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 Vertiv Holdings Co. (NYSE:VRT) 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)
A close-up of a group of technicians working on complex data center systems.
Vertiv Holdings Co. (NYSE:VRT)
Number of hedge fund investors: 85
Vertiv Holdings Co. (NYSE:VRT) operates in the infrastructure sector and offers solutions such as uninterruptible power supplies (UPS), cooling systems, and IT infrastructure management. Despite the uncertainties surrounding the monetization of AI, Vertiv Holdings Co. (NYSE:VRT) management reports a growing multi-year backlog and increasing profit margins.
Vertiv Holdings Co. (NYSE:VRT) has also made significant progress in monetizing its existing and future data center installations through improved service management and predictive maintenance. These initiatives are reflected in a healthier balance sheet and underscore Vertiv Holdings Co. (NYSE:VRT)’s ability to fund future growth opportunities, especially with the next cloud supercycle looming. This strong financial position and strategic focus on expanding the service base support an optimistic outlook for Vertiv Holdings Co. (NYSE:VRT).
Despite the uncertainties surrounding AI monetization, Vertiv Holdings (NYSE:VRT) shows great potential due to its growing backlog and increasing profit margins. Vertiv Holdings (NYSE:VRT) is improving its financial stability through better service management and predictive maintenance of data center assets. This positions Vertiv well for future growth, especially in light of the upcoming cloud supercycle.
Baron Small Cap Fund stated the following about Vertiv Holdings Co (NYSE:VRT) in its second quarter 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT), a leading provider of critical digital infrastructure for data centers, contributed during the quarter. As an industry leader in data center cooling and power management, Vertiv is poised to benefit from AI-driven growth in data center spending. The NVIDIA partner network, strong industry relationships and broad product portfolio that Vertiv maintains enable it to participate in creating the technology roadmap for the future of the data center. In addition, Vertiv is investing in its capacity to more effectively serve this growing end market. The company also has an extensive global services network to help customers grow. We believe the company has durable competitive advantages and a flexible balance sheet to benefit from the expected significant capital investments in data centers in the coming years. Vertiv reported very strong March quarter results with orders up 60%, underscoring strong demand for its products. We sold part of our position following the boost from the positive report, but still hold a large position in the fund as we see significant upside potential for the shares over time.”
Total VRT 3rd place on our list of cheap stocks to buy. While we recognize VRT’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 VRT 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.
