A Look At Billionaire Steve Cohen’s Top New Bets

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).

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.

Steven Cohen and his team purchased a 5.71 million-share stake in Corning Incorporated (NYSE:GLW) in the October-December period, worth $104.29 million. The high-tech glass maker has seen its stock decline by 26% over the past 52 weeks, mainly due to sustained weakness in the television and consumer electronic device retail markets. The company’s net sales for 2015 totaled $9.11 billion, down by 6% year-on-year. Corning Incorporated (NYSE:GLW)’s anticipates LCD glass prices to decline moderately in 2016 and glass volume to grow by mid-single digits. The company is known for its scratch-resistant glass used in smartphones, but the majority of its revenue is derived from the sale of glass used in LCDs. Corning pays out a quarterly dividend of $0.135 per share and expects to increase its dividend payments by at least 10% annually through 2019. The stock trades at a forward P/E of 11.16, below the average of 15.75 for the S&P 500. A total of 38 hedge funds from our database were invested in the company at the end 2015. David Harding’s Winton Capital Management owns 9.18 million shares of Corning Incorporated (NYSE:GLW) as of the end of December 2015.

Billionaire Steven Cohen added a 2.98 million-share position in CSRA Inc. (NYSE:CSRA) valued at $89.46 million to his portfolio during the December quarter. At the end of November 2015, CSRA spun off from Computer Sciences Corp. (NYSE:CSC) and emerged as an independent public company that provides IT solutions to U.S. government customers. Simultaneously, CSRA completed the merger with Fairfax-based government IT contractor SRA International. Under the terms of the merger, former SRA shareholders were paid $390 million in cash and received roughly 25 million CSRA shares. CSRA Inc. (NYSE:CSRA)’s stock is down by 14% year-to-date, but analysts have high expectations about the company’s future stock performance. Just recently, Stifel initiated coverage on CSRA with a ‘Buy’ rating and a $41 price target, citing the company’s strong position in the Government Services industry. There were 31 smart money investors from our database with positions in CSRA at the end of December, amassing nearly 14% of its outstanding stock. Paul Tudor Jones’ Tudor Investment owns 1.54 million shares of CSRA Inc. (NYSE:CSRA) as of the end of 2015.

Mr. Cohen’s fund initiated a new position of 4.26 million shares in Applied Materials Inc. (NASDAQ:AMAT), worth $79.58 million. The provider of manufacturing equipment, services, and software to the semiconductor, display and solar photovoltaic (PV) industries has seen its shares slid by 24% over the past 12 months. The company’s new orders for fiscal 2015 increased by 5% year-on-year due to higher demand for semiconductor equipment, semiconductor spares and services, which was somewhat offset by weaker demand for display and solar equipment. Earlier this month, the California-based company reported its financial results for the first quarter of fiscal 2016 ended January 31, which were very well received by the market. More importantly, Applied Materials Inc. (NASDAQ:AMAT)’s management said it anticipates sequential net sales growth in the range of 5%-10% for its second fiscal quarter. The shares of Applied Materials are trading at around 11.5 times forward fiscal 2017 earnings, below the multiple of 12.6 for the Semiconductor Equipment industry. The number of hedge funds among those we track with stakes in the company dropped to 41 from 54 during the fourth quarter. Larry Robbins’ Glenview Capital disclosed owning 8.24 million shares of Applied Materials Inc. (NASDAQ:AMAT) in its latest 13F filing.

Point72 Asset Management also acquired a new stake of 1.99 million shares in PBF Energy Inc. (NYSE:PBF), which was valued at $73.08 million at the end of 2015. The shares of the petroleum refiner are down 19% year-to-date, presumably because of fast-mounting gasoline supplies in the United States. A recent article posted by Bloomberg said that refiners’ profit per barrel from refining West Texas Intermediate crude into gasoline and diesel dropped to as low as $2.14 in the Mid-Continent. However, the Dated Brent (NYH) 2-1-1 industry crack, which is a benchmark for industry refining margin, was approximately $16.35 per barrel for 2015, higher than the $12.92 per barrel in 2014. PBF Energy Inc. (NYSE:PBF)’s gross refining margin totaled $2.82 per barrel of throughput in the fourth quarter of 2015. PBF Energy has three refineries, which are located in Ohio, Delaware and New Jersey.  The company’s operating income, excluding special items, for 2015 totaled $787.3 million, down from $837.8 million for 2014. Among the funds we track, 25 investors had stakes in the company at the end of December and accumulated nearly 30% of its outstanding shares. Seth Klarman’s Baupost Group owned 11.03 million shares of PBF Energy Inc. (NYSE:PBF) at the end of last year.

Disclosure: None