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The Stocks Jim Chanos and Leon Cooperman Are Buying — And Shorting

The stock pickers share long and short bets at the ninth annual Delivering Alpha conference.

Both bulls and bears are getting squeamish about the stock market — especially with a presidential election a little over a year away.

“Politically, I don’t think the stock market is discounting a win by the left in 2020,” short seller Jim Chanos of Kynikos Associates said at the CNBC Institutional Investor Delivering Alpha Conference on Thursday.

But he took issue with fellow panelist Leon Cooperman’s view that the stock market “won’t open” if Democratic hopeful Elizabeth Warren becomes the next U.S. president.  

“The stock market is pretty confident that Lee’s scenario of the market not opening if Warren is elected won’t happen,” he said, pointing to stocks of for-profit prisons and for-profit education stocks — currently hitting highs — which would likely get hit if Democrats win.

Chanos doesn’t have to wait for the election to identify short opportunities. He said he’s short DaVita, a kidney dialysis company that operates what he calls a “rent-seeking” model, in that it seeks to gain wealth without creating new wealth. “The federal government is getting more interested in these rent-seeking models,” he said.  

DaVita, whose biggest investor is Warren Buffett’s Berkshire Hathaway, has been sued by Blue Cross and Blue Shield because of its model, which Chanos described as pushing Medicare and Medicaid patients into more expensive commercial insurance contracts through the Obamacare exchanges.

“It allegedly tells customers, ‘We’ll treat you better if you can be a commercial paying customer,’ then turns around and charges commercial payers three to four times” more than what Medicare and Medicaid would pay, Chanos explained. The American Kidney Foundation agrees to pay some of the costs, but DaVita is a donor to that foundation — and gets the money back from the exchanges. 

According to whistleblower allegations, DaVita is also directing the charitable deductions. “It’s certainly running an insurance scam and if the whistleblower is correct, it’s running a fraud,” Chanos said.

Chanos called it a “bad look” for Buffett’s Berkshire Hathaway, which owns about a quarter of the stock. 

DaVita may also have exposure to opioid lawsuits, as most kidney dialysis patients are on opioids, he said.

DaVita’s stock fell about 3 percent on his comments. 

“Today’s statements from a short seller contain false and misleading information and reflect a poor understanding of our business and our industry,” a representative for DaVita said in an emailed statement to Institutional Investor. “Contrary to his claims, charitable assistance is a long-standing financial safety net for a small percentage of kidney care patients who use it to afford their insurance plan, with the majority of patients using it to support their Medicare primary or secondary premiums. This assistance helps ensure they have continuity of care for life-sustaining treatment and access to transplantation.”

Meanwhile, ten years into the bull market, it has become harder to pick winning stocks, but Leon Cooperman is trying. 

“We’re in a very abnormal year,” he said.

Cooperman, the former head of Omega Advisors, the hedge fund that he has shut down, is known for his bullish views. But he criticized the President’s jawboning of the Federal Reserve, which cut rates another quarter of a point this week. 

“The president is doing a lot of damage with the Fed,” he said. “I vote with the guys at the Fed who didn’t want to cut rates.”

Still, he named three stocks on his buy list: Cigna, WPX Energy, and New Media Investment Group.

“The S&P 500 is overvalued,” he said, adding that it hasn’t yet seen the euphoria that will make it crack — “other than the IPO market.”

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