Leon Cooperman warns shares could fall 22% from here — he’s using these two stocks for protection

For those longing for the early bull run of the year to regain steam, watch out. A well-known investment wise man thinks that is completely unlikely.

Billionaire investor Leon Cooperman thinks so S&P500 is about to slip 22% from here while still anticipating the US economy will be pulled into recession.

“I think QT, Fed tightening, high oil price, or maybe a strong dollar — a combination of these four things will result in a recession and the market’s ultimate bottom will be about 35% below the 4,800 peak,” the said Chairman and CEO of Omega Advisors explained.

That doesn’t mean Cooperman threw the baby out with the bath water, though. In its portfolio, and this accounts for a large part, there are names that have far outperformed the market over the past year. By sticking with them, Cooperman clearly believes these stocks will continue to deliver even when the bad times come.

With that in mind, we dug into the TipRanks database and pulled up the details of two stocks owned by Cooperman. Do The Street’s equity experts agree these are worth buying now? Let’s take a closer look.

Fisherv, Inc. (FISV)

We start with Fiserv, a leading fintech company providing financial services and payment solutions. The company provides merchants and financial institutions with state-of-the-art technical tools to facilitate and monitor financial transactions. Services also include account management systems, client management and online banking, risk compliance tools and data analytics, among others. These solutions are used by more than 10,000 customers around the world and in key industries such as banking, insurance, telecom and healthcare.

It’s a model that has served the company well of late, according to its latest quarterly statement — for 4Q22. Revenue rose 8% year over year to $4.36 billion, beating consensus by $10 million. At the other end of the scale adj. Earnings per share increased 22% year-on-year to $1.91 in 4Q22 from $1.57 in 4Q21, in line with Street’s expectations.

The story goes on

The outlook was also promising. For 2023, the company is calling for organic sales growth of between 7% and 9% and adjusted earnings per share of between $7.25 and $7.40, ahead of Wall Street’s forecast of $7.28.

The Street liked the results and shares rose after the release. In fact, investors have supported stocks over the past year. The stock is up 19% over 12 months, far outperforming the S&P 500’s 8% loss.

Cooperman must expect FISV stock to continue to outperform. Nearly 9% of his portfolio is taken up by FISV stocks. Specifically, he holds 1,030,600 shares, which are currently worth just over $118.6 million.

Tigress Financial’s Ivan Feinseth is also a big fan of Fiserv. Laying out the bull case for the fintech, the 5-star analyst writes, “FISV’s industry-leading position, asset strength, agility and new product launches will continue to accelerate growth. FISV continues to capitalize on the growth of online and in-store payments and is one of the leaders driving new payment technologies and the secular shift to electronic payments. FISV will continue to grow in a growing market and increasingly tap into a growing customer base through ongoing new product development and strategic acquisitions to expand its product and service portfolio.”

These comments form the basis of Feinseth’s Buy rating on FISV, while its $154 price target leaves room for the stock to grow 34% in the coming year. (To see Feinseth’s track record, Click here)

Most on the street agree with Feinseth; FISV’s Moderate Buy consensus rating is based on 19 ratings, broken down into 15 buys, 3 holds, and 1 sell. The current trading price is $115.09 and the average price target of $130.32 implies a ~13% 1-year increase from this level. (See Fiserv Stock Forecast)

The Cigna Group (AI)

The next stock Cooperman backs is Cigna, a global healthcare services company. This large-cap provides insurance and healthcare services to a wide range of clients, including businesses, families, and individuals. In fact, Cigna is one of the giants of the healthcare industry and one of the world’s largest health insurers.

Some numbers tell the story well; The company entered 2022 with nearly 190 million total customer relationships and $180.5 billion in total revenue. The health insurance industry is expected to continue to expand in the coming years, leaving Cigna well-positioned to capitalize on the growing demand for health insurance.

The company recently came out with a solid report at the end of 2022. Fourth-quarter revenue reached $45.75 billion, in line with Street’s expectations while adjusted. Earnings per share of $4.96 beat analysts’ forecast of $4.87.

However, the outlook was a bit softer; For the full year, the company is forecasting adjusted sales of at least $187 billion versus $190.20 billion consensus.

Stocks trended lower after the gains and have underperformed so far this year. Still, zoom out a little and you’ll find that shares have significantly outperformed the broader market over the past 12 months — up 25% over the period.

This blue chip also pays a regular dividend. It currently yields 1.68% — more or less in line with the S&P average — but given that the company recently increased its payout by 10%, more increases could follow in the coming years.

As for Cooperman’s exposure, he owns 450,000 shares, which makes up nearly 9% of his portfolio. At the current share price, these are worth more than $131 million.

Analyst Lisa Gill, who covers JP Morgan stock, believes the momentum “will continue into 2023.” Looking ahead, the 5-star analyst writes, “While the recession remains a concern given CI’s exposure to the commercial market, management noted that an increase in deregistrations will feed into the 2023 guidance. We are also encouraged by the strong performance of Evernorth (the subsidiary that provides pharmacy, care and benefits solutions), significant new customer wins (Centene PBM contract), return of customer retention to historic levels in the top 90% and Specialization reflects pharmacy an important long-term tailwind.”

“We believe CI deserves to trade above its historical multiples, particularly given the growth opportunities in specialty products and biosimilars coupled with continued strong growth in the health insurance business,” added Gil.

To this end, Gill ranks CI stock at an Overweight (ie, Buy), supported by a price target of $370. The consequences for investors? Upside potential of ~28% from current levels. (To see Gil’s track record, Click here)

Elsewhere down the road, the stock receives another 7 Buy and Hold for a moderate Buy consensus rating. The forecast calls for a ~21% 1-year return considering the median target is $352.33. (See Cigna Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.