Steven A. Cohen likes Green Mountain Coffee.
The founder of SAC Capital Advisers, the $12 billion hedge fund in Stamford, Conn., sat for a rare wide-ranging interview with Paul Tudor Jones, another hedge fund manager, where he discussed his favorite stocks and a whole lot more. The interview was part of a two-day conference at the Waldorf Astoria hotel in Midtown Manhattan sponsored by ISI, the Wall Street research firm.
The conference was closed to the media, but this DealBook dispatch is based on detailed reports from several people in the audience.
Other than complaining about his bad back, Mr. Cohen is said to have appeared at ease during the hourlong conversation before a packed crowd. Mr. Jones, who joked that he was playing the role of Charlie Rose, pressed Mr. Cohen on a variety of topics but did not — no surprise — ask questions about the government’s insider trading charges against two of his former traders.
Mr. Cohen talked about how he got started as a trader, reading the stock tables in the daily newspaper as a child and hanging around the local brokerage firm near his house in Great Neck, N.Y. There “was something in my blood, something that I loved” about trading that has stayed with him. He had a little money to trade and began putting it at risk.
Mr. Cohen’s first stock investment? Perkin Elmer, which turned out to be a winner. He said he had ignored an alternative recommendation from his father, a garment center executive, to buy a fabric maker.
He spoke about his 14 years at Gruntal, a New York brokerage firm where he worked before forming SAC. He started in the firm’s options arbitrage area. But he found himself quickly bored of hedging stocks because he would see the firm selling a position up 20 cents — when if he had only held on it would have gone up a dollar.
In his 20s, Mr. Cohen said he had his own “pad” and was earning “seven figures” at Gruntal. The firm paid him 60 percent of the profits he earned — “pretty generous” terms, he said — but he eventually wanted more money to manage so he took a pay cut and started SAC.
He said his fondest market memory came from his time at Gruntal when he was short the market heading into the crash of 1987. “I made a lot of money,” he said, “and I also covered on the open the next day.” Had he not done that he would’ve put his firm out of business, he said.
During the early days, he described SAC as a “pure trading shop” but soon realized the business was scalable. So he said he went about hiring “people who were smarter than me” and who were “young and hungry.” The hope was to turn SAC into a more “fundamental shop,” meaning a firm that focused less on trading and more on security analysis.
Considered a gifted “tape reader” with an uncanny knack for predicting stock-price movements, Mr. Cohen said that because of the rise of electronic trading and the way that orders were chopped up, “tape reading is a lost art that today is not very useful.”...MORE
Wednesday, February 16, 2011
SAC Capital’s Cohen Opens Up (he likes Green Mountain) GMCR
Scoopage from DealBook: