A few weeks ago, Omega Advisors CEO
appeared on CNBC to elucidate the market for investors. The value
investor who looks to "pay less for more," suggested several stocks
to consider trading at attractive valuations in a "fairly valued"
market. He says this valuation status has driven his firm to start
looking at "red chip" rather than "blue chip" companies, which he
defines as "not the major companies, but companies that have a good
story, good valuation, and we have to be patient."
His stock recommendations from this group: Sprint (
), American International Group (
), KKR Financial (
), Qualcomm (
) and Sandridge Energy (
Sprint shares have gained 19% since July when the company was
acquired by Japanese telecom SoftBank, compared to just over 7% for
the S&P 500, and are trading at $6.60 on Monday afternoon.
Cooperman increased his stake in Sprint by more than 45% to
95,112,117 shares in the second quarter. Other gurus that bought or
increased their shares of Sprint include
Paul Tudor Jones
and Louis Moore Bacon. Ken Fisher and David Einhorn sold out.
Sprint is trading at a P/B ratio of 5.08 and P/S of 0.55.
Sprint reported a net loss in the first two quarter of 2013 - $643
million in the first quarter and $1.6 billion in the second
quarter. A substantial portion of the loss in the second quarter
was due to costs associated with closing down its Nextel network
over the past year. Sprint's total wireless subscribers at the end
of the first period also declined year over year to 55,211, and
again in the second quarter to 53,588.
"If you look at the proper profit margins for this business, the
growth in revenues - we think Sprint could probably in two years
earn over $1 a share; the stock is $6," Cooperman said.
The company has earned profit margins over 40% across the past
decade, though they have been in decline. Operating margins and net
margins have predominantly been in the negatives since 2007.
Revenue per share has declined at an annual rate of 1.1% over the
past five years.
American International Group (
AIG shares year to date have gained more than 46% and trade around
$51.43 Monday afternoon, still less than book value.
AIG has a P/E of 29, P/B of 0.8 and P/S of 1.21, which is near a
Cooperman in the second quarter sold about 25% of his stake in the
company, reducing for the third consecutive quarter, and leaving
his holding with 5,814,100 shares.
Gurus who entered or added to positions in the second quarter
include Joel Greenblatt and Ray Dalio. George Soros, David Tepper
and Julian Robertson among others sold shares and Ken Heebner, John
Keeley and Steve Mandel all sold out.
In the first two quarters of the year, AIG reported increased
year-over-year book value, and sequential growth in net income
which reached $2.7 billion for the second quarter. Net premiums
written also increased sequentially to $9.26 billion, and revenue
per share grew for the third consecutive quarter to $11.68.
KKR Financial (
KKR shares year to date declined almost 5% to trade around $10 on
Cooperman in the second quarter increased his shares owned of the
company by almost 7%, to hold 14,762,185 at quarter end. The other
gurus with a position in the stock are David Dreman, Chuck Royce
and Jim Simons.
KKR is a global investment firm with a $2.06 billion market cap. It
trades with a P/E of 5.5, P/B of 0.8 - which is near a three-year
low - and P/S of 4.2.
Over this year, KKR has experienced three consecutive quarters of
net income declines to $33 million and revenues declines to $128.7
million in the third quarter. It also had marginal book value
increases each quarter to $10.42.
"Our results reflect the environment in which KFN is operating, as
yields continue to compress and many of our legacy CLOs continue to
amortize," said Craig J. Farr, CEO of KFN.
KKR also has a dividend yield of 8.3% and paid a dividend of $0.22
per common share in the third quarter. The company has increased
its annual dividend payout per share for the past three consecutive
years after instating it in 2010 following a cut to $0.05 in 2009.
Go to Leon Cooperman's portfolio here to see his stock holdings.
Also check out the Undervalued Stocks, Top Growth Companies, and
High Yield stocks of Leon Cooperman.About GuruFocus: GuruFocus.com
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