Steve Millionaire Cohen Offloaded 67.5% of His Shares in This AI-Related Company During a Stock Split and is Now Increasing His Investments in a Preferred Pick of Warren Buffett
Billionaire investor Steve Cohen, with a net worth exceeding $21 billion, knows a thing or two about financial strategies. He established S.A.C Capital Advisers in 1992 and later shifted the firm's activities to Point72 Asset Management in 2014 following Securities and Exchange Commission accusations of insider trading against S.A.C. Despite the incident, Cohen continues to serve as co-chief investment officer at Point72.
Investors should not blindly imitate large-scale investors like Cohen, as they employ distinct investment philosophies. However, they can serve as a source of inspiration for new investment ideas and assessing the investment theses of one's own portfolio.
Recently, Cohen offloaded most of his interest in semiconductor manufacturer Broadcom (AVGO 1.13%), and invested in a company favored by Warren Buffett instead. Let's delve into it.
Cohen shed 3.17 million shares of Broadcom
In the second quarter, Point72 disposed of more than 3 million shares of Broadcom, translating to approximately 67.5% of the fund's Broadcom holdings. Point72 started acquiring Broadcom shares in 2018. Though Point72 has bought and sold shares in Broadcom, the stock has performed impressively since Point72 first invested.
The stock appreciated by roughly 50% in 2022 and underwent a 10-for-1 stock split effective in June, aiming to make the stock more attractive to individual investors due to its high price. Given the hype around AI this year, Broadcom's AI-focused stocks played a significant role in the market's growth, but the ascent may face challenges if corporate earnings plateau or if inflation does not recede as anticipated. With the stock trading around 140 times trailing earnings, Cohen and Broadcom's management may have decided it's time to cash in their gains. Furthermore, the company's executives have been disposing of shares, and analysts forecast a 12% increase, although the potential reward may not be as enticing as it once was.
Investing in a Buffett classic
In the second quarter, Cohen and Point72 invested in a new position in tech giant Apple (AAPL 1.88%), purchasing 1.57 million shares at an average price of $186.50 each. Apple now holds the third-largest position in Point72's portfolio. Cohen has previously invested in and divested from Apple, but his latest acquisition marks a fresh position.
Apple is the most substantial holding in Berkshire Hathaway's significant equity portfolio. Notably, Buffett and Berkshire diminished their Apple stake by roughly 70% this year, yet Apple still accounts for more than 20% of Berkshire's $312 billion equity portfolio.
Point72's entry into Apple is far from surprising, given its historical relationship with the stock, and Cohen's affinity for technology and AI. Apple's forward price-to-earnings ratio of 30.3 has moderated from recent highs. In its latest quarterly earnings release, Apple surpassed analyst estimates for earnings and revenue, boosted by iPhone revenue growth of 6%. The iPhone, Apple's major revenue generator, exemplifies some consumer demand for the new iPhone 16, which was launched in September.
Additionally, Apple introduced Apple Intelligence, its AI system for latest iPhones and Macs running iOS 18.1, sparking optimism that AI updates to the operating system can invigorate iPhone demand, which has slackened formerly. This decrease can partly be attributed to weak consumer demand in China.
Perhaps Cohen appreciates the new AI components that Apple is introducing and views the company's valuation as reasonable. Apple is also notorious for generating substantial cash flow and buying back a large amount of stock, likely a factor that appeals to Cohen.
Following his sale of Broadcom shares, billionaire investor Steve Cohen looked to other opportunities in the finance world. He invested a significant amount in tech giant Apple, viewing its AI capabilities and cash flow as attractive opportunities for profit.
This strategic move aligns with Cohen's focus on finance and investments, as well as his interest in technology and AI companies that have the potential for robust growth.
