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Billionaire Steve Cohen’s Point72 Asia (Singapore)’s 13F Posts Strong Returns Betting on Commodities

Apart from his family office Point72 Asset Management, billionaire trader Steve Cohen also manages his personal fortune through Asia-focused subsidiaries, Point72 Asia (Singapore)  and Point72 Asia (Hong Kong). These subsidiaries were recently in news after several employees left the firm and they had to hire and promote analysts to replenish their talent pool. Though Point72 Asia (Singapore) and Point72 Asia (Hong Kong) Ltd primarily invest in Asian equities, they also manage sizeable US equity portfolios. At the beginning of this year Point72 Asia (Singapore) submitted its first 13F filing with the Securities and Exchange Commission (SEC), revealing a US equity portfolio worth almost $271 million at the end of December. Our analysis of Point72 Asia (Singapore)’s 13F showed that the fund’s nine holdings in companies with a market cap at least $1 billion posted weighted average return of 11% in the first quarter. Since Point72 Asia (Singapore) managed to perform so well despite the extreme volatility in the market and at a time when the broader market generated no returns, in this post, we are going to take a look at the fund’s top five US holdings from its last 13F filing and analyze how they performed during the first quarter.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Steve Cohen
Steve Cohen
Point72 Asia (Singapore)

#5 Alcoa Inc (NYSE:AA)

– Shares Owned by Point72 Asia (Singapore) (as of December 31): 2.63 million

– Value of Holding (as of December 31): $26 million

Let’s start with Alcoa Inc (NYSE:AA), which lost more than one-third of its market capitalization last year. Apart from Point72 Asia (Singapore), billionaire Paul Singer‘s Elliott Management also initiated a stake in the company during the fourth quarter by purchasing 67.1 million shares and ranked as the largest shareholder of the company at the end of December among funds in our database. Shares of Alcoa Inc (NYSE:AA) started 2016 on a terrible note by falling over 30%  at the beginning of the year. However, a rally in aluminum prices helped them to narrow down their losses and end the first quarter down by only 2.5%. The company is currently in the process of splitting its valued-added business into a separate publicly traded company ‘Arconic’and expects this spin-off to get completed in the second-half of this year. In the last few months the company has been focusing on strengthening its balance sheet by selling non-core assets, which has been appreciated by analysts. On April 6, analysts at Macquarie reiterated their ‘Outperform’ rating on the stock, and raised their price target to $12 from $11.

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#4 Ashland Inc (NYSE:ASH)

– Shares Owned by Point72 Asia (Singapore) (as of December 31): 350,000

– Value of Holding (as of December 31): $36 million

Ashland Inc (NYSE:ASH) is another company in this list, which is in the process of splitting its business. In September last year, the company announced a tax-free spin-off of its lubricant business Valvoline, which it expects to get completed by early-2017. Owing largely to the 15% rally they saw in March, shares of Ashland Inc (NYSE:ASH) managed to end the first quarter up by 7.5% However, investors expect the stock to move higher from here as the date for Valvoline spin-off approaches. The reason for their bullishness is the sum-of-parts valuation of Ashland Inc done by several analysts in the last few months, which shows that Ashland and Valvoline together are worth $140-$160 per share, which represents a potential upside of 27% – 45% from the stock’s current trading price. On March 24, analysts at Credit Suisse initiated coverage on the stock with an ‘Outperform’ rating and $118 price target. With ownership of over 1.5 million shares of the company, Leon Copperman‘s Omega Advisors was the largest shareholder of Ashland at the end of December among the funds tracked by us.

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#3 Nucor Corporation (NYSE:NUE)

– Shares Owned by Point72 Asia (Singapore) (as of December 31): 1 million

– Value of Holding (as of December 31): $40.3 million

Nucor Corporation (NYSE:NUE), another metal company, has also seen its stock soaring this year. However, the reason Nucor Corporation (NYSE:NUE)’s stock ended the first quarter with gains over 18% is actually twofold. Apart from the rally in steel prices, a lot of appreciation that the stock has seen has come from US government decision, on March 1, to impose anti-dumping duties on steel imports from foreign countries. On March 23, two of the leading commodity analysts on Wall Street provided their outlook for steel prices and their views on Nucor’s stock, which were in stark contrast to each other. In his note, Credit Suisse analyst Curt Woodworth stated that steel prices will continue to rise through the end of the second quarter due to growing demand and upped his price target on Nucor’s stock to $45 from $42 while keeping his rating on it unchanged at ‘Neutral’. However, Deutsche Bank analyst Jorge Berstain, who thinks that the rally commodities have seen so far this year will not last, downgraded the stock to ‘Hold’ from ‘Buy’. Brazilian billionaire Jorge Paulo Lemann‘s 3G Capital initiated a stake in Nucor Corporation (NYSE:NUE) during the fourth quarter by purchasing 800,000 shares of the company.

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#2 Albemarle Corporation (NYSE:ALB)

– Shares Owned by Point72 Asia (Singapore) (as of December 31): 750,000

– Value of Holding (as of December 31): $42 million

Moving on, shares of lithium producer Albemarle Corporation (NYSE:ALB) have been on a consistent rally since mid-February. After ending the first quarter with gains of 14.7%, they have climbed by over 3.5% so far this month, bringing their year-to-date return to almost 18%. On February 1, the stock registered a boost after authorities in Chile announced a 27-year agreement with the company that will allow it to triple its lithium production in the country. Analysts believe that the company is undervalued and its stock will appreciate significantly in the coming quarters if it uses its free cash flow to bring down its net debt. Another reason for their bullish sentiment is the increasing demand for lithium, which is expected to increase by over 20% annually over the next few years. Some analysts also predict that Albemarle Corporation (NYSE:ALB) will be a major beneficiary of Tesla Motors Inc (NASDAQ:TSLA)’s electric car revolution because of its position as the largest supplier of lithium in the world. Anand Parekh‘s Alyeska Investment Group increased its stake in the company by 85% to 890,526 shares during the fourth quarter.

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#1 Steel Dynamics, Inc. (NASDAQ:STLD)

– Shares Owned by Point72 Asia (Singapore) (as of December 31): 2.5 million

– Value of Holding (as of December 31): $44.67 million

Point72 Asia (Singapore)’s largest equity holding at the end of 2015  also turned out to be its best performing stock pick in the first quarter, registering gains of 26.7%. Another fund that initiated a stake in Steel Dynamics, Inc. (NASDAQ:STLD) was Kurt Billick‘s Bocage Capital, which purchased 643,636 shares of the company during the October-December period. Steel Dynamics, Inc. (NASDAQ:STLD) is expected to report its fiscal 2016 first quarter earnings on April 20 and the consensus among analysts include EPS of $0.24 on revenue of 41.70 billion. For the same quarter of the previous year, the company reported EPS of $0.17 and revenue of $2.05 billion. Most analysts have a positive outlook on Steel Dynamics, Inc. (NASDAQ:STLD) because of its status as the most efficient steel producer in the US and expects the company’s earnings to rise by 80% this year and 30% in 2017. The 20 prominent analysts and brokerage houses that cover the stock currently have an average ‘Buy’ rating  and an average price target of $23.68.

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Disclosure: None