We recently published a list of Billionaire Lee Cooperman says the market is expensive, but these 10 stocks are cheapIn this article, we will look at how Energy Transfer LP (NYSE:ET) compares to other cheap stocks.
Leon Cooperman recently laid out his conservative economic forecast and talked about stocks he’s watching in a CNBC interview. He believes the U.S. is headed for financial disaster because of a lack of attention to rising debt. He also noted that nothing seems overvalued when a 10-year bond is priced at the current rate.
“My assumption is that we are heading for a fiscal catastrophe in our country. No one in the economy is focused on taking on debt. My second assumption is that nothing is overvalued when a 10-year bond is at the current interest rate of 3.9%.”
Cooperman compared this to the Nifty-Fifty period of 1972, when government bonds were at 6.5% and several companies with high earnings multiples eventually went bust. He pointed out that these companies were acquired by JP Morgan despite their high valuations.
“In the Nifty Fifty period of 1972, government bonds rose 6.5%, Avon Products was at 65x earnings and went bankrupt. Eastman Kodak went bankrupt at 48x earnings. IBM went bankrupt at 37x earnings. These are companies that are being actively bought up by JP Morgan in the US.”
Cooperman stressed that with the 10-year yield at 3.932 percent, nothing seems overvalued. He expects interest rates to remain low and expects the Federal Reserve to cut rates in September, probably by 25 to 50 basis points. He expects this to lead to a slow positive movement in the yield curve, with the yield on 10-year bonds rising and their price falling.
Leon Cooperman also mentioned that he considers the current environment to be more of a “stock market” than a unified stock market. In addition, he expressed concern about the health insurance sector, noting that these companies are trading at low multiples despite generating excess capital and buying back their own shares. Cooperman then emphasized that he is guided by valuation levels when evaluating investments.
Leon Cooperman follows a value-oriented investment strategy, focusing on undervalued stocks and using a top-down approach to selecting sectors. He combines fundamental analysis with a bottom-up approach to constructing and managing portfolios. Omega Advisors, which manages over $3.3 billion in assets, most of which come from Cooperman’s own wealth, manages approximately $4.37 billion for seven clients. The firm’s first-quarter 2024 13F report showed $2.4 billion in securities under management, with the top 10 holdings accounting for 61.09% of the portfolio.
Our methodology
In this article, we review Leon Cooperman’s recent CNBC interview and highlight ten stocks he owns and has mentioned. We’ve also provided analyst ratings, key details about each company, and the number of hedge funds investing in them.
Why focus on the stocks hedge funds invest in? Our research shows that if you follow the top picks of leading hedge funds, you can generate returns that beat the market. We use this strategy in our quarterly newsletter, where we select 14 small-cap and large-cap stocks each quarter. Since May 2014, this approach has produced a return of 275%, beating the benchmark by 150 percentage points. (Further details can be found here)
An aerial view of an oil rig at sunrise, highlighting the importance of the natural gas transportation industry.
Energy Transfer LP (NYSE:ET)
Number of hedge fund investors: 32
Energy Transfer LP (NYSE:ET) manages a broad range of midstream assets, including pipelines, storage facilities and terminals. This extensive network enables Energy Transfer LP (NYSE:ET) to capitalize on the increasing demand for natural gas and liquefied natural gas (LNG) both in the United States and globally.
As the energy market shifts to cleaner fuels, Energy Transfer LP’s (NYSE:ET) infrastructure plays a critical role in that shift. In addition, Energy Transfer LP (NYSE:ET) has a strong track record of paying attractive dividends.
Analyst Steven Fiorillo points out that Energy Transfer LP (NYSE:ET) may still be undervalued, which presents a buying opportunity. He expects Energy Transfer LP (NYSE:ET), which has been trading in a certain range, to rise above $16.50 and reach the $20 mark by the end of 2024. Fiorillo also highlights that the growth in the AI space and the associated need for new data center infrastructure could indirectly benefit Energy Transfer LP (NYSE:ET), making it a valuable investment related to the AI boom.
Tom Long, Co-CEO of Energy Transfer LP (NYSE:ET), said during the last conference call:
“We had record volumes through our crude and NGL pipelines, as well as record NGL exports. We also saw strong performance from our NGL fractionators and our refined products pipelines and terminals. DCF, adjusted for Energy Transfer’s partners, was $2 billion, compared to $1.6 billion in the second quarter of 2023. And for the six months of 2024, we spent approximately $1 billion on organic growth capital, primarily in the Midstream and NGL and Refined Products segments, excluding SUN and USA Compression CapEx. Now turning to our results by segment for the second quarter, we’ll start with NGL and Refined Products. Adjusted EBITDA was $1.07 billion, compared to $837 million in the second quarter of 2023. The increase was primarily due to growth in our transportation, fractionation and terminal operations, including record volumes in both the Mariner East and Permian pipeline and NGL exports.
In addition, we realized higher gains from hedged NGL inventory optimization. For Midstream, Adjusted EBITDA was $693 million, compared to $579 million in the second quarter of 2023. The increase was primarily due to the addition of the Crestwood assets as well as higher volumes in the Permian Basin. For our Crude Oil segment, Adjusted EBITDA was $801 million, compared to $674 million in the second quarter of 2023. The increase was primarily due to record crude oil transportation throughput and the increase in our total crude oil exports, which increased 11%, as well as the acquisitions of the Lotus and Crestwood assets in May and November 2023, respectively. Excluding these acquisitions, Adjusted EBITDA and crude oil transportation volumes in our base business increased 4% and 8%, respectively.
In our Interstate segment, Adjusted EBITDA was $392 million compared to $441 million in the second quarter of 2023. During the quarter, we recorded higher contract volumes for Trunk Line, Pebble, Gulf Run and MRT, offset by lower operating gas sales, maintenance project costs of $12 million and a $35 million decrease in carrier reimbursement revenue related to our Pebble rate case. For the Intrastate segment, Adjusted EBITDA was $328 million compared to $216 million in the second quarter of the prior year. The increase was primarily due to approximately $75 million of higher gains related to pipeline optimization opportunities as well as favorable storage optimization opportunities.
Total ET takes 8th place on our list of cheap stocks to buy. While we recognize ET’s potential as an investment, we believe that under-the-radar AI stocks offer greater prospects for higher returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than ET but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
