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Steven Cohen Increases OCZ Technology and MedAssets Inc. 10815%

April 17, 2012 | About:
Holly LaFon

Holly LaFon

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Steven Cohen, founder of $14 billion hedge fund SAC Capital Advisors which has returned nearly 30% annually in the last 20 years, made major increases to two of his high-growth-potential holdings on April 5, according to GuruFocus Real Time Picks. Though once trading-oriented, SAC increasingly emphasizes fundamental and technical strategies in equity selection.

Steven Cohen drastically increased his position in MedAssets Inc. (MDAS), a company that helps healthcare providers increase revenue and operating margins and has a $12 billion total U.S. market opportunity, by 10815%. He now owns 3,238,369 shares. The stock price had fallen 18% over the last year and has dropped 4% since Cohen’s most recent purchase.

Since its IPO in 2007, MedAssets has grown revenue at a rate of 20.7% annually and EBITDA at 4.9%. Fourth-year 2011 net loss was $15.5 million, compared to a net loss of $32.1 million the previous year, due to costs associated with its acquisition of Broadlane, one of the nation’s largest supply chain management companies, in November 2010.

The Broadlane acquisition enhanced the company’s market position as one of the largest provider-based supply chain management companies.

"With the new health insurance reform legislation, healthcare providers need to fundamentally transform their operating cost structures and reduce their overall cost of care delivery in order to essentially breakeven on Medicare rates while continuing to deliver high-quality clinical outcomes and operational results," Bardis added. "MedAssets now has a much greater breadth of capabilities to help drive down total hospital costs by offering an unparalleled group purchasing and supply chain cost management model that leverages data, analytics, consulting and outsourcing to drive clinical and operating effectiveness."

The company financed the transaction through loans, senior notes and a revolving credit facility, and hopes the cash flow boost from the acquisition can help it maintain liquidity while paying down debt.

At year-end 2011, MedAssets had about $1.1 billion in long-term liabilities and debt, with $167 million in cash.

Cohen also increased his holding of OCZ Technology (OCZ), a computer hardware and solid-state drive (SSD) manufacturer, by 247.2% at an average price of $6.70 per share. His holding now totals 3,711,431 shares and the price has declined 5% since his most recent purchase.

Cohen bought the stock after it had declined nearly 35% over the last year, and on the same day that the company launched its next generation Indilinx Everest SSD controller platform, which offers the industry’s highest IOPS performance and radically extends NAND flash life. The Everest 2 operates at unsurpassed speeds and the SSD market is one of the fastest growing in technology.

"Our Indilinx Everest 2 platform with Ndurance 2.0 is truly in a class by itself. It convincingly outperforms all competing solutions while providing unparalleled reliability and exceptional value through its life-extending NAND flash management capabilities," said Ryan Petersen, CEO of OCZ Technology. "This revolutionary architecture will be integral in our own storage developments going forward, and offers storage solution manufacturers with unprecedented performance, endurance and cost flexibility to optimize their designs."

Founded in 2002, OCZ began listing on NASDAQ in April 2010. In the last two years revenue has increased from $144 million in 2010 to $190 in 2011, while losses in EBITDA, net income and free cash flow steepened. The company’s balance sheet contains $104 million in cash with just $10.3 million in long-term liabilities, with no long-term debt.

In the company’s third quarter 2012, however, revenue increased 94% year over year, driven by an increased in market adoption of its SSDs.

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