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6 Stocks Leon Cooperman and Mario Gabelli Agree On

- By James Li

Leon Cooperman (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio), two billionaire investors that commented this week on the ongoing trade war between the U.S. and China, have several common holdings. According to aggregated portfolio statistics, the top six holdings in terms of combined weight are Alphabet Inc. (GOOGL), Ashland Global Holdings Inc. (ASH), CVS Health Corp. (CVS), DowDuPont Inc. (DWDP), AMC Networks Inc. (AMCX) and Cigna Corp. (CI).


Background

Cooperman, who founded Omega Advisors in 1991 following 25 years at Goldman Sachs Group Inc. (GS), turned his hedge fund into a family office at the end of 2018, citing in a client 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." Omega Advisors invests using a combination of macro views and fundamental valuations.

Gabelli, chairman and CEO of GAMCO Investors Inc. (GBL), graduated summa con laude in 1965 from Fordham University's College of Business Administration and earned an MBA from Columbia University Graduate School of Business. The 1997 Morningstar Inc.'s (MORN) Portfolio Manager of the Year, who recently spoke at the 2019 GuruFocus Value Conference, seeks undervalued companies that have a catalyst.

According to CNBC columnist Kate Rooney, Cooperman said on CNBC's Halftime Report on Thursday that the market does not have the ingredients normally associated with a market recession: The Federal Reserve remained dovish about raising interest rates while valuations remain reasonable. Despite this, Cooperman also warned that if Trump increases tariffs on China, the U.S. gross domestic product can expect to decline approximately 0.50% while S&P 500 earnings can expect to decline around $5.

Gabelli underscored it is time that "somebody arm-wrestled" the trade deficit with China and "get a resolution," hopefully in "a better and a fairer way." Cooperman agreed that such a resolution can mitigate the potential market correction.

Dow rebounds from intraday lows and closes higher as trade talks continue

Even though the Dow Jones Industrial Average tumbled over 350 points Friday morning, the 30-stock index closed at 25,942.37, approximately 114 points higher than Thursday's close of 25,828.36 on President Trump's tweet that the U.S. and China had "candid and constructive" conversations regarding a potential trade deal. Trump said in his tweets that his relationship with Chinese President Xi Jinping remain strong and that trade talks "will continue" even though the U.S. increased the tariff on Chinese goods from 10% to 25%. Despite Trump's tweets, top Warren Buffett (Trades, Portfolio) holding Apple Inc. (AAPL) still closed over 1.3% lower for the day.

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Alphabet

Cooperman and Gabelli have not released their first-quarter portfolios as the deadline is 45 days after quarter-end. As of the latest portfolio date, the Omega Advisors chairman owns 82,364 Class A shares of Alphabet, while the GAMCO Investors CEO owns 6,949 shares. The two gurus have a combined weight of 8.47% in the stock.

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GuruFocus ranks the Mountain View, California-based company's financial strength and profitability 9 out of 10 on several strong indicators, which include a robust Altman Z-score of 10.16, a solid Piotroski F-score of 7 and operating margins that are outperforming 84.96% of global competitors despite contracting 2.3% per year over the past five years. Additionally, the Google parent's business predictability ranks 3.5 stars out of five on consistent revenue and earnings growth over the past 10 years.

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Other gurus riding Alphabet's profit momentum include PRIMECAP Management (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).

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Ashland

Cooperman owns 766,563 shares of Ashland, while Gabelli owns 223,052 shares. The two gurus have a combined weight of 5.45% in the stock.

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The Covington, Kentucky-based company manufactures and sells specialty chemicals through three business segments: specialty ingredients, Valvoline and performance materials. GuruFocus ranks the company's financial strength and profitability 5 out of 10: Although it has a strong Piotroski F-score of 7, Ashland's interest coverage of 1.07 underperforms 93.44% of global competitors, suggesting possible financial distress. Other weak signs include a five-year revenue decline rate of 7.10% and a three-year revenue growth rate that underperforms 89.73% of global competitors.

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CVS Health

Cooperman owns 795,900 shares of CVS Health, while Gabelli owns 528,872 shares. The two gurus have a combined weight of 5.32% in the stock.

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The Woonsocket, Rhode Island-based company processes over 1.3 billion prescriptions per year and operates over 10,000 retail pharmacies across the U.S. GuruFocus ranks CVS Health's profitability 6 out of 10: Even though operating margins have declined and underperform 51.85% of global competitors, the company's return on equity and three-year revenue growth rate outperforms 65.38% and 73.91% of global health care plans companies.

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DowDuPont

Cooperman owns 935,600 shares of DowDuPont, while Gabelli owns 580,611 shares. The two gurus have a combined holding of 5.05% in the stock.

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DowDuPont, a diversified global chemicals and materials company, produces various agriculture products, including genetically modified seeds. GuruFocus ranks the company's financial strength 6 out of 10: Even though the Altman Z-score of 1.34 suggests possible financial distress, DowDuPont's Piotroski F-score of 6 suggests moderately strong business operations. Additionally, DowDuPont's interest coverage of 5.41 is above Benjamin Graham's safe threshold of five.

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AMC Networks

Cooperman owns 806,356 shares of AMC Networks, while Gabelli owns 881,906 shares. The two gurus have a combined holding of 4.71% in the stock.

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New York-based AMC Networks owns several cable networks, including AMC, WE tv, BBC America and SundanceTV. GuruFocus ranks the company's profitability 7 out of 10: even though gross margins have declined over the past five years, AMC Networks' operating margin and return on assets are outperforming over 85% of global competitors. Despite this, AMC Networks' Piotroski F-score ranks a modestly-strong 6 out of 9 and its three-year revenue growth rate of 4.80% outperforms just 78% of global competitors.

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Cigna

Cooperman owns 247,861 shares of Cigna, while Gabelli owns 17,213 shares. The two gurus have a combined holding of 4.62% in the stock.

The Bloomfield, Connecticut-based company provides health insurance services to individuals. GuruFocus ranks Cigna's financial strength 4 out of 10: Although the company's Beneish M-score suggests no material earnings manipulation, its cash-debt ratio of 0.12 underperforms 67.86% of global competitors.

See also

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Disclosure: No positions.

Read more here:

  • US Market Remains Significantly Overvalued Despite Trade War Fears
  • Mario Gabelli's Top 7 Buys of the 1st Quarter
  • Matthews China Fund Buys 8 Stocks in 1st Quarter



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This article first appeared on GuruFocus.