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.
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