In this article we take a look at billionaire Steve Cohen’s top 10 stock picks. You can skip our detailed discussion of Cohen’s history, his hedge fund’s performance and go to Billionaire Steve Cohen’s Top 5 Stock Picks.
Steve Cohen is an American billionaire and hedge fund manager who founded SAC Capital and Point72 Asset Management. As of the end of 2020, Point72 manages over $20 billion in securities. The 62-year-old investor who also bought the New York Mets for $2.4 billion last year has a net worth of $16 billion. Cohen invited the wrath of Reddit investors amid the GameStop episode when he took the side of Gabriel Plotkin’s Melvin Capital and injected $750 million into the struggling fund to bail it out amid a brutal “short squeeze” launched by retail investors. Point72 also reportedly raised $1.5 billion in a matter of days during this time of crisis. Amid the outrage, Cohen deactivated his Twitter account.
Steve Cohen’s Excellent Returns
Despite these controversies, even his staunch enemies admit that Cohen is a stock-picking genius. The billionaire, who is an art enthusiast and owns expensive works like Koons’s Rabbit and Picasso’s Le Rêve, got the attention of the SEC in 1978 while working as a junior trader at Gruntal & Co where hits bets made the firm $100,000 a day. In 1992, he launched SAC Capital Advisors with $25 million.
Cohen’s Connecticut-based hedge fund Point72 Asset Management posted a 16% gain in 2020, its best year since the fund opened itself for outside money in 2018.
Steve Cohen’s Investment Strategy
During the early days of SAC, Cohen’s strategy was to make money by holding stocks just for days and sometimes hours, trading 20 million shares per day. Cohen made a fortune through rapid-fire, high-frequency trading, never holding a stock for longer periods of time. However, SAC later diversified its strategy, foraying into long/short positions, fixed income and quant strategies. From 1992 to 2013, SAC on average posted 25% in returns.
Insider Trading Charges
However, in 2013, SAC pleaded guilty to insider trading charges and agreed to pay $1.8 billion in penalties. SAC had sold its major stake in pharma companies Elan and Wyeth just a few days before the companies announced disappointing results for their lead product. Additionally, SAC shorted the stock before the results, sparking allegations of insider trading.
In an Interview with 92nd Street Y, Cohen said:
“I’m doing a lot of private investing. I haven’t really done much in biotech but I am financing privately, not through the hedge fund, but through my own financing. We’ve got three verticals running and AI machine learning FinTech, and Cybersecurity, and enterprise. My goal is to build out a complete VC operation. I’m surprised how quickly we can get involved in this field, and lead deals, which means either, ‘we’re really doing a good job’ or ‘we’re really investing in bad deals’ and we will find that out.
I’ve set my firm up to have experts in verticals, and I did the same thing here in venture capital. These people know these spaces so much better than I do now. I’m pretty good at grilling them on investments and trying to figure out if the deals make sense or not. It’s a nice working collaboration partnership… If I’m going to make a significant investment, I’m going to ask them tough questions. If they’re not prepared, then I’m not going to be happy, and that does not work very well.
What I used to do is go down to the local brokerage firm and I would stand outside no matter what the weather was and watched the ticker tape go across. I’d be out there every day and eventually, they invited me in to sit with the brokers. In fact, I’ll take a step further, getting involved in, looking at the markets, and looking at the ticker tape starting when I was 12, 13-years-old.
I learned more from reading the Wall Street Journal and other publications. I did actually in the classes that I took, specifically on the markets. One of my brothers’ best friend was running the option arbitrage department at this firm(Gruntal). He was the guy who brought me in. I was using him as a broker during college so I was a little nepotism going on there. So I came in, first day I made money. They had me doing arbitrage, buying puts and then the markets were a lot more inefficient and it was easy to make money. They paid me like 12 grand a year to start, which it wasn’t a lot of money… I graduated early December ’77 and within a couple of months, I’m telling my buddies, ‘I think I’m gonna make a hundred grand this year’, because I’m doing well.
I already had a team in place, I was already hiring people to trade money outside of me. The inference that the business model was already established. What I needed was more money to keep building it. So I had no idea. We started with $20 million. I put up half the money and I had no idea what it would turn into. But it just shows you that they’ve just keep going.
You got to build an organization that has a different skill set. I’ve always had good people help me run. I want people to know that I’m still interested in the markets. I teach them, they can talk to me to ask questions. I’m in the middle of phlegm in the middle of the floor. I’m not sitting in some office someplace by myself. For me, I’m right there, I’m very accessible.”
According to Bloomberg, Steve Cohen’s hedge fund lost about 10% to 15% in January amid the war with retail investors.
While Steve Cohen’s stock-picking strategy is working, the broader hedge fund industry is struggling. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start our list of Steve Cohen’s top 10 stock picks.
10. JD.com, Inc. (NASDAQ: JD)
Value: $182,111,000
Percent of Steve Cohen’s 13F Portfolio: 0.88%
No. of Hedge Fund Holders: 89
China’s JD is one of the biggest ecommerce companies in the world. The company is rapidly investing in futuristic technologies like autonomous delivery, drones, driverless trucks and AI-based shopping. The stock is rising after the company said its revenue in the fourth quarter jumped 31% to about $34 billion. Annual active customer accounts jumped 30% to reach over 471 million.
As of the end of the fourth quarter, 89 hedge funds in Insider Monkey’s database of 887 funds held stakes in JD, compared to 85 funds in the third quarter. Tiger Global Management LLC is the biggest stakeholder in the company, with 51.7 million shares, worth $4.5 billion.
9. Micron Technology, Inc. (NASDAQ: MU)
Value: $195,367,000
Percent of Steve Cohen’s 13F Portfolio: 0.95%
No. of Hedge Fund Holders: 100
Micron ranks 9th on the list of billionaire Steve Cohen’s top 10 stock picks. Micron is one of the best semiconductor stocks to buy in 2021. Its shares are up 124% over the last 12 months. The company recently lifted its guidance for the fiscal second quarter ended March 4 on the back of rising prices for NAND and DRAM chips. During a fireside chat at Morgan Stanley, Micron CFO David Zinsner said that NAND showed stabilization during the quarter. Goldman Sachs said that the demand from DRAM is rising from major end markets like PC, smartphones, Cloud, gaming and automobiles.
The company is also getting the attention of the smart money, as 100 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 79 funds a quarter earlier.
In their Q4 2020 investor letter, Bonsai Partners highlighted a few stocks and Micron Technology Inc (NASDAQ:MU) is one of them.
Here is what Bonsai Partners said:
“Micron is a manufacturer of memory semiconductor chips. Micron’s stock appreciated 60.1% during the quarter.
Micron’s shares significantly appreciated this quarter for a couple of reasons. First, and most importantly, the DRAM market appears to have begun its cyclical rebound. As a result, we will likely see higher pricing and profitability through at least the calendar year 2021, hopefully meaningfully longer.
Another (and less meaningful) driver was that semiconductor stocks have become ‘en vogue’ once again. I may not be old, but I’ve been around the sector long enough to know that when generalists start getting excited about a ‘new paradigm’ around semiconductors, it’s time to be wary.
I wouldn’t call Micron overvalued, but I’d certainly say it’s more fairly priced today compared to when we first purchased it a few months ago.”
8. Dell Technologies Inc. (NYSE: DELL)
Value: $200,279,000
Percent of Steve Cohen’s 13F Portfolio: 0.97%
No. of Hedge Fund Holders: 50
Steve Cohen’s top 10 stock picks include Dell Technologies, which is up about 170% over the last 12 months. In the fourth quarter, Dell posted record Client Solutions revenue and beat Q4 estimates. Revenue in the quarter came in at $26.1 billion, compared to the Street’s estimates of $24.52 billion. EPS in the quarter came in at $2.70, beating the consensus by $0.50. In the fourth quarter, Paul Singer’s Elliot Management increased its stake in Dell.
According to our database, the number of DELL’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 50 hedge funds that hold a position in Dell Technologies compared to 43 funds in the third quarter. The biggest stakeholder of the company is Canyon Capital Advisors, with 6.2 million shares, worth $456.2 million.
7. Uber Technologies, Inc. (NYSE: UBER)
Value: $200,954,000
Percent of Steve Cohen’s 13F Portfolio: 0.98%
No. of Hedge Fund Holders: 135
Billionaire Steve Cohen initiated a new stake in Uber in the fourth quarter, buying 3.9 million shares of the ride-hailing company, worth $201 million. Uber shares are up 160% over the last 12 months. In February, KeyBanc increased its price target for Uber from $63 to $75 with an Overweight rating, citing strong demand expected in the second half of the year. The firm said that the company continues to enjoy an increasing demand in the food delivery segment, thanks to the pandemic. The firm also likes Uber’s acquisition of alcohol delivery startup Drizly.
Altimeter Capital Management is one of the 135 hedge funds tracked by Insider Monkey having stakes in UBER at the end of the fourth quarter.
Miller Value Partners, in their Q4 2020 investor letter, said that Uber Technologies, Inc. (NYSE: UBER) was a top contributor for their portfolio in the fourth quarter of 2020.
Here is what Miller Value Partners has to say about Uber Technologies, Inc. in their Q4 2020 investor letter:
“It was a busy quarter for Uber Technologies (UBER) who took off in the quarter following the passing of Proposition 22, their ballot initiative that allows them to classify their drivers as independent contractors and not employees. The company also reported 3Q results that was largely in-line with expectations. Adjusted net revenues of $2.81B was slightly below expectations of $2.82B with EBITDA of -$625M coming in slightly worse than expectations for -$623M. The company reiterated their expectation that they will reach EBITDA profitability at some point in 2021, as their Eats business continues to see strong growth as the pandemic continues. The company announced the sale of ATG, their self-driving car unit, to Aurora for $4B, while investing $400M in the business and holding a 26% share of the combined entity. This was followed by the announcement of the company selling Uber Elevate, their air taxi business, to Joby Aviation with Uber investing an additional $75M in Joby. The company’s acquisition of Postmates closed in the quarter and Mexico’s antitrust regulators approved Uber’s acquisition of Cornershop, the Latin American grocery delivery company. The company also announced a joint-venture with SK Telecom, to create a South Korean taxi-share company investing $150M in the start-up.”
6. AstraZeneca PLC (NASDAQ: AZN)
Value: $211,873,000
Percent of Steve Cohen’s 13F Portfolio: 1.03%
No. of Hedge Fund Holders: 41
Billionaire Steve Cohen loaded up on UK-based pharmaceutical company Astrazeneca Plc in the fourth quarter, increasing his hold on the company by a whopping 750%. Point72 Asset Management owns 4.24 million shares of the company, worth $211.9 million. The company’s shares recently rallied after Reuters reported that a preliminary study found that Astrazeneca’s COVID-19 vaccine developed in collaboration with the University of Oxford is effective against the coronavirus variant detected in Brazil. Germany recently approved Astrazeneca’s vaccine for the elderly. However, Denmark, Norway, and Iceland have suspended the company’s vaccine amid reports of blood clots in people after receiving the shot.
With an $892.4 million stake in AstraZeneca, Fisher Asset Management owns 17.9 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 41 hedge funds held stakes in AZN as of the end of the fourth quarter, versus 33 funds in the third quarter.
In their Q4 2020 investor letter, Baron Health Care Fund highlighted a few stocks and AstraZeneca Plc (NASDAQ:AZN) is one of them. Here is what Baron Health Care Fund said:
“AstraZeneca PLC is a multinational pharmaceutical company developing drugs across multiple therapeutic areas such as oncology and respiratory diseases. Shares were impacted by news of AstraZeneca’s joint development with Oxford University of a viral-based COVID-19 vaccine. Given a mixed data set due to an unforeseen error in dosing that occurred in the Brazilian market, the vaccine timelines slipped, hurting share performance. Our investment thesis on AstraZeneca is not dependent on COVID-19 but rather its best-in-class large-cap growth profile, and we retain conviction.”
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Disclosure: None. Billionaire Steve Cohen’s Top 10 Stock Picks is originally published on Insider Monkey.
