Tech Stocks Steve Cohen Holds
Cohen started betting when he was in high school and played poker. Once there, he opened a brokerage account with $1,000 of his tuition money. He said that the game taught him how to take risks. Then, he earned a B.S. in economics from the Wharton School, University of Pennsylvania. After graduating, he started working on Wall Street, specifically at Gruntal & Co. as junior trader in the options arbitrage department. There, he managed a $75 million portfolio and six traders. After running his own trading at Gruntal & Co., he decided to start his own company, which would then be called SAC. In 1992, Cohen started SAC Capital Partners with $20 million of his own money; today the firm manages $14 billion in equity.
Here are some of his tech stocks:
Apple (AAPL): Apple trades consumer electronic devices, such as PCs (Mac), tablets (iPad), phones (iPhone). It also owns one the largest online music distributor in the world called iTunes. It has recently launched an online store that sells applications for Mac desktop and notebook computers.
AAPL has bought Anobit Technologies, a semiconductor start-up based in Israel which may help Apple acquire more flash memory controllers which constitute a crucial piece of its products and give Apple's products their main distinctive features. It’s of paramount importance for Apple to own this kind of product. Apparently, the deal involved between $400 million and $500 million. Apple has been moving away from hard drives. Most of its new products, iPod, the iPhone, and its Mc Book Air laptops do not use hard drives anymore; they carry flash memory chips. This change is what makes Apple's products so thin and enables them to run on less power.
There is no doubt why Steve Cohen has decided to invest in Apple. It trades high-tech products and it is constantly launching new initiatives to improve its balance sheet.
EXPE: Expedia Inc. (EXPE) is one of the leading global online travel companies. The company has many brands such as Hotwire.com, Classic Vacations, Egencia, TripAdvisor, eLong, Venere NetSpA and Hotels.com. These provide the perfect synergy to offer low cost travel services to businesses and individuals. Among some of the services, we can find hotel rooms, car rentals, airline tickets and vacation packages.
Competition is fierce for Expedia. Its primary competitors include Priceline.com Incorporated (PCLN), Orbitz Worldwide Inc. (OWW) and Ctrip.com International Ltd. (CTRP). Priceline.com is well known by the public due to its advertising campaigns and its “name your own price” service, which enables consumers to bid the maximum price they would pay for accommodation. The company offers airline tickets, hotel rooms, car rentals and vacation packages. OWW is also a competitor for Expedia. It is smaller that Expedia but it seems that size does not matter given Orbitz's ability to operate in the market. Orbitz allows businesses and consumers to research and book travel accommodations. Finally, Ctrip. Ctrip is a Chinese travel company that offers products and services similar to Expedia and operates in China.
Expedia has an interesting growth potential since travelers are constantly and increasingly looking for good travel packages online. There exists an important increase in traveling to China, India and Latin America which could translate into profitable opportunities for the company.
Expedia Inc. (EXPE) is spinning off subsidiary TripAdvisor. The TripAdvisor spin-off will include TripAdvisor Media Group which is the world’s largest travel site. TripAdvisor reported in 2010 $261 million in earnings before interest, taxes, depreciation and amortization. Its revenue was $485 million. Expedia’s capital share structure includes 274,255,669 common “A” shares. In addition, the company has 25,599,998 Class “B” shares.
Why did Steve Cohen invest in Expedia? Expedia has several present and future growth prospects. In 2011 it earned about $1.75 per share and earnings estimate for 2012 are $2.15 per share. Most importantly, Expedia is currently trading at a 16.7x price to earnings multiple and in 2012, it should be trading at 13.59x. The company is also repurchasing shares. In 2005 it repurchased 348 million and in 2011, 270 million shares. In addition the company is entering into partnership agreements to enhance revenues and earnings for the future. For instance it signed an agreement with United Continental Holdings (UAL).
Last but not least, Expedia has also been paying dividends at 28 cents annually. Of course, Expedia expects to increase this figure in coming years.
Netflix (NFLX): Netflix runs a fast-growing DVD rental and video streaming service. It also provides digital content to PCs, Internet connected TVs, and consumer electronic devices such as Xbox 360, Playstation and Wii. It has recently raised its monthly price for one DVD at a time plus streaming which could raise meaningful profits.
Although it provides services mainly in the United States and Canada, NFLX is planning to expand worldwide. This expansion will be boosted by the company´s ability to provide new and interesting contents to subscribers. NFLX does not own or produce the content outright. It licenses the content to content producers, who obtain revenue from media outlets like NFLX. NFLX’s current cash position is $365.77 million, debt is $234.66 million, and book value per share is $7.40 per share. All these elements were taken into consideration by Steve Cohen when investing in the firm.
Amazon (AMZN): Amazon is considered a largest online retailer in the world and trades in countries such as Canada, the UK, Germany, France, Austria, Japan and China, which accounted for the 45% of its total international sales in 2010. Net sales this very same year amounted to $34.2 billion. As regards media, it accounted for 43% of sales and electronics and general merchandise represented 54% thereof. The remaining 3% derived from co-branded credit card agreements, fulfillment operations and cloud computing services.
One of Amazon’s main advantages is that maintaining its network involves lower cost than being physically present anywhere and this may also help delegating tax responsibility to end consumers themselves and thus provide additional cost advantages.
Amazon’s main features are superior customer service and easy-to-use website, thus attracting more customers. Furthermore, Amazon has a user-friendly interface, product recommendations and wish lists. The company has become the starting point for online purchases. Amazon has expanded its costumer base to 152 million users which places Amazon as the pioneer of online purchases and thus yielding a four-year compounded annual growth of 20%.
I think Steve Cohen invested in Amazon because Amazon has a growth potential as figures show: It generated about $500 million in revenue during 2010 and its average annual revenue is expected to grow more than 40% in the next five years. Furthermore, cloud computing is expecting to generate a multibillion-dollar revenue stream. It is also expected that AWS will become a positive margin contributor thanks to its leverageable nature.
EBAY: With one of the most capital efficient models in e-commerce, eBay’s role in the global commerce is paramount and may represent important economic advantages. eBay has been continuously growing and has transformed itself into an important central e-commerce hub. Some of eBay’s growth factors are its growing portfolio of large retail partners, adjacent marketplace offerings, and PayPal’s diverse payment capabilities. eBay’s ongoing ability to partner with other e-commerce companies may result in an interesting multiple expansion. Most importantly, eBay holds a wide economic moat supported by a solid network effect.
The company is trialing a payment service at Home Depot (HD) which can increase PayPal's market by 35%. Talking about PayPal, although it lost its CEO it is still a growing part of EBAY.
Steve Cohen likely decided to invest in eBay given the company's consistent EPS growth. It made $1.73 per share in fiscal year 2010, should make $2.00 in fiscal 2011 and analysts expect $2.32 in earnings in fiscal 2012. The company has beat earnings estimates for six straight quarters and has a forward P/E of just over 13 which is a 20% discount to its five-year average.