Billionaire Steven Cohen is one of the most successful hedge fund managers in history, who was making money when other hedge fund vehicles were losing billions of dollars. Steven Cohen, who currently manages family office Point72 Asset Management, has had two consecutive years of strong gains since his SAC Capital Advisors was shut down due to insider trading allegations in 2013. Earlier this year, the successful money manager reached a settlement with regulators, which will allow him to manage outside capital within two years. Leaving the insider trading issue aside, Steven Cohen is extremely good at making money in equity markets, with his family office generating a return of 15.5% in 2015. His former hedge fund SAC Capital posted gains of 20.1% in 2013, as compared to the 6.5% returned by the hedge fund industry, which suggests that the money manager can generate strong profits under most circumstances. However, our calculations show that Steven Cohen’s 562 long positions in companies with a market capitalization above $1 billion generated a negative weighted average return of 5.8% in 2015, based on the size of each position at the beginning of each quarter. It is important to note that our calculations may differ significantly from Mr. Cohen’s actual returns, as they involve only a part of his investments. That being said, the following article will discuss five new positions initiated by Point72 during the final quarter of 2015.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient (see more details here).
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Point72 Asset Management acquired a new stake of 1.45 million shares in Advance Auto Parts Inc. (NYSE:AAP) during the fourth quarter, which was valued at $218.95 million on December 31. The shares of the automotive aftermarket parts provider have lost 3% over the past 12 months, but are flat year-to-date. In September 2015, activist investor Jeffrey Smith’s Starboard Value LP disclosed a 3.7% stake in the company and urged the management to take steps aimed at creating shareholder value. Most importantly, the activist asserted that the automotive parts retailer “substantially underperformed peers on almost any measure, including operating margins, revenue growth, and total shareholder return”. Advance Auto Parts Inc. (NYSE:AAP) sealed an agreement with Starboard in November, under which Jeffrey Smith was appointed to the company’s Board of Directors. Meanwhile, AAP’s stock is currently trading around 15 times expected fiscal 2017 earnings, significantly above the forward P/E multiple of 9.8 for the Auto Parts and Equipment industry. The number of hedge funds tracked by Insider Monkey with stakes in the company climbed to 56 from 44 during the December quarter. Starboard Value LP reported owning 1.71 million shares of Advance Auto Parts Inc. (NYSE:AAP) in its 13F for the fourth quarter.