Steven A. Cohen is a billionaire hedge fund manager and the founder of SAC Capital Advisors. SAC Capital Advisors manage ~$14 billion in assets and is known to charge a whopping 50% performance fees, thanks to its excellent past performance.
In this article, I will be discussing some of the top holdings of SAC Capital. According to its latest 13F filing, SAC capital held 19 positions worth over $100mn as of 12/31/2011. Here is a closer look at five of those positions.
Baidu.com Inc. (BIDU): My Take - Buy
SAC Capital holds 1,216,600 shares of Baidu. Baidu is the #1 internet search provider in China with a focus on Chinese web pages. The company generates a majority of its revenue through pay-per-click advertising and customized search solutions.
Baidu is still in the early stages of online advertising boom in China and is expected to benefit from the increased online ad budget allocated by the traditional advertisers. Many large customers now see Baidu's search marketing platform as a more effective brand building medium. With new investments in technology, contextual ad network is expected to pick up momentum. Despite slowdown in SME demand, strength in large advertisers will be the major growth driver for 2012.
Further, Baidu's strategy for mobile indicates growing opportunity in this space. This will be more of a long term catalyst with Baidu currently focusing more on increasing its user base by enhancing user experience. New product offerings in this space include Baidu Yi and Baidu maps. Baidu is expected to partner with handsets companies to pre-install Baidu Yi, a mobile OS. Also, with Baidu maps users on mobile increasing by 10 folds in 2011, Baidu is all set to capture the market share and hold a dominant position similar to its position in PCs market.
I believe that Baidu continues to enjoy superior pricing power against its peers due to its dominant market share and keyword bidding model. With a shift in large advertisers ad spend and Baidu's focus on monetization of social, mobile and other vertical search offerings, revenue growth outlook for both near term and long term is expected to be solid.
Google Inc. (GOOG): My Take - Buy
SAC Capital holds 191,699 shares of Google. Google is a defensive stock with high growth rate. The company's leadership position in its core search business is what makes it a defensive stock. Its main competitors, Bing and Yahoo Search, have been unable to pose any meaningful threat to Google-- despite burning a good amount of cash. From a growth perspective, Google is likely to post a double digit growth rate for the next several years as a secular shift of advertisers from traditional media to online media continues. Its mobile business is likely to be another major growth driver.
Many of Google's web properties are undermonetized. For example, only 3% of YouTube videos are monetized through video advertising. This can increase significantly going forward. I see big potential from the recent announcement by Google that it will be launching 100 online video channels on YouTube that feature new original programming from celebrities such as Jay-Z, Madonna, Shaquille O'Neal and Tony Hawk.
This venture will generate ~25 hours of new, on-demand, original content per channel per day, and Google is reportedly paying up more than $100 million in advance to its content partners. I believe this and similar partnerships can potentially have a very big impact in the long run, as more and more original content comes online through these partnerships. Quality content is likely to bring in more advertisers, and thus help in further monetization of Google's properties.
Google is trading at a forward PE of just 12x, despite the expected 20% top and bottom-line growth next year. Although some investors are worried about increasing dominance of Facebook (FB), I think it's too premature to say that Facebook can adversely affect Google's core search and advertising business. I find the risk-reward profile of Google very attractive at these levels.
Biogen Idec Inc. (BIIB): My Take - Buy
SAC Capital holds 1,073,368 shares of Biogen. Biogen Idec Inc. is a global biotechnology company focused on discovering, developing, manufacturing and marketing products for the treatment of neurological disorders and other serious diseases. The company's products include AVONEX, TYSABRI, FUMADERM and RITUXAN. Biogen is one of the best earnings reacceleration stories among big biotech. Continued strength in its core multiple sclerosis franchise, strong Avonex sales and several upcoming catalysts (dexpramiprexole in ALS, hemophilia A/B, and PEG-Avonex) make me bullish on the company.
Freeport-McMoRan Copper & Gold Inc. (FCX): My Take - Buy
SAC Capital holds 2,791,271 shares of Freeport-McMoRan. Freeport-McMoRan Copper & Gold Inc. is a copper, gold and molybdenum mining company. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo. Freeport-McMoRan is likely to see a high top-line growth for next several years.
It has potential to grow copper and gold volumes by 35% and 50%, respectively by 2016. In the near term continued strength in underlying copper prices are likely to provide upside catalysts for the stock prices. At 8.40x forward PE stock doesn't look pricey. I recommend buying the stock given its long-term company-specific growth and near term upside from its copper exposure for which the market still remains tight.
Occidental Petroleum Corporation (OXY): My Take - Sell
SAC Capital holds 1,366,182 shares of Occidental Petroleum. Occidental petroleum has run up significantly in few months. It is trading over $100 now, up 47% from its October lows of $68. The key drivers for the upside were recovery in oil prices and improved expectations on the company's development program in California. At these levels, I believe investors are fully pricing in the positives and any potential for the further stock price appreciation looks quite bleak in the near term. Hence, I would recommend avoiding this one.