Billionaire Steve Cohen Is Bullish On These Dividend Stocks

In a career spanning over three and a half decades,  billionaire Steve Cohen has made a name for himself as being one of the best traders in the world. His erstwhile hedge fund, SAC Capital – before it shut down in 2013 – was considered one of the most revered names on the Street. Although Mr. Cohen doesn’t manage outside capital anymore, his family office Point72 Asset Management still sports a considerable amount of money. According to Point72’s latest 13F filing, its US equity portfolio at the end of September 2015 was worth nearly $12.74 billion, 11.7% lower than what it was worth at the end of June, 2015.

The filing also revealed that the family office had a high quarter-over-quarter turnover of 74.83% during the third quarter and that its top 10 equity holdings at the end of September accounted for 13.70% of the value of its portfolio. Given Mr. Cohen’s reputation as a maverick equity trader, it is hard for many people to associate the term dividend or fixed income with him. However, there are several dividend stocks that Mr. Cohen has placed his bets on in the past and still continues to do that. With this in mind, we have selected several stocks from Point72’s latest 13F filing that sport a considerable dividend yield.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 49% gain) over the last 39 months (see the details here).

#5 Coach Inc (NYSE:COH)

– Shares Owned by Point72 Asset Management (as of September 30): 3.02 Million

– Value of Holding (as of September 30): $87.5 Million

Point72 Asset Management not only increased its stake in luxury retailer Coach Inc (NYSE:COH) by 16% during the third quarter, but also purchased 100,000 Call options on the stock during the same period. Mr. Cohen was not the only billionaire who was bullish on the company during the third quarter as the ownership of Coach Inc (NYSE:COH) among the billionaire investors covered by Insider Monkey saw a 100% quarter-over-quarter rise to eight at the end of September. While billionaires were lapping up shares of the company, several hedge funds were fleeing the stock. The number of hedge funds covered by Insider Monkey that held a stake in Coach Inc declined by eight during the third quarter to 27. Shares of Coach Inc  have been on a gradual decline since 2012, which has helped in pushing its annual dividend yield to over 4% currently. Despite the decline in its stock price, Coach Inc currently trades at a forward price to earnings multiple of 15.70, which is considerably higher than its peers. Recently  analysts at BB&T Corp. have upgraded the stock to ‘Hold’ from ‘Underweight’. Billionaire Jim Simons‘ Renaissance Technologies initiated a stake in Coach Inc during the third quarter by purchasing slightly above 1.0 million shares of the company.

#4 Microsoft Corporation (NASDAQ:MSFT)

– Shares Owned by Point72 Asset Management (as of September 30): 2.114 Million

– Value of Holding (as of September 30): $93.57 Million

Shares of Microsoft Corporation (NASDAQ:MSFT) had a spectacular 27% rise during the last quarter of 2015. It seems Point72 Asset Management had already anticipated this move and that’s why increased its stake in the company by 2.1 million shares during the third quarter. Even after such a decent rise, Microsoft Corporation (NASDAQ:MSFT)’s stock currently sports a healthy annual dividend yield of 2.63%. Barry Rosenstein’s JANA Partners – which initiated a large stake of 7.7 million shares in the company during the third quarter – believes that Microsoft will continue to increase its dividends and reward its shareholders going forward.

In its third-quarter letter to investors, JANA mentioned, that they “expect dividends to continue to increase and for about $4 billion of cash to be directed toward share repurchases on a quarterly basis.” JANA also believes that the transformation from software licensing to Cloud that Microsoft is currently undergoing is “advantageous for customers and for owners.”

FBR Capital analyst Daniel Ives seems to agree with JANA on this, as in a recently released note to investors he reiterated his ‘Buy’ rating on the stock and mentioned that cloud would be a major growth driver for the company in the future, calling it ‘Rock of Gibraltar’ for Microsoft Corporation. On January 4, the company announced that its recently launched Windows 10 OS is now running on 200 million devices around the world. Microsoft Corporation was one of the most popular stocks among hedge funds covered by Insider Monkey at the end of the third quarter with 113 fund, out of the 730 that we cover, reporting a stake. However, with ownership of over 75 million shares, Jeffrey Ubben’s ValueAct Capital continued to remain its largest shareholder among funds in our database.

#3 Occidental Petroleum Corporation (NYSE:OXY)

– Shares Owned by Point72 Asset Management (as of September 30): 1.8 Million

– Value of Holding (as of September 30): $120 Million

The 14% drop that shares of Occidental Petroleum Corporation (NYSE:OXY) suffered during the third quarter seems to have shaken the faith of Point72 Asset Management in the company as the firm reduced its stake by 33% during the third quarter. Moreover, Point72 Asset Management also sold off the 891,900 Call options that it held of Occidental Petroleum Corporation (NYSE:OXY) during the same period. The fall in crude oil prices took a heavy toll on Occidental Petroleum Corporation’s stock in December. Though this decline would have caused pain to investors, but it has also helped increase the company’s annual dividend yield to 4.56%.

On December 16, Moody’s announced that it has placed Occidental Petroleum Corporation along with 28 other US exploration and production (E&P) companies on review for a potential downgrade. Most of the analysts that cover the stock currently have a ‘Hold’ rating and an average price target of $79.92, which represents a potential upside of 17.9% from the stock’s current trading price.

For the fourth quarter of fiscal 2015 analysts expect the company to report a loss of $0.01 per share on revenue of $3.25 billion, compared to the EPS of $0.72 on revenue of $4.31 billion it had reported for the same quarter last year. Although the popularity of the company among hedge funds covered by us declined by two to 44 during the third quarter, there were also a  few funds that became bullish on the company during the same period. Dmitry Balyasny‘s Balyasny Asset Management initiated a stake in Occidental Petroleum Corporation (NYSE:OXY) during the third quarter by purchasing over 1.26 million shares of the company.

#2 Eli Lilly and Co (NYSE:LLY)

– Shares Owned by Point72 Asset Management (as of September 30): 1.47 Million

– Value of Holding (as of September 30): $123 Million

Even though shares of pharma giant Eli Lilly and Co (NYSE:LLY) appreciated by 20% during 2015, the company still boasts a respectable annual dividend yield of nearly 2.50%. This could be among the reasons why in spite of Eli Lilly and Co (NYSE:LLY)’s stock remaining flat during the third quarter, four more funds covered by Insider Monkey reported owning a stake in the company as of the end of September and the aggregate value of their holdings in the company also saw a massive jump of 73.48% over the quarter. However, the rise has also made the company’s stock rather expensive, at a forward price-to-earnings multiple of 23.12.

Eli Lilly and Co is expected to declare its fourth-quarter results at the end of this month and analysts forecast EPS of $0.78 on revenue of $5.32 billion, higher than the EPS of $0.75 on revenue of $5.12 billion it had reported for the same quarter last year. On January 5, the company announced that its new Jardiance diabetes treatment has started to steal market share from competitors after clinical trials data emerged showing that it reduced deaths in patients with Type 2 diabetes by 32%. On the same day, analysts at BMO Capital Markets reiterated their ‘Outperform’ rating and $100 price target on the stock, which represents a potential upside of 19% from the stock’s current trading price.

While Point72 Asset Management and Samuel Isaly’s Orbimed Advisors  initiated stakes in the company during the third quarter, billionaire David E. Shaw‘s firm D.E. Shaw made an over fourfold increase to its stake in Eli Lilly and Co to 1.8 million shares during the same period.

#1 Delek US Holdings, Inc. (NYSE:DK)

– Shares Owned by Point72 Asset Management (as of September 30): 4.8 Million

– Value of Holding (as of September 30): $133.3 Million

After breaking the $40 mark for the first time in 2013, the stock of Delek US Holdings, Inc. (NYSE:DK) again tried to surpass it in April and July last year, but failed and since then has receded by over 40%. During the third quarter, when the stock fell by 24.4%, Point72 Asset Management increased its stake in the company by 37%. Moreover, the ownership of the company among the funds covered by Insider Monkey also increased by six during the same period.

According to Delek US Holdings, Inc. (NYSE:DK) latest quarterly report, its total liabilities at the end of third quarter stood at $2.01 billion, which, although, were lower than the $2.13 billion it had reported at the end of the second quarter, were still large compared to its size.

On December 23, the company submitted an amended 13D filing with the SEC revealing that it now owns almost 33.7 million or 47.5% of all outstanding shares of energy company Alon USA Energy, Inc. (NYSE:ALJ). Prior to that, on December 16, analysts at Raymond James had upgraded Delek US Holdings’ stock to ‘Outperform’ from ‘Market Perform’, while keeping their price target on it constant at $30. On January 5 analysts at Bank of America also upgraded the stock to ‘Buy’ from ‘Neutral’, while keeping their price target on it constant at $30.

The 2.60% annual dividend yield that the stock provides has made it appealing to a lot of institutional investors, including George Soros’ Soros Fund Management, which raised its stake in Delek US Holdings by 41% during the third quarter, taking its total holding to 957,053 shares at the end of September.

Disclosure: None