Steve aka “Stevie” Cohen is the founder of SAC Capital whose flagship fund returned 8% net of fees last year. Coming out of Wharton, Cohen cut his teeth in Wall Street as a junior options trader at Gruntal & Co., which was eventually bought by Ryan Beck, a New-Jersey investment bank. It is said that on his first day at Gruntal, Cohen made $8,000, going on to run a $75 million portfolio there, making $100,000 a day as a lead trader. After Gruntal, Cohen started SAC Capital in 1992 with $20 million. Now SAC manages $14 billion in AUM and has expanded to include fundamental, quant strategies, and an emerging markets platform on what began as a trading-oriented firm, focused on trading liquid, large cap stocks. Recently, SAC Capital has been put under the microscope with federal allegations of insider trading. Though Cohen has not been accused of any wrongdoing, last February two SAC managers, Noah Freeman and Donald Longueuil, were accused of insider trading with Freeman pleading guilty.
Top 10 Holdings:
|SPDR S & P 500 ETF Puts||SPY||1,129,982||226%|
|E N S C O PLC||ESV||269,048||86%|
|SPDR S & P 500 E T F TRUST||SPY||268,717||1270%|
|POWERSHARES QQQ TRUST Puts||QQQ||254,630||New|
|MURPHY OIL CORP||MUR||227,806||14752%|
|SIRIUS X M RADIO INC||SIRI||226,998||2647%|
|WALTER ENERGY INC||WLT||163,789||284%|
Cohen’s portfolio is currently most concentrated in Consumer Services, Oil & Gas, and Technology. Though it seems that he increased put positions meaningfully in ETFs like the S&P 500 (SPY) and Nasdaq-100 Index (QQQ), he actually has puts on those indices, implying bearishness. There weren’t many new positions this quarter, more so upsizing existing positions in companies like Ensco (ESV), Murphy Oil (NYSE:MUR), Sirius Radio (SIRI), and Transocean (NYSE:RIG). In spite of difficulties in fleet costs that RIG has experienced, we prefer it over competitors like Diamond Offshore (NYSE:DO) and Halliburton (NYSE:HAL) from a valuation standpoint as we think the market underestimates RIG’s earnings turnaround potential. DO and HAL both trade at ~9.0x forward earnings and if RIG can manage costs effectively and build out its fleet, it should be able to trade near that multiple as well. Billionaire Leon Cooperman boosted his stake in RIG to over $150 million during the first quarter while John Paulson sold out of Transocean (see John Paulson’s new picks).
Cohen also added significantly to MUR, an oil and gas exploration and production company with gasoline marketing operations in the US and refining operations in the UK. We continue to prefer Marathon Oil (NYSE:MRO) over MUR based on progress in obtaining scale in the attractive shale business and based on more generous return of capital policies to shareholders. MUR trades at 2.5x EV/EBITDA versus MRO which trades at 3.1x EV/EBITDA. Billionaire Louis Bacon Moore significantly boosted his stake in MRO during the first quarter.