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.
Gurus like Cohen tend to have a following because investors hope to piggyback on their investments... and for some that may be successful. StreetAuthority would like to offer an alternative: "The Hottest Investment Opportunities For 2015." This special report details 11 game-changing trends that could result in lucrative returns. For more information, click here.
ProfessionalsStock and bond markets are moving more closely in tandem with each other. Is illiquid real estate the vaccine for this correlation?
ProfessionalsA look at how to manage fixed income amid the specter of rising rates, correlation to stocks, client expectations and more.
Mutual Funds & ETFsLearn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
Mutual Funds & ETFsLearn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
EconomicsExamine the current state of the U.S. dollar as the world's reserve currency; learn the major reasons why the euro has failed to replace it in that capacity.
ProfessionalsRIAs looking to strike out on their own need to overcome and plan for a number of hurdles.
Investing BasicsAre bonds safe or risky right now? It depends on the type of bond and how you invest in them.
Investing BasicsMarkets are volatile and are in for more punishment. CDs can help investors earn some interest while they're waiting out the storm.
ProfessionalsDon’t underestimate the importance of legacy planning with your clients—it could serve as method for you to create new business with any heirs.
Investing BasicsIs there an opportunity in exotic currencies right now, or are you safer sticking to the major ones?
Whether the benefits you receive through your employer-sponsored cafeteria plan are taxable depends entirely on which benefits ... Read Full Answer >>
There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
The Central Bank of the Russian Federation (CBRF), like its peers in most countries, is the governmental entity responsible ... Read Full Answer >>
The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>