Billionaire Steve Cohen and Insiders Are Betting On These Stocks

Steve Cohen runs his family office Point72 Asset Management since being forced to close his hedge fund after falling foul with the SEC. The billionaire’s insider trading related troubles didn’t stop him from becoming the third highest earning hedge fund manager in 2016 according to Forbes. His hedge fund and family office has generated one of the strongest returns since its inception in early 90s and this isn’t all due to illegally obtained insider tips. Point72 Asset Management has its largest allocation towards the consumer discretionary sector, closely followed by energy and healthcare industries. The fund had a value of more than $14 billion in terms of its 13F positions. Alphabet Inc (NASDAQ:GOOGL) and Facebook Inc. (NASDAQ:FB) were the top buys of the fund during the third quarter. We take a look at some of fund’s top holdings which have also seen big insider purchases. Tracking the purchases made by insiders of a company can help in taking more intelligent actions as they have the best information about their company’s progress.

To be clear, the stocks we will be discussing in this article have seen legal insider purchases disclosed through the SEC’s website over the last 6 months or so.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Point72 Asset Management bought 244,786 of Zoetis Inc (NYSE:ZTS) shares during the third quarter. The fund holds shares worth $241 million at the end of September. Michael Mccallister, director at Zoetis Inc (NYSE:ZTS) bought 2000 shares at $51.34 each in September. The stock has returned more than 4% over the last one year and is trading 7% above its 52 week average price. Zoetis Inc (NYSE:ZTS) has an average analyst rating of overweight. This animal medicine and vaccine company posted a healthy operating margin of 26.75% for its quarter ending October results. The EPS saw sharp growth to $0.48 per share as compared to $0.38 per share posted in the year ago quarter. The number of other hedge funds tracked by us having a position in Zoetis Inc (NYSE:ZTS) declined slightly to 44 in the third quarter from 46 in the quarter earlier. The corresponding value of their holdings also came down by 25% to $2.24 billion during the July-September period.

Dollar Tree, Inc. (NASDAQ:DLTR) formed 1.23% of Point72 Asset Management as of September 30^th. The fund increased its stake in the stock by buying more than 1 million shares during the third quarter. In the last three months, the company’s directors purchased 8,030 shares of this discount variety store operator. Mr. Hall and Mr. Lewis now hold 55,000 and 11,029 shares respectively after their recent purchases. For its quarter ending October, the company posted an earning per share of $0.72 which more than doubled from $0.35 EPS reported in the year ago quarter.  The stock has an average recommendation of overweight and has rallied by more than 14% over the last one month. The number of funds in our system owning Dollar Tree, Inc. (NASDAQ:DLTR) inched down by 1 during the third quarter while the value of their holdings declined by 19.4% quarter over quarter.

Advance Auto Parts, Inc. (NYSE:AAP) ranks 12^th in Point72 asset Management’s 13F portfolio. The fund bought an additional 417,360 shares during the quarter ending September. Advance Auto Parts, Inc. (NYSE:AAP) now constitutes 1.16% of the fund’s total portfolio up from 0.75% in the earlier period. Steve Cohen’s bullish sentiment was mirrored by a director of the company who also bought 22,205 shares in the month of September. Mr.Smith now holds an aggregate of 67,259 shares of Advance Auto Parts, Inc. (NYSE:AAP). The stock has returned 146% over the last five years, when the broader S&P was up 89%. This automotive parts company reported a net profit margin of 5% for its quarter ending October. Sales reached $2.25 billion down from $2.30 billion a year ago. The other hedge funds from our system which were bullish on the stock grew to 62 marking an increase of 11 quarter over quarter. These funds amassed almost 20% of the company’s outstanding common stock.

2.6 million shares of Newell Brands Inc. (NYSE:NWL) worth $137 million were held by Point72 Asset Management as per their last round of 13F filing. The stock constituted 0.97% of Steve Cohen’s fund. Newell Brands Inc (NYSE:NWL) has been witnessing frequent insider purchases made by its officers over the last six months. CEO Michael Polk bought 11,500 shares of this stock in the last two months while President Mark Tarchetti acquired more than 12,000 shares in October. Newell Brands Inc (NYSE:NWL) reported $3.9 billion as third quarter revenues when compared to $3.85 billion in the quarter earlier. Its net income also jumped by $51 million to reach $186 million during the July-September period. The stock has a mean recommendation of buy and has returned almost 3.6% year to date. The number of asset managers tracked by insider Monkey who have invested in this stock declined to 39 during the quarter ending September as compared to 51 at the end of the June quarter.

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