SAC Capital Advisors isn’t going to let the current speculation and investigation into insider trading by past employees of the fund interfere with its investing activities. A recent 13G filed with the SEC shows that the fund, which is managed by billionaire Steven Cohen, owns 1.6 million shares of medical device company ArthroCare Corporation (NASDAQ:ARTC). This gives it 5.6% of the shares outstanding. ArthroCare is best known for products which help treat orthopedic and soft tissue conditions. SAC had owned about 400,000 shares of the company at the beginning of October, and that had been an increase of 250% from the size of its position at the end of June (check out more of Cohen’s stock picks and read our latest report on the insider trading probe). As such this seems to have been a fairly recent buy by Cohen and his team, and with the stock about flat since the end of September investors have the opportunity to buy in at a similar price.
ArthroCare Corporation has a market capitalization of a little over $900 million; it averages about 140,000 shares traded daily, and has a current market price of about $33 per share, giving it close to $5 million in average daily dollar volume. The company’s most recent 10-Q showed a small increase in product sales compared to the third quarter of 2011. Because ArthroCare did not report as much in exit, investigation, and restatement costs, earnings were up substantially from a year ago. However, for the fuller year, income seems to be more steady and it looks to us like the company merely had a number of one-time charges in Q3 2011- there hasn’t been much actual growth. A little over two-thirds of the company’s business comes from the United States. At the current stock price, ArthroCare trades at 22 times forward earnings estimates. This is a valuation at which we’d expect to see substantial growth in the company’s business.
Healthcor Management, a healthcare-focused hedge fund managed by two former SAC employees (Arthur Cohen and Joseph Healey), reported owning nearly 2 million shares of ArthroCare Corporation at the end of September, making the stock one of the fund’s ten largest holdings by market value (see what other healthcare stocks they thought were good investments). Healthcor had been increasing its stake in the company earlier this year. Renaissance Technologies, whose founder Jim Simons is now a multi-billionaire thanks to the fund’s success, had reported owning about 400,000 shares though this had been a 15% decrease from three months earlier (find more stocks that Renaissance was trading).