Steve Cohen’s SAC Buys 5.2% Stake in Validus Holdings $VR

Steve Cohen disclosed a 5.2% stake in Validus Holdings Ltd (VR) yesterday. The holding is composed of 5,187,689 shares (see the SEC filing here).

Cohen has been a fan of VR since the second quarter 2009, when his SAC Capital Advisors initiated a small 1,312 share position. During that quarter, VR’s average share price was $22.99. Cohen upped his stake in the company the next quarter, when the average share price was $24.01, by 11,382 shares, bringing his total staek inteh company to 12,694 share. Cohen sold out of this position in the fourth quarter 2004 when VR’s average share price was $26.22.Steven Cohen

Then, in the second quarter 2010, Cohen bought back in. He purchased 14,194 shares. The average price was $25.07 that quarter. The next quarter, when VR’s average share price was $25.37, Cohen upped his positon by 118,798 shares, bringing his total stake to 132,992 shares. In the fourth quarter 2010, the average share price for VR hit $29.02 and Cohen sold a large 121,663-share chunk of his position.

Cohen has increased his position in VR each quarter this year. he bought 38,771 shares in the first quarter, 1,090,046 shares in the second quarter and 585,879 shares in the third, capping the year off with his most recent transaction.

Cohen’s transactions with VR seem to follow a trend – buy in, increase that position by 800%-1000% and cash in. Given his sudden large stake in the company, the question begs to be asked – could Cohen be onto something?

VR opened trading today at $31.70 a share and has a one-year target estimate of $36. It also pays a $1.00 dividend (3.40% dividend yield) and is priced at 6.98 times its forward earnings. The company, which provides reinsurance and insurance coverage for property, marine and specialty lines around the world, has a superlow beta of 0.37, meaning it is much less volatile than the market. Analysts predict its earnings will grow by 9.50% per annum over the next five years, roughly on par with industry expectations of 9.83%.