SAC Capital Advisors is a diversified, research-driven investment management firm, with assets under management of $20.73 billion as of March 31. It has performed well since its inception, generating an average annual return of 25%, but sustained substantial losses during the 2008 financial crisis.
By tracking its movement, investors may find good investment opportunities. As per its recent 13F filings with the SEC, Suncor Energy Inc. (USA) (NYSE:SU), Amazon.com, Inc. (NASDAQ:AMZN), and EQT Corporation (NYSE:EQT) are the top three holdings of SAC Capital Advisors. These companies, accounting for 3.56% of its portfolio, are adopting different strategies which provide good prospects for long-term growth.
Debottlenecking with a meaningful hike in dividends
Suncor Energy Inc. (USA) (NYSE:SU), an Alberta-based oil sands producer, is planning production growth of its oil sands through a capital-efficient debottlenecking program. It is increasing capacity at low cost instead of building a new facility. For this project, the company will invest $3.3 billion this year. Production will increase by improvement in base facilities, optimization of in-situ operations, better logistics, and infrastructure connectivity.
Under this program, production is increased at existing facilities through the improvement and modification of existing equipment. This will increase efficiency of oil sands production, adding 100,000 barrels per day at a cost of $20,000 – $30,000 per day over the next four years. The company is also debottlenecking its operations at Firebag.
Suncor Energy Inc. (USA) (NYSE:SU) increased its production to 357, 800 barrels per day from its oil sands operations in the first quarter ending in March of 2013, compared with 305,700 barrels per day, year-over-year. The increase in production was mainly due to an upgrade of its Firebag facility. With improvements to its facility, operating cost has decreased to $34.80 per barrel in first quarter from $38.10 per barrel in the same quarter a year ago. Suncor Energy Inc. (USA) (NYSE:SU) also plans oil production expansion of 20,000 barrels per day in Mackay River in 2014 under this program.
On April 29, 2013 Suncor Energy Inc. (USA) (NYSE:SU) announced a 54% hike in its quarterly dividend, the highest dividend increase in the company’s history. The quarterly dividend has increased to $0.20 per share from $0.13 per share. Annual dividend of $0.80 per share indicates dividend a yield of 2.5%, which is in the range of the average 2.8% yield of peer groups in Canada. Its target is to distribute 20%-30% of earnings in the form of dividends. Suncor Energy Inc. (USA) (NYSE:SU) estimates its free cash flow yield will rise to 5.7% in 2014 from 2.9% in 2013. It will further increase dividend next year with a rise in cash flow.
Growth from global expansion and new launch
Amazon.com, Inc. (NASDAQ:AMZN), the e-commerce and cloud company, has expanded its Appstore for Android in 200 countries. Its Appstore for Android is now available internationally in countries like Brazil, Canada, Mexico, India, and South Africa. This expansion gives millions of customers access to direct purchases of apps and games from the Amazon.com, Inc. (NASDAQ:AMZN) Appstore on Android phones. Developers are currently getting strong monetization through the Amazon.com, Inc. (NASDAQ:AMZN) Appstore due to the company’s large customer base and leading e-commerce features like one-click purchasing. The Appstore for Andriod expansion will also allow new developers to distribute their apps and games. With this expansion, Amazon.com, Inc. (NASDAQ:AMZN)’s revenue will rise to $11.73 billion this year and $12.43 billion next year, up from $10.91 billion in last year.
The company is enhancing its footprint in emerging markets with a focus on China. On June 7, 2013 it launched Kindle e-readers and tablets in China. The Kindle Fire HD tablet and Kindle Paperwhite e-reader will be sold through its Chinese website at a reasonable price compared with competition from Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (KRX:005930).
The price of the Kindle Fire HD for the 16 GB model starts from $242, and the Kindle Paperwhite is priced at $137. The competitive prices and size of its product provides opportunity to attract growing Chinese middle class customers. The tablet market in China is estimated to reach 22.6 million units this year and 34 million units next year, up from 12 million units in 2012. China ranks second in the global e-reader industry. Amazon.com, Inc. (NASDAQ:AMZN)’s launch in China opens a big market for its products
Increased EUR and acquisition in Marcellus
EQT Corporation (NYSE:EQT), a natural gas producer, has raised estimates for its Estimated Ultimate Recovery (EUR), in Southwestern Pennsylvania, Northern West Virginia, and the Central Pennsylvania region. EUR is an approximation of the quantity of gas that is potentially recoverable from reserves or wells. EQT Corporation (NYSE:EQT) increased its EUR in these regions by reducing cluster spacing in wells. The company has reduced cluster spacing to around 800 feet from 1000 feet in Southern Pennsylvania and Northern West Virginia; EUR per well now is 9.8 billion cubic feet equivalent, or Bcfe, of natural gas in these regions, with estimated drilling locations of 1080 wells and 1065 wells respectively. In Central Pennsylvania, EUR is estimated at 6.6 Bcfe with 727 drilling locations. With this reduced cluster spacing, the company’s natural gas production will rise to 329.9 billion cubic feet, or Bcf, this year and 430.3 Bcf next year compared to 243.9 Bcf last year.
On May 3, 2013, EQT Corporation (NYSE:EQT) announced the acquisition of 99,000 net acres of leases in Southwestern Pennsylvania and 10 Marcellus wells from Chesapeake Energy Corporation (NYSE:CHK) for $113 million. With this acquisition, EQT Corporation (NYSE:EQT)’s total area in the Marcellus expands to an acreage of 560,000. EQT Corporation (NYSE:EQT) will develop 25,000 acres out of its total acquisition in Marcellus by using multi-pad drilling. Currently, three Marcellus wells are in the production stage, which represents 54 Bcfe of developed reserve. The remaining seven wells will start production by the end of this year, and will add approximately 1 Bcfe of sales volume. This acquisition will reflect in increased production in the next year.
Conclusion
Suncor Energy is focusing on improving the productivity of its oil sands, while competitive dividend yield provides signs of future growth.
Amazon Appstore’s global expansion, along with the launch of its e-reader and tablet in China will drive revenue increases.
EQT’s strategy of reducing cluster spacing and its acquisition of acreage in Marcellus provides prospects for future growth.
These three stocks are a “buy.”
The article Why SAC Capital Is Bullish on These Stocks originally appeared on Fool.com and is written by Shweta Dubey.
Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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