Although the fourth quarter is a historically strong period for the markets, Omega Advisors chairman and CEO Leon Cooperman remained wary.
"My cautious view is underpinned by the idea that I think the combination of Fed tightening, QT, strong dollar and the price of oil will create a recession in the second half of 2023," Cooperman said Tuesday on CNBC's "Squawk Box."
What To Know: Cooperman expects an impending recession to stifle the indices, paving the way for stock pickers to shine.
"I believe the action is going to be in individual stocks, not in the averages. I would advise people to go out and get a good quality money manager who can go both ways. What I mean by that is long and short," Cooperman said.
Related Link: Analyst Sees S&P 500 Surging Over 10% Tomorrow If Fed Takes These 2 Actions
Energy is still one of Cooperman's top sector picks, but he noted that he's getting nervous because everyone seems to like energy stocks now. Still, he sees opportunities in companies like Paramount Resources Ltd (OTC:PRMRF).
Despite being up a lot like the majority of energy names, the stock still seems cheap, he said. The company is able to produce a barrel of oil for approximately $31 and it's selling the barrels for more than $80. Moreover, production is growing in the double-digit percentage range.
Cooperman also expects the company to raise its dividend by 20% to 30% and announce a buyback during its upcoming earnings report.
"I can't find anything wrong with that," Cooperman said.
On the other hand, the big tech names are all down for the year and still look unattractive, he said.
"They still don't look interesting. They're losing money. You know, I could buy a lot of things that earn good money," Cooperman said.
He reiterated that investors will have to pick individual stocks moving forward, as he sees a recession coming next year.
"We've pulled forward demand because of very inappropriate fiscal monetary policies and ultimately a price is going to be paid," Cooperman said.
"I think we are in store for a long period of low returns in the averages ... and I'm looking to buy weakness, not strength."
See Also: The SPY Confirms Uptrend But Here's Why A Larger Pull Back May Be On The Horizon
SPY Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) is down about 18% since the start of the year.
The SPY was down 0.31% at $385.01 Tuesday afternoon at publication, according to Benzinga Pro.
Photo: Tumisu from Pixabay.
