Hedge fund managers are known to risk some of their own cash alongside investor's money to show they have “skin in the game.”
But big-name investors running what are known as family offices, or firms that manage investments for a particular family, take that idea to a whole new level.
Billionaire Steve Cohen is a newly-added member to the family office crowd, joining the likes of fellow billionaires George Soros and Carl Icahn.
Best known for his long-tenured hedge fund SAC Capital Advisors, Cohen has been running rings around the market for decades. SAC Capital has averaged 30% annual returns for 18 years, according to Bloomberg.com.
Cohen's new gig, Point72, groups and invests more than $9 billion of his own assets together with assets from a handful of former SAC employees. And in the first half of 2014, the fund has already profited nearly $1 billion, according to The New York Times.
Although Point72 is a private firm, it is subject to certain SEC guidelines. One of the most insightful rules requires Cohen to report when the Point72 owns more than 5% of a publicly traded company.
Take a look at some of Cohen's largest August investments.
Insmed, Inc. (NASD: INSM)
This stock stands out as a high-conviction pick. Why? Cohen has had to submit two SEC filings in the past few weeks for his continued buying. His stake amounted to 5.21% at the end of July, but a more recent filing on August 11 showed that he’s bumped his ownership up to 5.4%.
Over the trailing month, this biopharma stock has tumbled by more than 31%. The stock slid dramatically after announcing that its flagship drug, Arikayce, will require two additional unexpected Phase 3 studies to gain approval from the FDA. Point72’s second purchase on August 11th was most likely an averaging down tactic to lessen the blow of the falling stock price.
C&J Energy Services, Inc. (NYSE:CJES)
On August 6th, Point72 disclosed a 5.4% stake in CJES, a major player in the controversial hydraulic fracturing space. The company made waves at the end of June by agreeing to merge with Nabors Industries (NYSE:NBR) in a deal valued at nearly $3 billion.
The stock recently fell by 10% following its latest earnings announcement. However, CJES expects the merger to positively impact earnings during its first year of operations.
Kraton Performance Polymers (NYSE:KRA)
KRA can now count Cohen as a significant shareholder after purchasing a 5.1% stake in the company.
The producer of engineer polymers hasn’t found the same type of support from sell-side analysts, however. It has received two downgrades so far this summer from UBS and Credit Suisse. That said, a consensus of analyst price targets comes in at $24.71 – that’s over 22% of upside from where the stock stands currently.
Kindred Healthcare (NYSE:KND)
Kindred is Cohen's only new purchase that carries a dividend yield, coming in at 2.1%. The operator of hospitals and nursing centers has taken a hefty spill in August after issuing lower guidance numbers.
Considering Cohen reported the purchase of KND shares on August 13, it appears that the manager thinks a rebound is ahead. Point72 increased its stake in the company to 5.1% following a 20% drop in stock price.
Risks to consider: Cohen’s methodologies have come under fire in the past, resulting in SAC Capital Advisor’s entering a guilty plea to insider trading and paying a $1.8 billion settlement. Although Cohen was never charged with any wrongdoing and aims to distance himself from the conviction, it is important to be cognizant of SAC's past.
Action to take --> While the closing of SAC Capital Advisors was the end of an era, a new one took its place. With more than two decades experience generating massive returns, Steve Cohen is still a force to be reckoned with among fund managers. Glimpsing into his personal portfolio through SEC filings seems to be the clearest look we’ll have into his office’s inner workings.
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