The Morning Brief: Ackman’s Latest Herbalife Tactic

Pershing Square Capital Management’s William Ackman is apparently trying to reach out to Herbalife distributors to learn about their experiences and what they are happy and unhappy about. How do I know? Well, on Thursday afternoon I was randomly invited to participate in an automated telephone survey about Herbalife. Normally I immediately hang up on these calls but I stayed on the line when the survey firm identified itself and provided a phone number and contact person, suggesting it was legitimate and not trying to steal money from me. (Like a jerk, I answered honestly and said I wasn’t a distributor, so I didn’t get to hear the questions.) When I called the contact person at the polling firm, Global Strategies Group, she would not tell me who hired them. But the company’s website lists Pershing Square among a handful of clients. And the company has been known in the past to do public relations for the hedge fund firm. Ackman did not respond to requests to discuss the survey.

Another hedge fund data collector has weighed in on the size of the industry. Chicago-based Hedge Fund Research says total industry-wide capital rose to $2.51 trillion in the third quarter. Investors poured in more than $23 billion in net new capital in the most recent three-month period, the highest inflows in more than two years, according to the firm. Fund flows were concentrated among the largest, more well-known firms that mostly comprise Institutional Investor’s Hedge Fund 100. Investors allocated $18.7 billion of new capital to hedge fund firms with more than $5 billion in assets, while just $3.6 billion went to firms with less than $1 billion, according to HFR. Firms between $1 and $5 billion AUM received inflows of $1.1 billion.

Three hedge fund managers were included in Worth magazine’s fourth annual list ranking of the 100 most powerful people in finance. They include Steven Cohen, founder of SAC Capital Advisors, which is reportedly prepared to settle criminal charges of insider trading (which would probably result in the firm becoming a family office). The other two members of the ranking are Daniel Loeb, founder of Third Point, and Raymond Dalio, founder of Bridgewater Associates, who was recently named to Alpha’s Hedge Fund Hall of Fame. One hedge fund manager fell off this year’s list: William Ackman, founder of Pershing Square Capital Management.

Shares of hedge fund favorite Google surged an eye-popping $122.86, or nearly 14 percent, to close at $1,011.65 after the company reported upbeat earnings results after the market closed on Thursday. In response, Credit Suisse raised its earnings estimate and its target price on the stock, to $1,200 from $1,000. “We continue to view Google as one of the best-positioned in our space to benefit from the proliferation of connected devices and the ensuing lift in engagement,” it tells clients in a note Friday morning. “And we view the volume growth as a leading indicator of where its top line growth can go as pricing on mobile will eventually close the gap with desktop.”

Shares of Chipotle Mexican Grill surged nearly $72, or 16.34 percent, to an all-time high of $510.81, further calling into question why Greenlight Capital’s David Einhorn thought Yum Brands’ Taco Bell would steal significant business from the higher-priced, better quality Mexican food chain.


Eastman Chemical rose for the eighth straight day, closing at $81.61. We speculated earlier this month that the company is the next target of activist investor Barry Rosenstein’s Jana Partners. On the other hand, shares of J.C. Penney, held by various hedge funds, fell 4.76 percent, closing at the rock-bottom price of $7.

Citadel disclosed it owns 5.3 percent of GSV Capital Corp., a publicly-traded venture capital fund. The stock jumped more than 5 percent on Friday on the news.