Several weeks after the end of each quarter, hedge funds such as billionaire Steve Cohen’s SAC Capital Advisors file 13Fs with the SEC to disclose many of their long equity positions as of the end of the previous quarter. We track these filings in our database and use them to develop investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy). Many investors also like to use 13Fs as a source of initial investment ideas for further research, by seeing what top managers such as Cohen did in the last quarter. Read on for our thoughts on some moves we noticed Cohen making in the first quarter of 2013 and compare his picks to those in previous filings.
Switching e-commerce companies. The fund reduced its stake in eBay Inc (NASDAQ:EBAY) from 4.6 million shares to 2.6 million, and instead more than tripled the size of its position in Amazon.com, Inc. (NASDAQ:AMZN) to make that company its second largest single-stock position by market value. Amazon.com, Inc. (NASDAQ:AMZN)’s valuation is entirely based on expectations for better earnings numbers in the future, as the $120 billion market cap company is actually unprofitable on a trailing basis (and is valued at over 80 times expected earnings for 2014). We’d note that Amazon.com, Inc. (NASDAQ:AMZN) was one of the most popular consumer services stocks among hedge funds in Q4 2012 (see more consumer services stocks hedge funds loved). While eBay Inc (NASDAQ:EBAY)’s multiples certainly aren’t as high in relative terms, that stock is also dependent on future growth with the current market cap of $74 billion making for a trailing earnings multiple of 28. eBay Inc (NASDAQ:EBAY) (which owns Paypal as part of its Payments segment) did experience double-digit growth rates in both revenue and earnings in its most recent quarter compared to the same period in the previous year, though this multiple might still be a bit high.
EQT. The new top pick in SAC’s portfolio is integrated natural gas company EQT Corporation (NYSE:EQT), with the filing disclosing ownership of 4.3 million shares. Natural gas prices have been very low (at least domestically) over the last couple of years, as overexpansion in onshore U.S shale plays have resulted in a supply glut. There’s some hope that higher demand- including, possibly, from exporting- will emerge going forward though. Cohen and his team are pretty dependent on growth unfolding here as EQT currently trades at 25 times forward earnings estimates. So far this quarter, EQT Corporation (NYSE:EQT) has agreed to buy a portion of Chesapeake Energy Corporation (NYSE:CHK)’s Marcellus assets as that company tries to raise cash and focus on its core assets. Billionaire George Soros has also been buying EQT (research more stocks Soros has been buying).