Last week, we discussed the federal government’s allegations of illegal insider trading against Mathew Martoma, a former hedge fund manager employed by CR Intrinsic Investors (a division of Steven Cohen’s SAC Capital). The case, in which Martoma is said to have made millions trading via non-public pharmaceutical tests, also mentions an “Investment Advisor A.”
While we don’t know exactly what fund this reference is to, we have showed you which funds also sold both pharma companies in the third quarter of 2008 (here’s the list of those 5 funds).
Interestingly, the FOX Business Network (FBN) has found some new information on the matter, pertaining to what Steven Cohen plans to do about the situation. In a report by FBN Senior Correspondent Charlie Gasparino, it has been found that “SAC Capital founder Steve Cohen will not step down amid the United State government’s insider-trading probe. Sources tell FOX Business that the company’s funds are not being liquidated at this time, but that continued bad press could prompt massive investor exodus.”
While estimates of Cohen’s assets under management vary, we do know with certainty that the hedge fund manager’s stock holdings are mammoth in size, in excess of $20 billion (see Steven Cohen’s top stock picks here). If there is any sort of “investor exodus,” it could force Cohen to sell of some of his positions, but it is worth mentioning that close to half – exact estimates vary – of his portfolio is made up of his own capital. Now, it is also possible that Cohen’s own fortune could be exposed to “any court-ordered disgorgement of illicit profits,” as CNBC has speculated, so there are two factors at work that could potentially squeeze SAC Capital’s assets.
If the New York-based mega fund does decide to trim any of its holdings, there’s no way to know for sure exactly what may get cut, but we can take a look at some of Cohen’s transactions last quarter to get a better idea of the situation.
As noted in his latest 13F filing with the SEC, Cohen downsized his position in the perturbingly valued e-retailer Amazon.com, Inc. (NASDAQ:AMZN) by two thirds, and slashed his stake in oil-dependent Murphy Oil Corporation (NYSE:MUR) by 99%. He did increase his holdings in Sirius XM Radio Inc (NASDAQ:SIRI) and American International Group, Inc. (NYSE:AIG) quite noticeably though, as each can be a company-specific situational play going forward. AIG’s Treasury bailout passed into profitable territory in September, while Sirius has been boosted by a Liberty Media takeover effort.
Now, SAC Capital does experience quite a bit more turnover than the Buffett’s or Einhorn’s of the hedge fund world, which is partially an effect of Cohen’s penchant for Fibonacci technical analysis guru Tom DeMark. Our advice: even if Cohen does downsize his positions in some top-name stocks mentioned above, the overall size of his equity portfolio means that these cuts might not be focused on any one company.
Even if this is not the case, there’s no way to determine just which investments may be trimmed, making this a guessing game worth avoiding. Here’s a full look at some of Cohen’s latest bullish bets; it’d be a good place to start looking for long-term additions to your portfolio.