Editor’s Note: Related tickers: EQT Corporation (NYSE:EQT), Amazon.com, Inc. (NASDAQ:AMZN), Suncor Energy Inc. (USA) (NYSE:SU), Visa Inc (NYSE:V), Micron Technology, Inc. (NASDAQ:MU)
In mid May, billionaire Steve Cohen’s SAC Capital Advisors filed its 13F with the SEC, disclosing many of its long equity positions as of the end of March;see the filing on the SEC’s website. Even though the information in these filings is a bit old, there are still multiple ways for investors to use it.
We have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year;learn more about imitating small cap picks and think that other strategies are possible as well. Another use of 13F filings is to use them as a source of free investment ideas from top managers, and do further research on any interesting names. Here are our thoughts on SAC’s five largest stock holdings by market value from the filing;or see a history of what the fund has previously owned:
Top dog
During the first quarter of the year, Cohen was a big buyer of energy company EQT Corporation (NYSE:EQT) and it was his largest holding according to the filing. The company is vertically integrated; it produces natural gas and other petroleum products, gathers and processes the gas, and distributes it as a utility to over 250,000 customers in the Appalachian region. While recent quarterly reports have shown strong improvement in revenue and earnings, the current valuation already accounts for a good deal of future growth as the trailing P/E is over 50. As such it might not be a good value.
Best of the rest
SAC reported a position of over 880,000 shares in Amazon.com, Inc. (NASDAQ:AMZN). Of course, purely in terms of earnings multiples Amazon.com, Inc. (NASDAQ:AMZN) appears incredibly overvalued: analyst consensus for 2014 implies a forward P/E of more than 80. Bulls on the stock believe that the company is currently working on expanding its reach with new business initiatives such as same-day delivery as well as Kindle market share, following which it will be more free to focus on profitability. Revenue did grow by over 20% last quarter compared to the first quarter of 2012, but we would still avoid the stock.
The fund increased its stake in Suncor Energy Inc. (USA) (NYSE:SU), a $48 billion market cap energy company perhaps best known for its position in the Alberta oil sands, to a total of 7.1 million shares. With trailing and forward earnings multiples of 20 and 10 respectively, Suncor Energy Inc. (USA) (NYSE:SU) is certainly dependent on future growth in order to justify its current valuation but if it does hit that analyst target for 2014 it would arguably be in value territory. Of course, a number of oil and gas companies are currently trading at low multiples and so investors interested in Suncor Energy Inc. (USA) (NYSE:SU) should take a look at the company’s peers.
Visa Inc (NYSE:V) was another of SAC’s top stock picks with the filing disclosing ownership of 1.2 million shares. The credit card brand is another stock which looks a bit pricy to us: even with earnings per share expected to increase over the next couple years, Visa Inc (NYSE:V) trades at 21 times forward earnings estimates. In addition, bottom-line performance has not been too great recently with net income actually lower in its most recent quarter compared to the same period in the previous year (though revenue was up at a double-digit rate).
Cohen and his teamhad about 19 million shares of Micron Technology, Inc. (NASDAQ:MU) in their portfolio at the beginning of April. Micron Technology, Inc. (NASDAQ:MU), a $12 billion market cap company, manufactures semiconductors, which are used as data storage systems in computer and peripheral memory components. It has been unprofitable on a trailing basis, but the sell-side is looking for it to recover in the fiscal year ending in August 2014. While there is a range of outcomes, all analysts are expecting at least some positive earnings with consensus implying a forward P/E of 17.
Final thoughts
For better or worse, Steve Cohen is one of the most highly discussed hedge fund managers out there. All insider trading speculation aside, SAC Capital manages one of the largest equity portfolios in the game, and each of its top five picks warrants investors’ consideration. Micron Technology, Inc. (NASDAQ:MU) is an intriguing play on the semiconductor space, and although many bears proclaim this market a modern-day Tech Bubble, we’d caution against that line of thinking, as it’s very tough to call a bubble’s top. Visa Inc (NYSE:V), meanwhile, just one of three mobile payment companies any big-time investor tends to place his or her capital in, while Suncor, Amazon.com, Inc. (NASDAQ:AMZN) and EQT Corporation (NYSE:EQT) each hold dominant positions in their areas of expertise.
Disclosure: I own no shares of any stocks mentioned in this article.
