Leon Cooperman, the CEO and Chairman of Omega Advisors, expressed skepticism about the future growth of the S&P 500 index. In an interview at CNBC's Financial Advisor Summit, Cooperman stated that he would be "surprised" if the index surpasses 4,600 this year. He emphasized his preference for individual stocks rather than the broader market.
A Disinterest in the S&P 500
Cooperman voiced his lack of interest in the S&P 500, questioning whether anyone would be willing to pay 20 times earnings for it. He argued that this valuation is too high given the current macro environment and interest rates. Instead, he sought out undervalued opportunities, highlighting the presence of many inexpensive stocks in the market.
A Shift in Investment Strategy
Drawing a comparison to his early career in 1967, Cooperman contended that the market's growth potential lies in stock-picking rather than relying solely on the S&P 500. He pointed out that during that period, the Dow Jones Industrial Average was around 1,000. Cooperman emphasized the importance of finding stocks that he personally liked, which were mispriced and had room for appreciation.
Cautious on Long-Term Bonds
Cooperman criticized long-term bonds as an investment option in the current global context. He believed that with the state of the world, interest rates were more likely to rise rather than fall. Consequently, he advised against investing in long-term bonds as they did not align with his outlook.
A Balanced View on the Market
Although Cooperman did not foresee significant upside potential for the market, he also did not anticipate a major downturn unless a recession occurred. He attributed his cautious optimism to what he deemed a "very aggressive fiscal policy" that would act as a buffer against a recessionary environment.
Concerns over U.S. Debt
Cooperman expressed his concerns about the growing U.S. debt and its potential consequences. He highlighted the risks of a potential fiscal crisis, cautioning against fixating solely on inflation. Cooperman believed that the U.S.'s dependence on external borrowing at favorable rates posed a significant danger that should not be overlooked.
Cooperman's Outlook on the Economy
Renowned investor Leon Cooperman has expressed concerns about the current state of the U.S. economy, suggesting that consumers are struggling to keep up with soaring prices. He refers to this phenomenon as "shrinkflation" and believes it is a result of a monetary illusion.
When it comes to investment strategies, Cooperman advises focusing on certain assets. He highlights "favorite cheap stocks" as a top choice for investors. Additionally, he suggests considering short-dated Treasurys in the one-to-two year range, while expressing a less favorable outlook for long-term bonds.
Cooperman argues that investing in bonds offering yields below 5.5% is unattractive. He recommends waiting until interest rates surpass 5% before considering buying bonds. According to his assessment, stocks offer better long-term prospects and present numerous attractive opportunities.
Stocks that Pique Cooperman's Interest
Among the specific stocks that Cooperman finds intriguing is Paramount Resources (PRMRF), a Canadian oil-and-gas company. He points out that the company currently produces oil at a cost of approximately $31 per barrel, which adds to its appeal.
Cooperman also reveals that around 20% of his portfolio consists of energy stocks. He mentions Exxon Mobil (XOM) and their recent deal to acquire Pioneer Resources (PXD) for $59.5 billion, stating that it may trigger further consolidation in the energy sector. Devon Energy (DVN) emerges as another possible candidate for consolidation, according to him. Additionally, he holds shares in pipeline companies like Enterprise Products (EPD) and Energy Transfer (ET).
Furthermore, Cooperman highlights several other investments in his portfolio. These include Mirion (MIR), a nuclear safety company, as well as tech giants Microsoft (MSFT) and Google (GOOGL). He also reveals ownership of shares in healthcare companies such as Elevance (ELV) and Cigna (CI), private-equity firm Apollo Global Management (APO), and Citibank (C).