Steven Cohen (Trades, Portfolio), CEO and President of Point72 Asset Management, has revealed his portfolio for the third quarter of 2021. The guru’s top trades from the quarter include reductions to positions in Amazon.com Inc. (AMZN, Financial) and Western Digital Corp. (WDC, Financial), new buys into International Business Machines Corp. (IBM, Financial) and Activision Blizzard Inc. (ATVI, Financial) alongside selling out of his Micron Technology Inc. (MU, Financial) holding.
Cohen's Point72 was formed as a hedge fund in 2014 when SAC Capital Advisors converted its investment operations into a family office. In 2018, the firm reopened to external investors. The firm invests via a wide range of asset classes and strategies worldwide to generate superior risk-adjusted returns. Its long-short strategy is based on bottom-up research with a focus on fundamentals and macroeconomic conditions.
Portfolio overview
At the end of the quarter, the guru’s portfolio contained 1,016 stocks with 350 new holdings. It was valued at $22.74 billion and has seen a turnover rate of 40%. The top holdings in the portfolio include Salseforce.com Inc. (CRM, Financial), Uber Technologies Inc. (UBER, Financial), Meta Platforms Inc. (FB, Financial), Twitter Inc. (TWTR, Financial) and Booking Holdings Inc. (BKNG, Financial).
The top sectors represented in the portfolio are technology (23.41%), health care (20.97%) and consumer cyclical (10.24%).
Amazon
The guru’s position in Amazon (AMZN, Financial) has rotated in and out of the portfolio throughout the last decade, but most recently saw a massive 96.63% reduction with the sale of 143,532 shares. The shares traded at an average price of $3,451.22 during the quarter. Overall, the sale had a -2.22% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 35.43%.
Amazon is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $482 billion in estimated physical-digital online gross merchandise volume, or GMV, in 2020. Retail related revenue represented approximately 83% of total, followed by Amazon Web Services' cloud computing, storage, database and other offerings (12%) and advertising services and co-branded credit cards (6%). International segments constituted 27% of Amazon's non-AWS sales in 2020, led by Germany, the United Kingdom and Japan.
On Nov. 19, the stock was trading at $3,757.62 per share with a market cap of $1.90 trillion. According to the GF Value Line, the stock is trading at a fair value rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 3 out of 10. There is one severe warning sign issued for assets growing faster than revenue. The company’s cash-to-debt ratio of 0.69 just edges out the majority of industry competitors, though falls short of the 10-year median ratio of 1.17.
Top guru shareholders in Amazon (AMZN, Financial) include Baillie Gifford (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Pioneer Investments, Spiros Segalas (Trades, Portfolio) and Frank Sands (Trades, Portfolio).
IBM
For the third time in four years, the guru established a new buy into IBM (IBM, Financial). The position was established with the purchase of 1.60 million shares that traded at an average price of $133.56 during the quarter. GuruFocus estimates the total loss of the holding at 5.38% and the purchase had a 0.87% impact on the equity portfolio.
IBM looks to be a part of every aspect of an enterprise's IT needs. The company primarily sells infrastructure services (37% of revenue), software (29% of revenue), IT services (23% of revenue) and hardware (8% of revenue). IBM operates in 175 countries and employs approximately 350,000 people. The company has a robust roster of 80,000 business partners to service 95% of all Fortune 500 companies. While IBM is a business-to-business company, IBM's outward impact is substantial. For example, IBM manages 90% of all credit card transactions globally and is responsible for 50% of all wireless connections in the world.
As of Nov. 19, the stock was trading at $116.16 per share with a market cap of $104.04 billion. The GF Value Line gives the stock a fair value rating.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 9 out of 10. There is one severe warning sign issued for a declining operating margin. Despite the severe warning sign, the company’s operating margin exceeds 68.46% of industry competitors alongside a similarly strong net margin.
IBM (IBM, Financial) counts Pioneer Investments, Jeremy Grantham (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Dodge & Cox and Mario Gabelli (Trades, Portfolio) as top guru shareholders.
Activision Blizzard
Cohen bought back into Activision Blizzard (ATVI, Financial) after selling out of his holding in the first quarter of 2021. The holding was re-established with the purchase of 2.53 million shares that traded at an average price of $83.70 during the quarter. The new buy had a 0.86% impact on the equity portfolio and GuruFocus estimates the guru has lost 5.02% on the holding overall.
Activision Blizzard was formed in 2008 by the merger of Activision, one of the largest console video game publishers, and Blizzard, one of largest PC video game publishers. The combined company remains one of the world's largest video game publishers. Activision's impressive franchise portfolio includes "World of Warcraft," which boasts more than $8 billion of lifetime sales, and "Call of Duty," which has sold over 175 million copies across 14 titles over 12 years.
The stock was trading at $63.34 per share with a market cap of $49.67 billion on Nov. 19. A modestly undervalued rating is given to the stock by the GF Value Line.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 6 out of 10. The company only shows good warning signs for expanding margins and growing revenue per share. Revenue and net income took a small hit in 2019, but recovered quickly to hit a 10-year high.
Primecap Management, Pioneer Investments, First Pacific Advisors (Trades, Portfolio), Daniel Loeb (Trades, Portfolio) and George Soros (Trades, Portfolio) also own Activision Blizzard (ATVI, Financial) shares.
Micron
The guru sold all 2.2 million shares of Micron (MU, Financial) to exit the holding during the quarter. The shares traded at an average price of $75.15, landing the holding at a total estimated gain of 28.02%. Overall, the sale had a -0.85% impact on the equity portfolio.
Micron historically focused on designing and manufacturing DRAM for PCs and servers. The company then expanded into the NAND flash memory market. It increased its DRAM scale with the purchase of Elpida (completed in mid-2013) and Inotera (completed in December 2016). The firm's DRAM and NAND products are tailored to PCs, data centers, smartphones, game consoles, automotives and other computing devices.
On Nov. 19, the stock was trading at $83.09 per share with a market cap of $92.94 billion. According to the GF Value Line, the stock is trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 4 out of 10. There is one severe warning sign issued for assets growing faster than revenue. The company’s cash flows tanked last year as supply constraints plagued the semiconductor industry, but show signs of recovery this year.
Top guru shareholders of Micron (MU, Financial) include Primecap Management, Li Lu (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Seth Klarman (Trades, Portfolio) and Pioneer Investments.
Western Digital
Rounding out Cohen’s top trades was a reduction in his Western Digital (WDC, Financial) holding. The guru sold 2.34 million shares to cut the holding by 40.36%. The shares traded at an average price of $62.94 throughout the quarter. GuruFocus estimates Cohen has lost 4.46% on the holding and the sale had a -0.75% impact on the equity portfolio overall.
Western Digital is a leading vertically-integrated supplier of data storage solutions, spanning both hard disk drives (HDDs) and solid state drives (SSDs). In the HDD market, it forms a practical duopoly with Seagate, and it is the largest global producer of NAND flash chips for SSDs in a joint venture with competitor Kioxia.
As of Nov. 19, the stock was trading at $56.23 per share with a market cap of $17.53 billion. The stock is trading at a fair value rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 8 out of 10. There are three severe warning signs issued for a declining gross margin, a declining operating margin and declining revenue per share. The company has struggled to balance the weighted average cost of capital and return on invested capital in recent years, indicating capital efficiency issues.
Western Digital (WDC, Financial) shares are also owned by the Parnassus Endeavor Fund (Trades, Portfolio), Primecap Management, Pioneer Investments, Jerome Dodson (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
