Omega Advisors leader Leon Cooperman (Trades, Portfolio) disclosed earlier this week he curbed his stake in Mr. Cooper Group Inc. (COOP, Financial) by 23.42%.
At the end of 2018, the guru converted his New York-based hedge fund into a family office structure. In a letter to clients, Cooperman, who is in his 70s, said he decided to make the change because he does not want to spend the rest of his life “chasing the S&P 500 and focused on generating returns on investor capital.” His investment strategy combines a macro view with fundamental valuations.
According to GuruFocus Real-Time Picks, a Premium feature based on 13D and 13G filings, Cooperman sold 995,000 shares of the Coppell, Texas-based company on March 17, which had an impact of -2.38% on the equity portfolio. The stock traded for an average price of $47.67 per share on the day of the transaction.
He now holds 3.25 million shares total, which represent 7.98% of the equity portfolio. As of the end of the fourth quarter of 2021, it was his largest holding.
GuruFocus estimates he has gained 187.53% on the investment since the third quarter of 2018.
The financial services company, which provides mortgage services, has a $3.5 billion market cap; its shares were trading around $47.31 on Tuesday with a price-earnings ratio of 2.92, a price-book ratio of 1.04 and a price-sales ratio of 1.14.
The GF Value Line suggests the stock is significantly overvalued currently based on its historical ratios, past financial performance and future earnings projections.
On Feb. 11, Mr. Cooper Group released its fourth-quarter and full-year 2021 financial results.
For the quarter, the company posted net income of $155 million, or earnings of $2.01 per share, on $625 million in revenue.
The company also said book value per share rose to $45.64 and tangible book value per share increased to $43.82.
For the year, Mr. Cooper Group recorded net income of $1.45 billion, or earnings of $16.53 per diluted share, on $3.55 billion in revenue. Both figures were up from 2020.
In a statement, Chairman and CEO Jay Bray commented on the company’s performance.
“Solid results in the fourth quarter closed out a fantastic year for Mr. Cooper, where we delivered very strong returns and portfolio growth,” he said. “We enter 2022 with an extremely talented and dedicated team and a balanced business model that positions us to benefit from higher interest rates.”
Mr. Cooper Group also revealed its board approved an incremental $200 million stock repurchase, bringing the total authorization to $252 million.
Concurrent with the earnings release, the company announced it inked a strategic partnership deal with fintech software company Sagent M&C LLC to create the mortgage industry’s first cloud-native servicing platform.
GuruFocus rated Mr. Cooper Group’s financial strength 4 out of 10. As a result of issuing new long-term debt over the past several years, the company has weak interest coverage and a low Altman Z-Score of 1.23 that warns it could be at risk of bankruptcy. The return on invested capital, however, eclipses the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability scored a 6 out of 10 rating, driven by strong margins and returns on equity, assets and capital that outperform a majority of competitors. Mr. Cooper Group also has a high Piotroski F-Score of 7 out of 9, indicating operations are in good shape, and a predictability rank of one out of five stars even though it has recorded losses in operating income in recent years. GuruFocus says companies with this rank return an average of 1.1% annually over a 10-year period.
Cooperman is the company’s largest guru shareholder with a 4.41% stake. Other top guru investors are Diamond Hill Capital (Trades, Portfolio), Howard Marks (Trades, Portfolio), David Nierenberg (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Joel Greenblatt (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Portfolio composition
Cooperman’s $1.99 billion equity portfolio, which was composed of 56 stocks as of Dec. 31, is heavily invested in the financial services, energy, technology and industrials sectors.
Other financial services companies the guru owned as of the end of the fourth quarter included Athene Holding Ltd. (ATH, Financial), Citigroup Inc. (C, Financial), Finance of America Companies Inc. (FOA, Financial), First Eagle Alternative Capital BDC Inc. (FCRD, Financial), Barings BDC Inc. (BBDC, Financial), Ocwen Financial Corp. (OCN, Financial), PennyMac Financial Services Inc. (PFSI, Financial) and Owl Rock Capital Corp. (ORCC, Financial).
