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Top 4 4th-Quarter Buys of Leon Cooperman's Firm

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GuruFocus.com
·5 min read
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- By Margaret Moran

Leon Cooperman (Trades, Portfolio)'s Omega Advisors recently released its portfolio update for the fourth quarter of 2020, which ended on Dec. 31.


Cooperman is the founder and chairman of the Omega Advisors Family Office. The firm's investing strategy is a combination of macro views and fundamental valuation. In 2018, Cooperman converted his hedge fund to a family office, citing in a letter that he did not wish to chase the S&P 500 for the rest of his life.

Based on its investing strategy, the firm's top new buys for the quarter were MP Materials Corp. (NYSE:MP), General Motors Co. (NYSE:GM), Barings BDC Inc. (NYSE:BBDC) and WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC).

MP Materials

The firm took a stake of 2,426,000 shares in MP Materials (NYSE:MP), impacting the equity portfolio by 5.62%. During the quarter, shares traded for an average price of $26.46.

MP Materials is a mining company headquartered in Las Vegas. It mines rare earth materials with the goal of eventually establishing a full domestic rare earth supply chain to the U.S. It is majority owned by Chicago hedge fund JHL Capital Group and New York's QVT Financial LP.

On Feb. 22, shares of MP Materials traded around $42.27 for a market cap of $7.22 billion. Since its initial public offering last November, the stock has gained 174%.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

The largest rare earth materials producer in the Western Hemisphere is set to release its first-ever earnings report after the U.S. markets close on Thursday, March 18. The report will be for the fourth quarter and fiscal year ended Dec. 31, 2020.

General Motors

The firm invested in 375,000 shares of General Motors (NYSE:GM), which had a 1.12% impact on the equity portfolio. Shares traded for an average price of $39.01 during the quarter.

Detroit-based General Motors is an American multinational automobile company that designs, manufactures, markets and distributes vehicles and vehicle parts and related financial services. Its model lineup includes Chevrolet, GMC, Cadillac and Hummer, among others.

On Feb. 22, shares of General Motors traded around $52.52 for a market cap of $75.68 billion. According to the GuruFocus Value chart, the stock is significantly overvalued.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

The company has a financial strength rating of 4 out of 10 and a profitability rating of 5 out of 10. The Altman Z-Score of 1.09 indicates that the company could be in danger of bankruptcy, though the Piotroski F-Score of 5 out of 9 is typical of a financially stable company. The return on invested capital has typically been less than the weighted average cost of capital in recent years, indicating the company's operations have not been profitable.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

Barings BDC

The firm made a new investment in Barings BDC (NYSE:BBDC) worth 1,661,461 shares, impacting the equity portfolio by 1.10%. During the quarter, shares traded for an average price of $8.50.

Barings BDC is an externally managed, closed-end investment management company that has elected to be regulated as a business development company. It primarily makes debt investments in middle market companies and is managed by global asset management company Barings LLC.

On Feb. 22, shares of Barings BDC traded around $9.44 for a market cap of $615.28 million. According to the Peter Lynch chart, the stock is trading below what its fair value was at the end of 2019, though the company has not earned a profit since then.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

The company has a financial strength rating of 2 out of 10 and a profitability rating of 2 out of 10. The cash-debt ratio of 0.01 is lower than 94% of industry peers, while the Piotroski F-Score of 1 out of 9 indicates poor business operations. The three-year revenue growth rate is -8.9%, while the three-year earnings per share without non-recurring items growth rate is 7.3%.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

WillScot Mobile Mini Holdings

The firm established a new holding of 650,085 shares in WillScot Mobile Mini Holdings (NASDAQ:WSC), which had a 1.09% impact on the equity portfolio. Shares traded for an average price of $20.22 during the quarter.

WillScot Mobile is a holding company that, through its subsidiaries, operates as a provider of "mobile spaces" such as mobile offices, portable storage containers, modular classrooms and various specialty temporary space. Its headquarters is in Phoenix.

On Feb. 22, shares of WillScot Mobile traded around $26.79 for a market cap of $6.11 billion. Since the company was created from the merger of WillScot Corp. and Mobile Mini Inc. on July 1, the stock has gained 104%.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

The company has a financial strength rating of 3 out of 10 and a profitability rating of 2 out of 10. The interest coverage ratio of 1.63 and current ratio of 0.92 indicate the company will likely need to raise additional liquidity to avoid bankruptcy. The operating margin of 19.56% is higher than the industry median of 4.18%, while the net margin of 3.89% is above the industry median of 1.87.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

Portfolio overview

As of the quarter's end, the firm held shares in 46 stocks valued at a total of $1.39 billion. During the quarter, it established eight new positions, sold out of three holdings and added to or reduced several other positions for a turnover of 12%.

The top holdings were Mr. Cooper Group Inc. (NASDAQ:COOP) with 11.17% of the equity portfolio, Fiserv Inc. (NASDAQ:FISV) with 8.45% and Alphabet Inc. (NASDAQ:GOOGL) with 7.58%. In terms of sector weighting, the firm was most invested in financial services, technology and basic materials.

Top 4 4th-Quarter Buys of Leon Cooperman's Firm
Top 4 4th-Quarter Buys of Leon Cooperman's Firm

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.

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This article first appeared on GuruFocus.