According to a new filing with the SEC, Steve Cohen‘s Point72 Asset Management has acquired some 13.74 million shares of Sunedison Inc (NYSE:SUNE), to take the firm’s total stake to 15.95 million shares, which represent 5.1% of the company’s outstanding stock.
Steve Cohen re-branded his former hedge fund, SAC Capital, into a family office for himself and his employees after SAC ran into trouble involving insider trading, which were later settled. At the end of June the market value of Point 72’s equity portfolio stood at $14.44 billion, down from $14.67 billion at the end of March. The consumer discretionary and energy sectors amassed the largest parts of the portfolio, of 22% and 21% respectively.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activity. They ignore hedge funds because of their recent poor performance in the bull market. However, our research indicates that hedge funds underperformed the benchmark because they aren’t 100% long. We uncovered that hedge funds’ long positions actually outperformed the market. Moreover, their 15 most popular small-cap ideas beat the S&P 500 Index by more than 80 percentage points since the end of August 2012. These stocks returned a cumulative of 123% vs. a 58% gain for the S&P 500 ETF (SPY) (read more details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
Point72 initiated a stake in Sunedison Inc (NYSE:SUNE) during the third quarter last year, when it held 20,000 shares and the latest move has been the largest increase so far. Sunedison Inc (NYSE:SUNE)’s stock has cratered by more than 46% mainly falling since the beginning of August on the back of financial results that disappointed investors. Solar stocks have generally received a harsh treatment lately owing to two main reasons. Firstly, it’s the slumping oil price, which although has little to do with these companies, but investors believe this will lead to a dampening demand for clean energy products. Secondly, the impending interest rate hike means that investors would demand more return from the debt ridden companies like Sunedison Inc (NYSE:SUNE) (debt-to-equity ratio stands tall at 16.97), because that is how the company have been financing its projects. This would not only lead to a slump in profits, but it could also get more difficult to attract funds for these projects.