Billionaire Steve Cohen, founder of SAC Capital, has been a hot topic in the news lately surrounding insider trading allegations. His hedge fund has seen redemptions that are expected to take his outside-managed capital down to $1.7 billion by year end from the $6.7 billion at the beginning of the year.
Even though the future of Cohen and SAC remains uncertain, it doesn’t mean that Cohen’s biggest stock purchases during the first quarter should be shunned. Cohen has a number of interesting stocks that he is bullish on–let’s see why (check out Cohen’s favorite small caps).
Steve Cohen upped his stake in Amazon.com, Inc. (NASDAQ:AMZN)
by 233% to make the online retailer as SAC Capital’s second-largest holding. As we all know, Amazon.com, Inc. (NASDAQ:AMZN) is one of the largest online retailers in the world. Amazon.com, Inc. (NASDAQ:AMZN) has made quite the transformation, going from a books company to one of the largest e-commerce companies in the world, and now moving into the hardware business with its Kindle and the grocery-delivery
Also, to help meet increasing demand, Amazon.com, Inc. (NASDAQ:AMZN) has upped its number of fulfillment centers. These investments are easily being supported by Amazon.com, Inc. (NASDAQ:AMZN)’s impressive balance sheet, including cash of approximately $7.9 billion. Yet I remain concerned about the e-commerce company’s poor margins and high valuation.
Amazon.com, Inc. (NASDAQ:AMZN) trades at a P/E that’s well above its peers and above the S&P 500. Even with a five-year annualized expected EPS growth rate of 37%, Amazon’s PEG ratio is upwards of 5.6. Amazon also has a P/B multiple of nearly 15 times, a 135% premium to the peer group. The valuation does appear to be rich, but Amazon still has sizable interest from hedge funds, with 58 hedge funds owning the stock going into 2013. Billionaire Ken Fisher of Fisher Asset Management had the most valuable position in Amazon, worth some $613 million, accounting for 1.7% of its total 13F portfolio (check out Fisher’s top picks).
SAC Capital’s third-largest holding is in the energy space, Suncor Energy Inc. (USA) (NYSE:SU)
, after an impressive 19,200% increase in shares owned. Chances are you’ve never heard of Suncor Energy Inc. (USA) (NYSE:SU). Although it has a $45 billion market cap, it’s an underrated energy company.
Part of this is that it’s Canada’s largest energy firm and the largest oil sands company. Suncor Energy Inc. (USA) (NYSE:SU)’s merger with Petro-Canada has also provided the company with a better balance between upstream and downstream operations. With Petro-Canada’s assets, Suncor Energy Inc. (USA) (NYSE:SU) is one of the largest owners of oil sands in the world with 23.5 billion barrels.
Part of Suncor Energy Inc. (USA) (NYSE:SU)’s advantage is its significant oil-sands platform, with long-lived oil-sands reserves. The oil company also has an asset base that includes conventional reserves at offshore Eastern Canada and the North Sea. The company plans on increasing production to more than 1 million barrels of oil-equivalent per day by 2020, where oil sands production will grow by 10% and company-wide production will grow by 8% over the next 10 years.
Suncor Energy Inc. (USA) (NYSE:SU) trades at a 19.2 times trailing P/E, which is above some of its major peers. However, on a forward P/E basis, Suncor trades at only 9.3 times, suggesting the market is underestimating the company’s interim growth capabilities.