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Steven Cohen quietly became a billionaire by managing a hedge fund that achieved spectacular returns. From 1992 through 2005, he generated for his investors an average annual return of 43.5 percent, after subtracting his 3 percent annual management fee and 50 percent share of profits.

Cohen earned his high returns by quickly trading in and out of stocks. He often had no knowledge of what a company did or what its financial fundamentals were. Instead, he followed the trading patterns of stocks. He bought and sold based on what was called "tape watching" in the days when stock prices were reported on paper ticker tapes. Investment positions were held for short periods of time (a few weeks on average), and the number of trades was high.

After the bull market ended in 2000, the markets began to change. After 2002, Cohen decided the changes were long term and his strategy needed to adapt. According to a profile published in the Wall Street Journal ("The Hedge-Fund King Is Getting Nervous" by Susan Pulliam, September 16, 2006), Cohen altered his strategy to focus more on fundamentals and to hold stocks longer, from 6 to

12 months. He also told investors to expect lower returns in future years because there would be fewer opportunities in the markets. Cohen concluded that the days of making high returns were over as were the days of profiting from quick trading.

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