In this article, we review billionaire Lee Cooperman's stock market predictions and the 10 best high dividend stocks to buy according to billionaire Lee Cooperman. Click to skip our discussion on Cooperman's investment philosophy, his returns and portfolio updates and see 5 Best High Dividend Stocks to Buy According to Billionaire Lee Cooperman.
Early this year, the self-made billionaire and Omega Advisors founder Leon Cooperman had predicted that the stock market is in the state of euphoria and it will be difficult to sustain that momentum in the long run. He further added that he is looking for value despite his concerns over Joe Biden’s business policies as well as the long-term economic outlook. His prediction was certainly right as growth stocks fumbled strongly after hitting an all-time high in February. Meanwhile, value and dividend growth stocks have strongly outperformed growth stocks so far this year. Nevertheless, investors' rotation out of technology stocks as well as economic recovery will help the self-made billionaire Leon Cooperman make big gains from his equity investments. Further bolstering the profitability prospects is his stakes in high dividend-yielding stocks from finance, real estate, energy, and industrial sectors.
In an interview with CNBC, Cooperman said that a "meaningful chunk" of the market was in "euphoria." The billionaire cited soaring valuations, SPAC-based IPOs, massive fluctuations and "no revenues and no earnings" for his bearish outlook.
Leon Cooperman, who worked 25 years for Goldman Sachs and turned his hedge fund into a family office in 2018, doubled down on his stake in financial services stocks last year when they were suffering losses due to pandemic-related volatility. Companies operating in the financial services industry have always been considered lucrative investments for long-term investors due to two reasons: dividends and a steady share price gain. Stocks from the financial sector accounted for around 36% of the $1.3 billion worth of the billionaire's 13F portfolio at the end of the latest quarter compared to 17% in the year-ago period. Cooperman's stock-picking strategy based on fundamental analysis and macro trends helped Omega Advisors in generating more than 12% annualized returns since inception through 2018. The dividends also played a key role in enhancing overall returns.
Dividend investing is one of the best ways of generating strong returns over the long term. Dividends accounted for more than 2.14% of the overall S&P 500 returns last year, with expectations that dividend growth will accelerate this year amid improving business and economic trends. Dividend-paying stocks had returned 8.92% on average from 1982 through 2009, compared with just 1.83% for non-dividend payers, according to Wall Street Journal.
Furthermore, dividend-paying companies have the potential to cope with the volatile business environment. This is clearly reflected from a 0.7% increase in average dividend payments in the pandemic year to $58.28 per share from the previous record set in 2019. The market participants expect dividend payments to increase for the 10th consecutive record year in 2021.
While Lee Cooperman’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Leon Cooperman of Omega Advisors
Let’s start reviewing the 10 best high dividend stocks to buy according to billionaire Lee Cooperman.
Best High Dividend Stocks to Buy According to Billionaire Lee Cooperman
10. Falcon Minerals (NASDAQ: FLMN)
Omega Advisors first initiated a position in Falcon Minerals (NASDAQ: FLMN) during the third quarter of last year. It appears that the billionaire Lee Cooperman’s stock-picking strategy worked in the case of Falcon because its share price rallied 77% in the last six months. The dividend factor is further bolstering the gains. The company recently raised its quarterly dividend by 15% to $0.075 per share, yielding around 4.3%.
The number of bullish hedge fund bets went up by 6 recently. Falcon Minerals Corporation was in 26 hedge funds’ portfolios at the end of December. The previous all-time high for this statistic is 22. Our calculations also showed that FLMN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 21 hedge funds in our database with FLMN positions at the end of the second quarter.
9. Brigham Minerals, Inc. (NYSE: MNRL)
With a dividend yield of 6.8%, Brigham Minerals is ranked ninth in the list of 10 best high dividend stocks to buy according to billionaire Lee Cooperman. In addition to dividends, the company’s share price rallied more than 50% in the last six months. Omega Advisors first initiated a position in Brigham Minerals during the third quarter of 2020. MNRL position currently accounts for 0.30% of the overall portfolio.
Brigham Minerals was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all-time high for this statistic is 23. MNRL has experienced a decrease in activity from the world’s largest hedge funds in recent months. There were 16 hedge funds in our database with MNRL positions at the end of the second quarter.
8. Ellington Financial Inc. (NYSE: EFC)
Ellington Financial Inc. (NYSE: EFC) is one of the best dividend stocks to own because of its robust dividend growth potential. The company recently raised its monthly dividend by 40% to $0.14 per share, yielding above 6.15%. Omega Advisors first initiated a position in Ellington Financial in 2013 and it currently represents 0.80% of the overall portfolio. Its share price also recovered strongly following the pandemic-related selloff early last year. The company’s share price grew 59% in the last twelve-month.
7. Barings BDC Inc. (NYSE: BBDC)
The investment company Barings BDC Inc (NYSE: BBDC) is in the list of 10 best high dividend stocks to buy according to billionaire Lee Cooperman amid its massive dividend yield of 7.41%. Its shares have also outperformed the broader market index so far in 2021. Lee Cooperman first initiated a position in BBDC during the December quarter of 2020 by purchasing 1.66 million shares.
Money managers were turning bullish. The number of long hedge fund bets improved by 6 lately. Barings BDC was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2020. The previous all-time high for this statistic is 13.
6. Energy Transfer LP (NYSE: ET)
Omega Advisors is bullish over the future fundamentals of dividend-paying limited partnership Energy Transfer LP (NYSE: ET). The firm raised its stake in ET by 28% in the December quarter to 2.82% of the overall 13F portfolio, according to the latest filings. Energy Transfer LP is also among the 10 best high dividend stocks to buy according to billionaire Lee Cooperman. The company offers a dividend yield of 7.59% at present. Lee Cooperman’s family office portfolio also benefited from ET’s significant share price run since the beginning of this year.
Hedge fund interest in Energy Transfer L.P shares fell at the end of last quarter. This is usually a negative indicator. The number of long hedge fund bets declined by 6 lately. Energy Transfer LP was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to 31 positions in the previous quarter.
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Disclosure: None. 10 Best High Dividend Stocks to Buy According to Billionaire Lee Cooperman is originally published on Insider Monkey.