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Leon Cooperman on CNBC’s “Halftime Report.”
Scott Mlyn | CNBC

Billionaire investor Leon Cooperman said Tuesday that stock picking is key to superior returns going forward as the overall market has grown stagnant after a historic rebound from the pandemic hit.

“In terms of my long-term outlook, to be honest with you, stocks are the best place to be, but I just wouldn’t expect much from the major averages,” Cooperman said at CNBC’s Financial Advisor Summit. “I’m prepared to be in that kind of environment where I have to stock-pick my way to success.”

The chairman of the Omega Family Office is still heavily invested in stocks and believes that the Federal Reserve’s view on inflation will provide support to the market. The S&P 500 has risen more than 14% in 2021 and notched another record high on Tuesday.

“The cyclical forces that determine the market outlook are basically positively positioned and that’s why I’m heavily invested,” Cooperman said. “We have a central bank that wants more inflation. Until that changes, I think the market is probably in good shape.”

Despite the recent hot inflation readings, the Fed is sticking with its view that any spike in price pressures will be temporary as the economy bounces back from the recession. A key inflation indicator that the central bank uses to set policy rose 3.4% in May year over year, the fastest increase since the early 1990s.

Cooperman argued that companies will be able to defend their profit margins by passing on inflation to consumers through raising prices.

“Everybody is worried about inflation. Inflation is a positive for common stocks because inflation in companies’ costs works its way into selling prices, which lift the nominal level of revenues and earnings. Inflation becomes a problem for the market when the central bank is moving to curb inflation,” Cooperman said.

The investor said he’s watching the dollar exchange rate very closely, along with signals from the Fed and overall economic performance to gauge if he wants to have one foot out the door.

In terms of individual stocks, Cooperman revealed that one of his biggest holdings is fintech company Fiserv, which he said has an attractive valuation. He said he also owns Chinese internet companies Baidu and Alibaba.