Steve Cohen And Insiders Are Bullish About These Stocks

Corporate insiders and hedge funds usually have an edge over ordinary investors. The reason is simple. Insiders have more exposure to their companies’ performance. They understand their companies and the industry much better than other investors. Sometimes they even have material non-public information. Hedge funds sometimes also have access to such information. Yes, trading on material non-public information is illegal and Raj Rajaratnam was caught. Steven Cohen was also recently under SEC’s radar but no charges were brought. But there are still many hedge funds and insiders trade in the grey area. In any case hedge funds have an edge over ordinary investors because they are more experienced and devote significant resources in researching stocks.

In this article, we are going to discuss the stocks that Steven Cohen and corporate insiders are bullish about. Cohen is founder of SAC Capital Advisors. He is the 35th richest man in America, according to Forbes. SAC Capital returned around 8% in 2011. All companies listed below have more than $10 billion market cap, were purchased by at least one insider during the past month, and Cohen’s SAC Capital invested at least $10 million in the stock. The market data is sourced from Finviz.

Company Name	Ticker	Value	Activity	Insiders
E Q T CORP	EQT	44997	1165%	3
N I I HOLDINGS INC	NIHD	35986	99%	4
VMWARE INC	VMW	30465	14%	1
BEST BUY COMPANY	BBY	28326	25%	1
ENERGY XXI LTD	EXXI	21490	17%	2
INCYTE CORP	INCY	19392	10%	1
WELLS FARGO	WFC	17260	371%	1
E TRADE FINANCIAL	ETFC	13224	193%	1

During the third quarter, Cohen significantly boosted his stakes in EQT by 1165%. As of September 30, 2011, SAC Capital disclosed owning $45 million worth of EQT shares. The stock was also purchased by three insiders during the past month. On January 3, Philip Behrman, Bray Cary and James Rohr bought more than 1000 shares in total at $54.79 per share. These three directors at EQT also bought about 800 shares at $53.36 on October 3. Now EQT is trading at $54.25 per share. It has a market cap of $8.62B and a P/E ratio of 17.74. At the end of the third quarter, there are 24 hedge funds with EQT positions. Richard Chilton’s Chilton Investment Company and Doug Silverman’s Senator Investment Group both opened new EQT position during the third quarter. Chilton initiated a brand new $44 million of EQT while Silverman bought $32 million new EQT shares.

Cohen also largely increased his stakes in Wells Fargo & Co (WFC) during the third quarter. SAC Capital had $17.3 million invested in this stock at the end of September, up 371% from the end of June. WFC was bought by one insider in the past month. John Baker purchased 662 shares at $27.2599, 66 shares at $27.26, and another 248 shares at $27.2999 on December 28. Now WFC is trading at $29.39 per share. It has a market cap of $155B and a relatively low P/E ratio of 10.85. The stock is also very popular among hedge funds. At the end of September, there are 69 hedge funds with WFC positions. For example, Warren Buffett’s Berkshire Hathaway had $8.7 billion invested in WFC at the end of the third quarter.

Other stocks that both Cohen and insiders are bullish about include VMware Inc (VMW), Best Buy Co Inc (BBY), NII Holdings Inc (NIHD), Energy XXI Limited (EXXI), E*TRADE Financial Corporation (ETFC), and Incyte Corporation (INCY). Our past studies have shown that investors can outperform the market simply by imitating insiders and hedge funds. Even they do not act directly on material non-public information, they can still benefit from such information by delaying their purchases or sells when they know bad or good news is about to be released. We strongly encourage investors to focus on the stocks picks of insiders and hedge funds managers like Cohen.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.