Here's What a Huge Hedge Fund Is Buying

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Every quarter, fund managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.

Today let's look at SAC Capital Advisors, run by Steven Cohen. SAC is one of the biggest hedge funds around, with a stock portfolio totaling close to $16 billion in value as of Dec. 31, 2011. A fund doesn't easily grow that large without performing well, and indeed, Cohen has reportedly averaged returns of roughly 30% annually over two decades.

The fund's top holdings as of Dec. 31 were Apple, Weatherford International, and Gilead Sciences. Together they represent just 4.9% of the overall portfolio, though, since SAC encompasses nearly 1,900 holdings.

Interesting developments
So what does SAC Capital's latest quarterly 13F filing tell us? Here are a few interesting details:

New holdings include Aeterna Zentaris (Nasdaq: AEZS  ) , which has many hopeful about the cancer drug perifosine that it's working on with Keryx Biopharmaceuticals. Phase 3 results for its use against colon cancer are due very soon, with results against blood cancer coming later. Shares have been rather volatile lately, and poor test results will knock them down, but the company has more potential in its pipeline, too.

SAC upped its stake in lots of companies, such as Chimera Investment (NYSE: CIM  ) . The mortgage REIT has drawn much interest with its dividend yield recently near 15%. But it's not without risk. In fact, Chimera has invested in riskier (and higher-yielding) assets than many of its peers, while taking on less debt than they do. For those who handle risk, Chimera is positioned to take advantage of opportunities out there, such as those brought on by trouble in Europe.

Among the many companies in which SAC reduced its stake are Sirius XM Radio (Nasdaq: SIRI  ) and Corning (NYSE: GLW  ) . Sirius has seen its revenue growth slow, but its profitability and cash flow have been growing well, and it sports a subscribership well above 20 million. Some think that a deep-pocketed tech company will buy Sirius, but my colleague Rick Munarriz doubts that. While SAC unloaded shares of Corning, many viewed them as bargains. The innovative company has a solid balance sheet and a very successful product in its Gorilla Glass, found in many devices such as smartphones and tablets. Bears worry about competition, though, as well as the low-profit LCD screen business.

Finally, SAC unloaded plenty of companies completely, such as InterDigital (Nasdaq: IDCC  ) . The company may have decided not to put itself on the block, but it does seem poised to sell off some of its valuable patents. That can generate some much-needed cash for the company, but it's not a great long-term business model.

We should never blindly copy any investor's moves, no matter how talented he or she may be. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.

If you're not too excited about InterDigital but still want to profit from the explosive growth of the smartphone industry, check out our special free report, "The Next Trillion-Dollar Revolution," which will introduce you to a much more compelling investment.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter here, owns shares of Apple, Gilead Sciences, and Corning, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Apple and Corning. Motley Fool newsletter services have recommended buying shares of Gilead Sciences, Corning, InterDigital, and Apple, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 15, 2012, at 12:35 PM, jonluxy wrote:

    Motley lives up to its reputation again for oversimplifying or leaving out infomormation. IDCC is not solely a patent selling model. They are primarily a patent licensing business model, but they are not patent troll. They invented the mobile industry and receive royalties from over half the industry and should be getting them from at least 90% of the industry but not eveyone plays by the rules (and so litigation). But it is smart to be selling their non-core non-money-producing patents, as they are estimated (the ones now being negotiated) to be worth up to $600 million to other interested parties. I suppose this is all too complicated for the layman, and thus the depressed bargain basement stock price for IDCC. I am long and staying long. AAPL needs to upgrade their IDCC license to include 4G (and don't expect IDCC to give away the store on this one). A possible favorable decision from the CAFC will be another windfall (could happen any day). I estimate 25% of the stock held a few months ago was soley in hopes of the buyout that was mentioned in the article and when that was not the option they picked the stock tumbled as all those millions of shares were dumped. It has yet to recover, but come on already with the punishment. This is a solid comoany. A solid business model and a rare pure play in the fastest growing mobile technology ever 4G/LTE. It also pays a 1% dividend, and is sitting on a net 11$ per share in cash, and they expect to be positive cash flow this year. Two new 4G license deals have been signed since the announcement. Last 3 qtrs blew away expecatatons. Yet it is down $10 a share from 1 year ago. Wake up investors! HellOOOoooo! Is this stock market just a bunch of sour pusses?

  • Report this Comment On March 15, 2012, at 2:28 PM, TMFSelena wrote:

    Hi, jonluxy --

    I didn't have the space to go into much detail, but I did link to a colleague's article that offers more information on the company. Of course it's more than just a patent licensor, but it does seem to be experiencing a hiccup or two now, and it's always worthwhile to question or look into a company's business model.


  • Report this Comment On March 18, 2012, at 3:12 PM, M4135 wrote:

    @jonluxy, What two 4g licenses were those? I didn't see this in the news.

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