Steve Cohen's Investment Moves: Selling Broadcom and Buying Apple

Steve Cohen is well-known as the owner of the New York Mets and the head of the hedge fund Point72 Asset Management. With an estimated net worth exceeding $21 billion, Cohen has established himself as a prominent figure in the investment world.

Cohen's journey in finance began when he founded S.A.C. Capital Advisers in 1992. However, after facing insider trading charges from the SEC, he shifted the company's focus to Point72 Asset Management in 2014. Today, he continues to serve as the co-chief investment officer at Point72.

While it's important for investors to conduct their own research and not follow large institutional investors without scrutiny, following these investors can provide valuable insights into market trends and investment opportunities.

Recently, Cohen made headlines by selling a significant portion of his shares in the chipmaker Broadcom (AVGO) and instead investing in a well-known stock associated with Warren Buffett.

Cohen's Sale of Broadcom Shares

In the second quarter, Point72 sold over 3 million shares of Broadcom, representing 67.5% of his total holdings in the company. Point72 had begun acquiring shares of Broadcom back in 2018, and throughout that time, the stock has shown solid performance.

Looking at the current state of Broadcom, the stock has risen approximately 50% this year and recently underwent a 10-for-1 stock split in June. Such splits often make shares more accessible to a broader range of investors. With the growing interest in artificial intelligence, Broadcom's management likely aimed to attract retail investors, despite its previously high share price.

AI stocks, including Broadcom, have played a significant role in the year's stock market surge. However, challenges may arise if corporate earnings start to plateau or if inflation continues to remain steady. Currently, Broadcom trades at about 140 times its trailing earnings, which may have prompted Cohen and his team to consider taking profits. Furthermore, Broadcom's executives have also been selling shares, and analyst price targets hint at only around a 12% potential upside, raising questions about risk versus reward.

Investment in Apple, a Buffett Favorite

In contrast to his decision on Broadcom, Cohen opened a new position in the second quarter by purchasing 1.57 million shares of Apple (AAPL) at roughly $186.50 each. With this purchase, Apple now stands as the third-largest investment in Point72's portfolio. Cohen has previously bought and sold shares of Apple, signifying an ongoing interest in the tech giant.

Interestingly, Apple represents the largest holding in Berkshire Hathaway's investment portfolio. While Warren Buffett and his team sold about 70% of their Apple position this year, Apple still constitutes more than 20% of Berkshire's substantial $312 billion equity portfolio.

Cohen's renewed investment in Apple is not surprising, given the fund's history with the company and Cohen's familiarity with tech and AI. Apple recently reported strong fiscal fourth-quarter earnings, surpassing expectations for both revenue and profit. The company's main revenue driver, the iPhone, saw a 6% increase in sales, hinting at consumer demand for the new iPhone 16 model that launched in late September.

Additionally, Apple has rolled out new artificial intelligence features across its devices, which may regenerate interest among consumers, particularly in light of recent weakening demand in markets like China. It seems that Cohen is optimistic about the company's new AI enhancements and finds its current valuation justifiable. Apple is also recognized for its strong cash flow and aggressive stock buyback program, aspects that likely appeal to Cohen's investment strategy.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Cohen, Investment, Stocks