It can be interesting to look at the larger positions held by the most institutional investors, including those running prominent hedge funds. Steven Cohen founded SAC Capital Advisors in 1992, and since then this group of hedge funds have grown to manage around $14 billion in assets. Controversy has surrounded the funds lately regarding allegations of insider trading, and just last week SAC agreed to pay $602 million in fines to resolve a civil lawsuit. The settlement removes the dark cloud above the firm that caused investors to withdraw $1.7 billion last month.
Regardless of these legal issues, SAC has averaged a 30% gross annual return over the last two decades, making it one of the best performing hedge funds. The funds also have some of the highest fees, charging customers 3% of assets and 50% of the profits each year. The funds hold around 1,900 different positions, which are all listed conveniently on NASDAQ’s website. Let’s take a look at three of the larger positions.
Schlumberger Limited. (NYSE:SLB)
Schlumberger Limited. (NYSE:SLB) is a supplier of technology and information solutions for the oil and gas industry. The company has been around for over 80 years and has seen impressive revenue growth over the past decade. Since 2003 revenue has grown at an annualized rate of about 13%, and that includes a decline in 2009 due to the financial crisis. EPS came in at $4.10 in 2012, still lower than the pre-recession 2008 EPS figure of $4.45. The current P/E ratio is about 19.3 based on the current share price of $79.
Strong growth seems likely to continue as global demand for oil continues to grow. In addition to oil, there is an expectation that natural gas will see a strong increase in demand as a low-cost energy alternative. In fact, Warren Buffett, who’s company owns the major railroad Burlington Northern, has recently stated that the railroad is exploring trains which run on natural gas instead of diesel. If natural gas demand blows up like many think it will, Schlumberger Limited. (NYSE:SLB) could be a big beneficiary.