In this article we’ll check out the Top 10 Stocks New Mets Owner Steve Cohen Was Buying in Q3.
Steve Cohen, the billionaire Chairman and CEO of registered investment advisor Point72, became one of the most talked-about figures in the baseball world after his purchase of the New York Mets for $2.4 billion was approved by MLB on November 6.
Cohen, a longtime Mets fan, takes over ownership from the Wilpons, who were forced to slash the Mets’ payroll in the 2010s after taking a huge financial hit from their involvement with ponzi scheme mastermind Bernie Madoff, who was brought down in 2008. Deferred compensation from players’ contracts signed by the Mets was given to Madoff to manage. In turn, the team drew money directly from Madoff accounts to fund its day-to-day operations.
Steven Cohen of Point72 Asset Management
Cohen has impressed people around baseball and may be the perfect owner to turn around a Mets team that has struggled to build around a solid core of young players. NL Cy Young winner and free agent Trevor Bauer, who could be a prize target of the Mets this offseason, praised Cohen for saying his goal is for the Mets to win a World Series in the next 3-5 years and believes Cohen’s plan to build up the Mets data analytics capabilities will help them in that pursuit.
Cohen of course is no stranger to data analytics, using it at Point72 alongside fundamental research and quantitative methodologies to find profitable investment ideas. Cohen and his team of more than 1,600 employees have had mixed results on that front in recent years. The firm, which has raised over $10 billion since it began accepting outside money in 2018, gained just 1% in 2018 before a much better showing of 14.9% returns net of fees in 2019.
Its main hedge fund also survived the devastation of this year’s Q1 that crushed so many hedge funds, with Cohen saying returns for the quarter were “essentially flat” in an internal company memo at the end of March and praising the way they had managed risk during the chaotic period. Point72 had $91.33 billion in assets under management as of November 9.
Point72 Asset Management had a busy quarter according to the fund’s 13F for the reporting period of September 30, released on Monday. Cohen added just over 400 stocks to Point72’s 13F portfolio while selling off 289 former positions during Q3. The value of the holdings in its 13F portfolio grew by $4.2 billion during the September quarter, hitting $19.53 billion. Point72 Asset Management’s sector allocation remained consistent despite the large turnover of stocks, with the fund pouring more money into the tech, healthcare, and consumer discretionary sectors than any others.
Why do we pay attention to hedge fund sentiment before making investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, though the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Now then, let’s check out the Top 10 Stocks Mets Owner Steve Cohen Was Buying in Q3, beginning with AMD.
10. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Steve Cohen bought over 1.32 million shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) during Q3, taking a $109 million position in the chipmaker, which became one of the 5 Best Robotics and Artificial Intelligence Stocks To Buy following its $35 billion acquisition of Xilinx, Inc. (NASDAQ:XLNX) in October. There was a greater than 60% jump in hedge fund ownership of AMD during the 18 months ended June 30.
AMD shares jumped by over 50% towards the end of July and into early August and have been able to hold their higher levels over the past 3½ months, which could be an indicator of another looming push upwards. Shares of AMD have been on a tremendous 3-year run, posting the biggest gains among all S&P 500 stocks in both 2018 (greater than 70% gains) and 2019 (nearly 150% gains).
AMD is valiantly attempting to three-peat, as its shares have gained over 80% this year. It will have a hard time tracking down Carrier Global Corporation (NYSE:CARR) however, which joined the S&P 500 earlier this year after being spun off from United Technologies Corp., and whose shares have gained an incredible 238% in 2020.
9. Activision Blizzard Inc. (NASDAQ:ATVI)
Cohen bought more than 1.05 million shares of Activision Blizzard Inc. (NASDAQ:ATVI) during Q3, 358% more shares than he owned on June 30. The billionaire’s hedge fund now has a $109 million investment in the video game publisher, which has already pulled in $5.71 billion in revenue through September. That puts the Call of Duty developer on pace to set a new high score in annual revenue, which currently stands at $7.5 billion put up in 2018.
Activision is one of 5 Stocks That Could Massively Grow Their Dividends in 2021, as the company has more than $7.4 billion in cash and a miniscule dividend payout ratio of 15%. ATVI shares currently pay out a 0.54% annual dividend. A big 2020 holiday season could be in store for Activision and the gaming industry as a whole, the latter of which is coming off a record $11.2 billion in sales during Q3, up 24% year-over-year.
8. Raytheon Technologies Corporation (NYSE:RTX)
1.08 million shares of Raytheon Technologies Corporation (NYSE:RTX), which supplies arms and defense systems to many of the 10 Most Powerful Militaries in the World in 2020, were bought up by Point72 Asset Management during Q3, increasing the size of its ownership position by 91%. Hedge fund ownership of RTX has dipped sharply in 2020 among the select group of high performing hedge funds tracked by Insider Monkey, sliding by 27%.
In contrast to the high-flying shares of AMD, RTX shares have had a rather miserable year, falling by close to 30%. Shares are up by 31% since October 28 however, and Cohen could be counting on a rally in the stock as a vaccine and subsequent travel industry rebound inch closer. The battered aviation industry has weighed heavily on Raytheon’s results, pushing its Q3 sales down by 34% year-over-year in both its Collins Aerospace and Pratt Whitney segments. Military sales were a rare bright spot for each segment, rising by 4% in the aerospace segment and by 11% in Raytheon’s commercial OEM segment.
7. CSX Corporation (NASDAQ:CSX)
Steve Cohen added CSX Corporation (NASDAQ:CSX) to Point72’s portfolio during Q3, buying nearly 1.81 million shares to build a $140 million stake in the railroad operator, which has raised its free cash flow four-fold over the past three years to $3.19 billion in 2019. 46 of the hedge funds tracked by Insider Monkey were long CSX on June 30.
Railroads’ recent adoption of precision scheduling railroad (PSR) techniques, which allow them to transport more goods with fewer assets, has greatly improved their margins and profitability. CSX achieved an operating ratio of 59.6% in Q3 and raised its operating margin by over 11 percentage points between 2016 and 2019, aided heavily by its adoption of PSR in 2017.
6. T-Mobile US Inc. (NASDAQ:TMUS)
Closing out the first-half of Steve Cohen’s top stock buys of Q3 is T-Mobile US Inc. (NASDAQ:TMUS), one of the 30 Most Popular Stocks Among Hedge Funds during Q2. Cohen was one of the company’s 113 hedge fund shareholders on June 30 among the funds that Insider Monkey tracks, which was a 74% quarterly increase spurred on by the April addition of Sprint to T-Mobile’s operations.
Point72 added more than 636,000 shares to its position during Q3, an 84% increase. Billionaire investing legend Warren Buffett was also buying loads of TMUS shares during Q3, 2.4 million in total. The telecom giant grew revenue by an impressive 74% year-over-year in the third quarter to $19.27 billion and crushed rivals AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) in postpaid net additions, topping the 2 million mark.
- Eli Lilly & Co (NYSE:LLY)
Steve Cohen’s Point72 Asset Management added Eli Lilly & Co to its portfolio in Q3, buying nearly 1.32 million shares worth $195 million on September 30. Several other hedge funds have been bullish on Eli Lilly this year, driving a 19% quarter-over-quarter jump in hedge fund ownership of LLY as of June 30 among the funds tracked by Insider Monkey.
Amana Mutual Fund discussed Eli Lilly, its top performing stock during Q1, in the fund’s first quarter 2020 investor letter, praising the pharma giant’s revenue growth and balance sheet:
“Lilly stood out as one, among a handful, of companies that registered a positive return for the first quarter. In January, Lilly reported excellent fourth quarter results, with revenue growing at a faster clip than over the first three quarters of the year. Lilly is also financially strong with debt equivalent to only two times EBITDA and 12% of market capitalization. Johnson & Johnson, while trailing Lilly, shares many of the same characteristics and also outperformed.”
- Microsoft Corporation (NASDAQ:MSFT)
Steve Cohen took a much bigger stake in Microsoft Corporation in the third quarter, buying nearly 639,000 shares to grow the size of its MSFT holding by 186%. 27% of the select group of high performing hedge funds tracked by Insider Monkey were long Microsoft on June 30, which was topped only by Amazon.com, Inc. (NASDAQ:AMZN).
Hedge funds like that Microsoft has been able to successfully diversify and better monetize its portfolio of products and services in recent years while pushing them onto the cloud. Microsoft’s top and bottom-line results were close to equally represented by its cloud, business, and consumer segments in 2019. Microsoft is also building an impressive security portfolio that is proving increasingly attractive to corporate CIOs and which could represent a $30 billion sales opportunity according to Barclay’s.
- Facebook Inc (NASDAQ:FB)
Steve Cohen added Facebook Inc to Point72’s portfolio in Q2 and kept buying shares during Q3, growing the size of his stake by 757% quarter-over-quarter. Point72 now owns just under 840,000 FB shares valued at $220 million at the end of September. That position was still dwarfed by the Facebook ownership stakes amassed by several other hedge funds, including Tiger Global’s $2.3 billion position.
Wedgewood Partners, which posted gains of 10.77% in Q3, believes Facebook still trades at a reasonable multiple and notes that the pandemic has accelerated the use of its platform by struggling and shuttered small businesses, which should drive future revenue growth. The fund had this to say about FB in its Q3 2020 investor letter:
“Facebook’s revenues grew +12% constant currency despite the near total shutdown of economic activity during the month of April. The vast majority of Facebook’s revenues are derived from small businesses, many of which have borne the brunt of lockdowns. To combat the sudden disappearance of foot traffic, these businesses are initiating or accelerating the adoption of digital customer acquisition strategies provided by Facebook’s vast ecosystem, including instant access to over 2 billion daily users. We continue to carry Facebook as one of our largest holdings as its value proposition is difficult to copy, yet the stock trades at still somewhat reasonable multiples relative to large cap peers.”
- Palantir Technologies (NYSE:PLTR)
Steve Cohen was one of many hedge fund managers to buy shares of Palantir Technologies after the company’s IPO in Q3, building a 29.90 million share position that is Point72’s 4th most valuable as of September 30. Palantir was also one of the Top 5 Stocks Billionaire George Soros Just Bought during Q3. PLTR shares have gained over 65% since their debut.
Given his own usage and understanding of data, it’s not surprising to see Cohen take a keen interest in the data analytics company, which was co-founded by Peter Thiel. Palantir primarily gathers and analyzes data for government agencies, including the Space Force, Navy, and Army, and could play a prominent role in the forthcoming Covid-19 vaccine rollout. In addition to its more than $1.5 billion in government contracts, an unnamed aerospace company also recently renewed its contract with Palantir for $300 million.
- Alphabet Inc. (NASDAQ:GOOGL)
Topping the list of Steve Cohen’s big buys of Q3 is the class A shares of Alphabet Inc.. Cohen added close to 160,000 GOOGL shares to Point72’s 13F portfolio during the September quarter, pushing the value of his ownership stake in the search giant to nearly $299 million.
GOOGL shares have climbed by 25% since July 1 and Ensemble Capital is predicting further gains. In its Q3 2020 investor letter, the fund said GOOGL shares are still undervalued even after their 20% gains in July and August and that the core value of Alphabet’s most important assets like Search and YouTube hasn’t been impacted by the pandemic despite the first ever revenue decline in the company’s history during Q2.
Alphabet delivered much stronger results in Q3, growing search ad revenue by 9% to $37.1 billion, $5 billion of which were sold on YouTube, a 15% year-over-year increase. Face mask-related videos were among the topics driving engagement on the video platform, generating over 1 billion views. Google Cloud revenue hit $3.44 billion during the quarter, a rise of just over $1 billion year-over-year.
For more timely stock picks from the world’s greatest money managers, check out the Top 10 Stocks Billionaire Daniel Loeb Just Bought.
