, Leon Cooperman is a towering presence on Wall Street. The billionaire investor started from humble beginnings as the son of a Bronx plumber who went to public schools, graduated from New York’s City University Hunter College, and then earned an MBA from Columbia University.
He worked on Wall Street developing Goldman Sachs (NYSE:GS | GS Price Prediction) asset management business before setting up his Omega Advisors hedge fund in 1991. He closed down the fund at the end of 2018 and retired, transferring much of his investments to a family office that invests on behalf of Cooperman, his family, and others.
However, Omega Advisors had an illustrious run over those 27 years, generating compound annual returns of 12.4% after fees compared to 9.5% returns for the S&P 500, including reinvested dividends.
His portfolio now holds 52 stocks and has some $2.4 billion in assets under management. Yet of those stock, just three companies account for one-quarter of the total. Let’s take a closer look at this trio to see whether they are right for your portfolio, too.
Key Points About This Article:
- Leon Cooperman has a long, storied career on Wall Street, and was able to consistently generate market-beating returns for nearly three decades.
- While the billionaire shut down his hedge fund and now runs a family office managing his own investments, with $2.4 billion in assets, there are three strategic areas Cooperman is putting his money to work.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Mr. Cooper Group (COOP)
Housing development under construction
I can’t help but think Cooperman was attracted to mortgage loan servicer Mr. Cooper Group (NASDAQ:COOP) at least in part because of its name. But, in reality, it is the largest mortgage loan servicer in the U.S. with 5.3 million customers. Mr. Cooper will add another 1.3 million customers when it closes on its acquisition of the mortgage servicing business of New York Community Bancorp‘s (NYSE:NYCB) Flagstar Bank in the fourth quarter.
Shares of Mr. Cooper are up 78% from their 52-week low as speculation about interest rate cuts grew and its mortgage business improved. Now that the Federal Reserve initiated a jumbo cut on rates of 0.5%, it could ignite a new housing boom. While demand for houses has not abated even in the high-rate environment, lower rates could entice more buyers into the market.
The billionaire investor owns 2.86 million shares of Mr. Cooper stock for a total worth $232 million. That makes Cooperman the third-largest investor in the company behind BlackRock (NYSE:BLK) and State Street Capital (NYSE:STT).
The mortgage servicer represents 9.8% of his portfolio’s holdings. It is also one of his longest-owned stocks as he began buying shares in 2018 as he transferred to a family office. Cooperman has an average buy price of just over $12 per share give him implied returns of 656%. With a valuation of just 7 times estimated earnings, it seems as though there is plenty of room for COOP stock to run higher.
Energy Transfer (ET)
Oil pipeline at sunrise
Midstream operator Energy Transfer (NYSE:ET) is the second-largest position in Cooperman’s portfolio representing 8.4% of the total. It is one of the largest owners of pipelines and storage facilities in the country and can readily move oil and gas supplies coast-to-coast and border-to-border.
Energy Transfer owns more than 130,000 miles of pipeline and associated energy infrastructure across 44 states and has assets in all the major basins of production. It also owns approximately 21% of Sunoco‘s (NYSE:SUN) outstanding shares, as well as its general partner interests and incentive distribution rights.
The only issue for small investors is that it is organized as a master limited partnership (MLP), which could introduce complex tax issues. Just make sure you are buying its stock with the right investment vehicle first.
Cooperman owns 12.3 million shares of ET stock worth $199 million. While that makes the billionaire a significant owner of the midstream operator, this time it’s not enough to put him even into the top 20 investors.
Vertiv Holdings (VRT)
Woman and man checking data center network
Cooperman’s investment in Vertiv Holdings (NYSE:VRT) shows the billionaire is staying on top of the most important trends today. The company offers cooling technologies to data centers that are consuming tons of electricity due to the demands of artificial intelligence. Vertiv’s coolant distribution units manage the flow of coolant throughout a data center while also offering cooling technology right to the chip. By mitigating their heat-generating properties, Vertiv is able to ensure optimal performance is obtained.
It is a fast-growing market that is expanding at double-digit rates and has only a relatively small handful of companies able to address it. Vertiv is the leading player in the space and with data centers expected to grow at a compound annual growth rate of 24% for the next three years, according to Goldman Sachs, it should see tremendous growth.
Vertiv reported 53% organic growth in orders in the second quarter, which came on top of 60% growth in the first. Cooperman owns 2.1 million shares of VRT stock valued at $182 million, which positions the data center infrastructure company at 7.7% of the billionaire investor’s portfolio.
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