Leon Cooperman: As AI Captures Attention, One Overlooked Sector Offers Hidden Value

In this interview with Jon Schultz, Leon Cooperman observes that technological advancements can render existing technologies obsolete. Highlighting past market trends, he recalls the overvaluation of Cisco during the internet boom, and the collapse of the “Nifty Fifty” stocks in the 1970s due to the oil crisis.

Cooperman suggests the current market may be in a bubble, with uncertainty around AI’s impact. He prefers value investing and one overlooked sector in particular.

Here’s an excerpt from the interview:

Cooperman: I’m a guy that plays the business cycle. I say every recession sows the seeds for the next business recovery, and every business recovery sows the seeds for the next recession. I’m not technology-oriented, even though I have a scientific background. I observed that somebody’s innovation is somebody else’s obsolescence.

In 2000, the word then was the internet, and Cisco was valued at 300 times earnings. Then in 2001-2002, it dropped 90% in price, and I think the internet has lived up to expectations, but Cisco is still below what it was in 2000.

Then you had the “Nifty Fifty” of 1972, where JP Morgan and US Trust ruled the roost. Their philosophy was to buy only growth stocks, regardless of the price, often paying 40, 50, or 60 times earnings. OPEC raised the price of oil tenfold, leading to a recession, and those stocks collapsed. It took a decade for some to recover.

I think we’re in a bit of a bubble period. I’m not qualified to comment on AI, but everyone seems to think it’s very real. I don’t know if it’s revolutionary or evolutionary. I think the world will be better off, I’ve tried a little bit of AI, it’s amazing.

The question is how you spend your money? I tend to be value-oriented. I have a heavy position in energy, they’re selling at three times cash flow and yielding 5-6%. Most of them have very little debt because you can’t borrow money as an energy company. My guess is that if I buy at three times cash flow yielding 6%, I’ll get lucky.

You can watch the entire interview here: