Billionaire Steve Cohen’s New Picks And Why You Can Profit From Them

It’s said that does who don’t learn from history are doomed to repeat it, and by the same token it could be said that those who want to predict the future must also learn from history. That’s exactly our mission at Insider Monkey. By studying the performance history of some of the world’s most celebrated hedge funds, we can identify which class of stocks they’ve been the most successful at investing in and which they haven’t.

Billionaire Steve Cohen of family office Point72 Asset Management is one of the most successful money managers in history, as his former hedge fund SAC Capital returned an astonishing 29% annually over a period of nearly 21 years beginning in 1992. Needless to say, it’s not hard to find a class of stocks that Cohen has beaten the market with. However, that’s not to say that Cohen’s firms haven’t been more successful investing in some stocks than in others.

While we can’t share Cohen’s best ideas (those are reserved for our subscribers), let’s look at how he fares when betting on smid-cap ($5 billion to $10 billion market cap) stocks. From 1999 through 2012, an equal-weighted portfolio of SAC’s top-five smid-cap stock picks returned an impressive 1.31% per month, beating the S&P 500 by nearly a full percentage point (0.99) each and every month during that period on average. Anyone who had been able to identify that trend could’ve beaten the market by nearly 12 percentage points (and that’s not even considering if one were reinvesting their returns) annually just by mimicking a few of the picks of a top hedge fund.

As it’s implausible or downright impossible for most investors to mimic a large hedge fund’s entire portfolio (Point72 had 792 positions in its 13F portfolio on March 31), being able to identify only a fund’s best performing picks can maximize the amount of time and money an investor spends building their portfolio, as well as maximize its returns.

Sadly, Insider Monkey had yet to be developed during the 1999-2012 period, so you probably missed out, but we’re here now and providing exactly that form of valuable identification of hedge funds’ top stock picks to our subscribers. Our flagship strategy has returned 44.2% since February 2016 vs. a 29.6% gain for the S&P 500 index ETF (SPY). Our most recent stock picks, which were disclosed to our subscribers in the middle of February, have since beat the market by 5 percentage points and we are going to disclose our new stock picks based on hedge funds’ latest moves tomorrow. Our system is easy for investors to implement, with just a small batch of trades to be executed once per quarter. We are also offering a 14-day money-back guarantee on our premium newsletters, plus you can get $90 off by using this link, so don’t miss this chance to check out our latest picks risk-free and see if Insider Monkey’s simple and effective small-cap strategy would make a good addition to your portfolio.

Now then, let’s check out the newest smid-cap additions to Steve Cohen’s 13F portfolio according to the fund’s latest filing with the SEC, released today.

Park Hotels & Resorts Inc (NYSE:PK)

Point72 took a large position in Park Hotels & Resorts Inc (NYSE:PK) during the first quarter, buying just under 4.62 million shares valued at over $118 million at the end of March. The big purchase came a quarter after Park Hotels & Resorts went public in December (it was spun-off from Hilton Worldwide Holdings Inc (NYSE:HLT), one of the 10 Largest Hotel Chains In The World in 2017) and may have been due to some weakness in the stock. While the stock’s large decline on January 17 was to be expected as the company paid out a special dividend of $2.79 per share to shareholders, shares hit a new low (at the time) at the end of February, losing nearly 10% in the span of a couple of weeks. The fact that private equity and asset management firm Blackstone had cut its ownership stake in Park Hotels & Resorts Inc (NYSE:PK) to 16.4% by mid-March from 40.2% likely added some downward pressure to shares leading up to that point.

The hotel REIT does look like an attractive investment, with a solid dividend yield of 6.77x and strong earnings growth over the last year. Its relative valuation is also discounted according to Boenning & Scattergood analyst Floris van Dijkum, who has an ‘Outperform’ rating and $30 price target on the stock.

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We’ll check out two other smid-cap additions to Point72’s portfolio on the next page.

Thor Industries, Inc. (NYSE:THO)

Point72 Asset Management added a 1.03 million-share stake in RV maker Thor Industries, Inc. (NYSE:THO) to its portfolio in Q1, with the position valued at just under $100 million. This may be another instance of Cohen and his team finding value on a dip, as shares hit their lifetime high of over $115 on March 5 before shedding 17% of their value by the end of the month. Also of note is the fact that Gabriel Plotkin, a protege of Cohen’s, took an even bigger stake in Thor shortly after that pullback, revealing a 5.5% stake in the company on March 15.

It appears there are some concerns about the growth prospects for the RV market, though SunTrust analyst Michael Swartz is not one of them, expecting the sector to experience solid 4%-8% CAGR over the coming four years. Thors’ acquisition of Jayco last year sent its annual revenue estimates hurtling past its market cap, and that spread has only widened in light of the recent pullback, now standing at nearly $2 billion. Should the sector grow at even a 4% CAGR over the next four years, it’s easy to see the bull case for Thor Industries, Inc. (NYSE:THO), which has a commanding presence in the sector.

Kansas City Southern (NYSE:KSU)

Lastly we come to Kansas City Southern (NYSE:KSU), which Point72 bought 483,600 shares of in Q1. The stock has gained 5.5% in Q2, though that period hasn’t been without its turbulence (I know, that’s an airline stock pun, but bumpy tracks just sounded forced). President Trump’s threat that he would sign an executive order (which he called “major power grabs of authority” while criticizing Barack Obama in a tweet several years ago, despite now signing them at a far faster pace than Obama did) that would remove the U.S from NAFTA sent a jolt through the sector in late-April, but it’s been smooth sailing since (I know, another incorrect pun).

However, NAFTA aside, Kansas City Southern (NYSE:KSU) is still facing some potential headwinds in Mexico, as the country’s federal competition commission found in a preliminary report that KCS and Grupo Mexico were disrupting the private Mexican rail system through various means, including blocking access to their networks and charging inflated prices. If the commission’s final report due later this year reaches the same conclusion, KCS could face sanctions in the country, where it earns about 50% of its revenue and EBITDA.

Be sure to check out Point72 Asset Management’s holdings page for a full, up-to-date listing of the fund’s 13F portfolio positions as of March 31 and click the ‘Get Email Alerts’ button on that page to get portfolio and story updates related to Point72 directly to your inbox the moment they happen.

Disclosure: None