Billionaire Steve Cohen Sold 67.5% of His Stake in This AI Stock-Split and Is Piling Into a Warren Buffett Favorite

Steve Cohen has an estimated net worth north of $21 billion. Needless to say, he knows a thing or two about investing. Cohen founded S.A.C Capital Advisers in 1992 and transitioned the company’s operations to Point72 Asset Management in 2014 after the Securities and Exchange Commission charged S.A.C. with insider trading. Cohen still serves as co-chief investment officer at Point72 today.

Investors should never blindly invest based on positions held by large institutional investors like Cohen, because they invest with very different mindsets. But these investors are great to follow for new investment ideas and to check investment theses of your own (i.e., if someone is selling a stock in your portfolio).

Recently, Cohen sold most of his stake in the chipmaker Broadcom (AVGO 3.17%) and piled into one that Warren Buffett long favored. Let’s take a look.

Cohen has sold 3.17 million shares of Broadcom

In the second quarter, Point72 sold more than 3 million shares in Broadcom, which equates to 67.5% of the fund’s total holdings in the stock. Point72 first began accumulating shares in Broadcom in 2018. While Point72 has been in and out of the stock, Broadcom has performed quite well since the hedge fund first bought shares.

AVGO data by YCharts

The stock is also up about 50% this year and underwent a 10-for-1 stock split that went into effect in June. Companies typically do this to make their stock more appealing to smaller investors. With artificial intelligence (AI) all the rage this year, management probably didn’t want to miss out on retail interest due to its high share price.

AI stocks like Broadcom have contributed significantly to the bull run this year, which could face challenges if corporate earnings top out or inflation doesn’t come down as many expect. With the stock trading at close to 140 times trailing earnings, Cohen and the portfolio managers at Broadcom may have decided that it’s time to cash in their winnings. Additionally, executives at the company have been selling shares and analyst price targets currently suggest about 12% upside. That’s certainly nothing to sniff at, but the risk-reward proposition may not be as appealing as it’s been.

Buying a classic Buffett favorite

Cohen and Point72 opened a new stake in the second quarter in the consumer tech giant Apple (AAPL 0.65%), purchasing 1.57 million shares at roughly $186.50 apiece. This makes Apple the third-largest position in Point72’s portfolio. Cohen has been in and out of Apple over the years, but it’s a new position from the last time he sold it.

Apple is the largest position in Berkshire Hathaway‘s significant equities portfolio. Interestingly, Buffett and Berkshire sold roughly 70% of their stake in Apple this year but it still makes up more than 20% of Berkshire’s $312 billion equity portfolio.

Point72’s purchase of Apple is not a huge surprise, considering the fund’s history with the stock. We also know that Cohen is no stranger to tech and AI. Apple’s forward price-to-earnings ratio of 30.3 has come down from highs seen in recent months. Apple recently reported its fiscal fourth-quarter earnings, beating estimates for earnings and revenue. iPhone revenue, the company’s largest revenue source, grew 6% — providing a small glimpse of consumer demand for the new iPhone 16, which came out in late September.

Apple also recently rolled out Apple Intelligence, its AI system for recent iPhones and Macs using the iOS 18.1 operating system. Many are optimistic that new AI updates to the operating system can rejuvenate iPhone demand, which has declined lately. Part of this is due to weak consumer demand in China.

I suppose Cohen likes the new AI components that Apple is unleashing and doesn’t view the company’s valuation as unreasonable. Apple is also known for generating lots of cash flow and repurchasing lots of stock, which I’m sure Cohen doesn’t mind, either.