Billionaire Steve Cohen added a number of stocks to his portfolio last quarter. He manages some $14 billion via his SAC Capital hedge fund, with over half of that being his own personal wealth. Outlined below are Cohen and SAC Capital’s five largest new additions to their portfolio last quarter.
The best part about these five stocks is that they all are all less-covered and less well-known than some of the other mega-cap investments many large hedge funds buy, which means there is a bigger chance of mis-pricing. Let’s take a look at Cohen’s largest new additions to his portfolio last quarter (see Cohen’s tops picks).
Cohen likes autos and communications
Cohen’s largest new addition was O’Reilly Automotive Inc (NASDAQ:ORLY), which is the third largest specialty retailer of aftermarket auto parts. The real tailwind for the company is the fact that the average age of vehicles on the roads is near all-time highs at around 11 years. The company also has a healthy blend of Do-It-Yourself and Do-it-for-Me customers, with a near 50/50 split between the two.
Big plans for O’Reilly include store expansion, helping the company enter new markets. It opened 185 stores in 2012 and expects to open another 190 in 2013. For the full year 2013, the company anticipates higher earnings per share in the range of $5.57 to $5.67, versus the $4.75 in 2012, and expects to generate free cash flow between $450 million and $500 million for the year. (check out why O’Reilly’s a buy).
Alcatel Lucent SA (ADR) (NYSE:ALU) is a Paris-based telecom equipment company which supplies digital subscriber line (DSL) equipment. The company is a leader in telephone switching equipment, mobile infrastructure, and communications software. Growth in mobile broadband data traffic should help drive its growth via increased spending on capacity and upgrades.
Alcatel Lucent SA (ADR) (NYSE:ALU) is also relatively diversified across geographical segments, with around 35% of revenue from the U.S., 30% from Europe, and 17% from Asia & Pacific, then another 17% from the rest of the world. As far as valuation is concerned, the stock is cheap on a price to sales basis. Alcatel Lucent SA (ADR) (NYSE:ALU) trades at 0.2 times sales, versus major peers Cisco Systems, Inc. (NASDAQ:CSCO) (2.4 times), Ciena (0.9 times) and Juniper Networks, Inc. (NYSE:JNPR) (2.7 times). However, investors should use caution and note the stock’s volatility when investing, as it has a beta of 2.3 (see if Alcatel can reach $2).
Cohen’s new tech bet
Analog Devices, Inc. (NASDAQ:ADI) is a leading supplier of analog and DSP integrated circuits. A little known secret is that Analog Devices, Inc. (NASDAQ:ADI) is the second largest producer of analog chips after Texas Instruments Incorporated (NASDAQ:TXN).
The company continues to generate a large portion of revenue from industrials and auto markets, which should lead to impressive growth on the back of strong economic growth.
Analog Devices, Inc. (NASDAQ:ADI) has a relatively diverse geographic mix, with around 33% from America and Europe each. The three segments, China, Japan, and Asia (excluding China and Japan), make up just over 10% each. The company has a strong balance sheet, with $3.9 billion in cash and only $760 million in debt.
Video games and discount retail for Cohen
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) was another big addition to Cohen’s portfolio (see other hedge funds buying Take-Two). Consensus forecasts show that the video game company has positive growth prospects, with fiscal year 2014 (ending March) revenue expected to be up 48%, after an expected 45% growth for 2013.