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Leon Cooperman, Optimist
On the same day that Federal Reserve chairman Ben Bernanke proclaimed that the economic outlook has worsened, hedge fund manager Leon Cooperman told a conference of value investors that the "bulk of the damage is done."
Cooperman, who founded Omega Advisors in 1991 after leaving his job as head of Goldman Sachs' asset management division, admits that this is the worst investment environment he's ever seen. But he sees reason to be optimistic.
Being a value investor, Cooperman is thrilled with the fact that the current average price to earnings ratio for S&P 500 companies is well below its average for the last 46 years (12.5 times earning vs. 14.8 times earnings). Corporations are liquid, and the recent cash-based M&A transactions give him encouragement. Amid the doom and gloom, Cooperman is even convinced he's seeing signs that the housing correction is nearing an end.
"America, to a degree, is on sale," he said.
Cooperman believes the recession began in January and will likely last until next June, but it won't be deep and prolonged as others predict. And here's even more good news: on average, stocks gain 23.8 percent between the trough of a recession and the recession's end.
Something to look forward to, folks!
Now, Cooperman's a value guy, and value guys are trained to seek opportunity in undervalued markets. Plenty of value investors have gotten burned in this recent market turmoil (Bill Miller, anyone?). Just when you think a solid, safe stock like Fannie Mae can't get any cheaper, it does.
It's also worth noting that Cooperman has been a bit more optimistic than most during this entire credit crisis. In February, he told Fortune that he saw less than 50 percent chance of a recession at all.
And in July, Cooperman told Barron's that "the ingredients for a decent bottom are in place." The Dow has lost 13 percent since then.
by Megan Barnett
Also on Portfolio.com:
- In Defense of Mark-to-Market Accounting
- The Duplicitous Sheila Bair
- Capital Index: Buy Bernanke, Sell Iceland
- Credit Crunched: A Special Report on Wall Street Chaos
