By Steve Goldstein
Leon Cooperman, the 77-year-old billionaire chief executive of hedge fund Omega Advisers, has a lot of thoughts on the stock market. Or, as he puts it, three stock markets.
The first market is what he would call the FAANG market — companies like Facebook /zigman2/quotes/205064656/composite FB +2.40% , Amazon /zigman2/quotes/210331248/composite AMZN +0.88% , Apple /zigman2/quotes/202934861/composite AAPL -0.61% , Netflix /zigman2/quotes/202353025/composite NFLX +0.63% and Google owner Alphabet /zigman2/quotes/205453964/composite GOOG +1.59% , the technology heavyweights that benefit from the COVID-19 disruptions. “Those stocks, to a degree, are better than gold. They are selling at very rich valuations, but if you look at interest rates, they’re not expensive,” he said in an interview with RealVision . Cooperman said his largest position is Alphabet, and he has a big position in Microsoft /zigman2/quotes/207732364/composite MSFT +0.62% , a decent sized position in Amazon, a small position in Facebook, and added a quick lament that he got out of Apple far too early.
The problem with those stocks, he says, is the market has had runs like this before, and there is usually a high failure rate. Comparing it to the Nifty 50 large-cap stocks of the 1970s, he said a 20% failure rate “would do a lot to sterilize the successful ones.” He also said he wouldn’t be surprised if an excess profit tax were imposed on the beneficiaries of the coronavirus pandemic.
The second market is what he calls the Robinhood market, referring to the zero-cost stock brokerage where young, retail investors play, bidding up bankrupt or struggling companies like Hertz /zigman2/quotes/200655672/composite HTZ -0.57% , American Airlines /zigman2/quotes/209207041/composite AAL -4.18% and Eastman Kodak /zigman2/quotes/205109646/composite KODK -0.12% . “Look, [billionaire investor] Carl Icahn is no fool. He’s a brilliant guy. He’s done a fabulous job in running his own financial affairs. He sold his mistake in Hertz [for] 72 cents a share. Three weeks later, the Robinhood guys take it for five bucks,” said Cooperman. “I don’t pay any attention to that market, it’ll end in tears, etcetera.”
The third market is “the rest of the market, and there’s plenty of value there, and you just got to manage your risk accordingly.”
Cooperman was asked by RealVision managing editor Ed Harrison to which of the three markets does Tesla /zigman2/quotes/203558040/composite TSLA -1.21% belong. “I’m not involved in Tesla, because I’m like a corporate type of guy, and [Chief Executive] Elon [Musk]’s behavior, the guy’s obviously a genius, but his behavior is such that I’m not comfortable, with his tweeting and this and that, and the market cap of company is just way beyond anything,” he said. Volkswagen /zigman2/quotes/203434344/delayed XE:VOW3 +1.06% , he added, just came out with an electric car, as has Porsche /zigman2/quotes/202769371/delayed XE:PAH3 +0.20% at the higher end.
The market’s biggest concern concerning a Biden presidency is his promise to increase corporate tax rates, from 21% currently to 28%. Invesco analysts Paul Jackson and András Vig say, historically, corporate stock rates aren’t particularly correlated with stock market performance. “Overall, it looks as though there are bigger influences on the stock market than the rate of corporation tax. This is not surprising, given the broader implications of tax changes, including the effect on government financing requirements,” they say.
China is cracking down on those who wish to scale the Great Wall .
Further ancient lakes of liquid water have been discovered on Mars .
Massachusetts Institute of Technology researchers say they are confident their designs for a compact nuclear fusion reactor should work.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.