Lessons On Value Investing From Leon Cooperman
One of the most successful value investors on the Street, Omega Advisors’ Leon Cooperman, was on Wall Street Week recently to discuss how he picks stocks and his career at Goldman Sachs Group Inc (NYSE: GS).
On why he joined Goldman Sachs after his MBA from Columbia, Cooperman said, "[It] wasn’t the biggest money, but I liked the people I met. I’d still actually be at Goldman Sachs if they were slightly more progressive and I say that with a huge smile on my face because I had a 25-year love affair at Goldman."
Cooperman was asked about his value-investing mantra and how he built that philosophy. He replied, "First thing I do is I spend a lot of time trying to figure out the market – is the market undervalued? Overvalued? Is it going to go up? Is it going to go down? – because that determines how much risk you want to have in your portfolio."
He went on, "And then I try to find what’s attractively priced. So, I am very knowledgeable and cognizant of what the S&P represents, it’s an index of 500 companies, on an average they are growing about 5 percent a year, they yield about 2 percent, they trade a little under three times their book value. They have got 35 or 36 percent of debt in their capital structure and for those financial statistics you pay on an average today about 16.5–17 times earnings.
"So, I look for, as a value investor, I am looking for either more growth at a lower multiple, I am looking for more asset value or more yield. Some combination that says, ‘Buy me,’ and my team and I spend all day long, 7 days a week, 24/7 trying to look for things that are mispriced to the market," Cooperman concluded.
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