Steve Cohen’s Point72 Asset Management has filed a schedule 13G reporting a 6.3% ownership stake in InterOil Corporation (USA) (NYSE:IOC). According to the filing, the investment manager owns 3.10 million shares of the oil company and this position indicates its confidence in the company. The share purchases were distributed among Point 72 Asset Management and its subsidiary Cubist Systematic Strategies LLC, which reported holding 42,028 shares.
Cohen converted his fund S.A.C Capital Advisors into the family office Point72 Asset Management last year, after initially founding S.A.C in 1992. According to its latest 13F filing, Point72 Asset Management holds a diversified portfolio, with the consumer discretionary and energy sectors comprising 17% of its overall portfolio as of the end of the first quarter, respectively. The fund manager reported a public equity portfolio of $14.67 billion at the end of the first quarter, with its top three equity investments being in Visteon Corp (NYSE:VC), EQT Corporation (NYSE:EQT), and Suncor Energy Inc. (USA) (NYSE:SU). The investment manager accepts investments from family clients only, primarily because of the prohibition imposed by the Department of Justice from accepting outside investors.
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 139% over the ensuing 34 months, outperforming the S&P 500 Index by 81 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Point72 Asset Management cites investment as its primary goal behind this purchase and further, a 13G signifies an ownership of 5% to 20%, without the permission of any activism activities. Earlier in July, Steve Cohen reported an increase in its position in Olin Corporation (NYSE:OLN) to 4.94 million shares, giving him ownership of 6.4% of the total outstanding common shares of the company.