How much can a good vibe push the market? That’s a question investors should ponder, especially if events unfold as investing legend Leon Cooperman believes.
The billionaire hedge fund manager doesn’t see the current rally in stocks as sustainable, and warns that it’s built on positive sentiment rather than anything solid. Also, he has a pessimistic attitude about him. S&P 500Not only is it capable of surpassing the multi-year high of 4,800 in January 2022.
Getting into specifics, Cooperman noted that the stock’s rise this year was due to improved fundamentals rather than improved sentiment. Investors are currently feeling optimistic about stocks, prompting them to buy in, even if corporate profits don’t keep up. Cooperman warns that this kind of optimism may not last, and when it eventually fades, it will coincide with the Fed’s rate hikes. This combination may bring about a collapse in 2024.
“There’s a lot of crazy stuff going on in the market. “I’ve never seen such moves on trivial news as we’re seeing in the market today,” Cooperman said, adding, “If we have one, it could come next year, when people run out of money and the Fed continues to raise rates.”
That’s not to say there aren’t good investments out there right now, and Cooperman is heavily invested in stocks he describes as ‘good values’. We ran through a couple of its large holdings TipRanks database To see what street stock experts make of these picks. Let’s take a closer look.
WillScot Mobile Mini Holdings (WSC)
We start with a twist at Willscott Mobile Mini Holdings, an office space company. Willscott specializes in temporary construction sites, including prefabricated office, classroom and storage units. It’s an interesting position, and Leon Cooperman clearly sees the potential in it – evidenced by his significant stake in WSC, totaling 1,698,951 shares. At current estimates, his holdings in Willscott are worth $70 million.
Among Willscott’s main products are mobile offices, prefab offices and office trailers. These structures are quick to assemble, easy to install where needed, and offer modular capabilities, allowing the creation of prefabricated office complexes in excess of 1,000 square feet. Building on this foundation, Willscott developed and introduced a line of preschool classes suitable for K-12 and high school settings. The company’s product range extends to special temporary buildings, including explosion-resistant safety structures as well as portable toilets and bathrooms. In addition, the company offers a series of steel storage units designed to withstand all weather conditions.
Willscott has long had experience expanding through acquisitions, and earlier this month the company announced the acquisition of both California-based Cold Box and Ohio-based A&M Cold Storage. These moves enhance Willscott’s ability to offer cold storage options and bring the company to approximately 3,500 new assets, including climate-controlled containers and walk-in coolers. In September of last year, Willscott acquired Allied Office Trailer and Storage Containers, a move that brought more than 8,000 mobile office and portable storage units to Willscott’s fleet of rental properties.
Earlier this month, Willscott released its financial results for 2Q23, and the stock was down 12% from the previous day’s high. The company’s results weren’t bad — rather, they didn’t meet high revenue estimates due to several years of Covid-era and post-Covid successes.
Willscott posted revenue of $582 million, marking year-over-year growth. However, the forecast fell short by $698,000. In terms of earnings, the company’s non-GAAP EPS was 44 cents per share, beating estimates by 3 cents per share. We should also note that Q2 EPS was up 11 cents y/y and 1H23 EPS, at $1.46, was a full 90 cents per share higher than the 1H22 figure.
Citing Willscott’s recent record of success, Stifel 5-star analyst Stanley Elliott describes it as an opportunity to buy the post-earnings weakness in the stock. In times of high expectations, investors can speak up. We believe that the softer unit on rental metrics indicates some sequential softening (mostly retail) but is unlikely to be sustained in 2022 given the strength from recent M&A on very large fleets.
In conclusion, Elliot says, “Overall, we are pleased to have more than doubled WSC while maintaining ROIC of 17% on a TTM basis and executing on VAPs, tuck-ins and efficiency gains. We believe the stock’s weakness in response to the publication creates an attractive opportunity for long-term investors.
Elliott rates a bullish stance on Willscott with a buy rating and a $57 price target, suggesting the shares will rise 38% over the next 12 months. (To look at Elliott’s track record, Click here)
Overall, the bulls are definitely running for WSC, as indicated by the stock’s Strong Buy consensus rating – supported by 5 unanimous positive analysts. The shares are trading at $41.24, and the average price target of $58.80 suggests a one-year upside potential of ~43%. (look out WSC stock forecast)
Mr. Cooper’s teamCOOP)
The second option we look at from Cooperman is Mr. Cooper Group, a Dallas, Texas-based company that operates in the mortgage servicing industry. Leon Cooperman doesn’t seem concerned about the softness in the real estate sector or the home buying activity due to high mortgage rates. Mr. Cooper’s investment in the group is $240.8 million, which is equivalent to 4,249,000 shares.
Mr. Cooper Group takes a customer-first approach to its lending business through its servicing, loan origination and marketing activities. The company’s operations focus primarily on single-family residential properties in the United States housing market, and it is one of America’s largest home loan servicers. The company’s Xome brand is technology-driven, and provides data-enhanced technology solutions to buyers, sellers, real estate agents and mortgage lenders.
By the numbers, Mr. Cooper Group is big by every measure. The company has more than 4.3 million customers, $3.8 billion in home loans, and the Xome brand has facilitated sales of more than 114,000 homes totaling $18.8 billion. Mr. Cooper Group is the largest non-bank mortgage servicer in the US, the 3rd largest servicer of any type. Ranked among the top 30 mortgage loan originators in the US real estate market.
That foundation underpinned some strong numbers in 2Q23. The company’s total revenue was $486 million, beating expectations by $73.22 million. On the bottom line, the company’s non-GAAP EPS, $1.66 per share, was 45 cents better than expected.
For Kevin Barker, an analyst who covers Piper Sandler stock, these facts add up to a sound investment. “This was another strong quarter for COOP as earnings were better than expected, the company increased guidance for servicing earnings, and a series of one-time gains in 2H23 kept TBV higher,” said the 5-star analyst. The servicing segment generated higher fees, lower than expected depreciation and higher net interest income. Meanwhile, the origination segment has seen its margins rise as competition in the correspondent market diminishes. Management looks bullish on its outlook for the rest of the year and into 2024, with ROEs expanding well into double digits. Overall, a good quarter and our sentiment on COOP remains intact.
Looking ahead, Barker gives COOP shares an overweight rating (i.e., buy) with a $72 price target, indicating a one-year upside of 27 percent. (To see Barker’s record, Click here)
Overall, COOP maintains a Moderate Buy rating based on the 5 most recent analyst reviews, with Buy out to 2 out of 5. The average price target of these analysts stands at $67, which means the stock will gain 18% over the next 12 months from its current trading price of $56.67. (look out COOP stock forecast)
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Disclaimer: The opinions expressed in this article are those of the featured analysts only. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.
