Omega Advisors Still Bullish; Shrugs Off China Fears

The bulk of Leon Cooperman’s Omega Advisors’ assets under management are in US equities, and the fund is extremely bullish on the outlook for equities in the near-term, according to a letter to investors reviewed by ValueWalk.

Omega doesn’t believe that the market as a whole is overvalued at present levels, there are pockets of value to be found, and, as a result, it is a stock-pickers market. While the current bull market is one of the longest in during of all the post-war bull markets, Omega Advisors observes that bull markets do not die of old age. The end of a bull market is usually brought about by excess.

And Omega believes that the market will head higher for the foreseeable future. Specifically, Omega’s predictions call for the market to deliver a high single-digit total return of between 7% and 9% — consisting of earnings growth of between 5% and 7% and a dividend yield of 2% — over the coming year. Moreover, Omega is telling clients that it believes the current S&P 500 P/E of approximately 16.5x forward earnings is “about right” and does not signal excess. As a result, the fund believes that the US equity bull market can last a while longer than the next twelve months.

[Note: As I reported in a previous article while Omega believes that the market has not entered a period of excess, the fund is advising investors that they should only take positions in companies that can achieve higher than average rates of earnings growth. Investors should no longer bank on multiple expansion to drive stock appreciation.]