The Morning Brief: Cooperman’s Stock Picks; Brevan Howard’s Summer Bummer

Omega Advisors’ Leon Cooperman told CNBC he believes the stock market is fairly valued. Speaking a couple of hours before the Federal Reserve announced that it has no current plans to reduce its bond buying program, the one-time Goldman Sachs partner stressed that the Fed needs to remain friendly. “The market is data dependent,” Cooperman added. He thinks the S&P 500 can rise to between 1600 and 1700, but it is mostly dependent on the price-to-earnings ratio, since “earnings are not growing that much,” he said. Among stocks he singled out: THL Credit, the private equity and mezzanine finance lender that is yielding around 9 percent; energy companies Linn Energy and Atlas Resource Partners, L.P.; and Tetragon Financial, even though earlier this week he sued the company’s officers and directors over its purchase of hedge-fund firm Polygon Management LP. Other stocks Cooperman mentioned included Express Scripts, Halliburton, Motorola Solutions and Sandridge Energy.

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Alan Howard’s London-based hedge fund firm Brevan Howard has already given back more than half the 2013 gains for its flagship fund in the first half of June alone. Its BH Macro fund lost 3.57 percent this month through June 14. As a result, the hedge fund is up just 3.28 percent for the year. The fund had lost 0.17 percent in May, its first monthly loss since October. At the end of May more than half of the fund’s exposure, some 54 percent, was to Europe, while 19 percent was invested in Asia. Of the eight different strategy groups defined by the firm, through the year the bulk of the fund’s gains have been driven by what it calls macro, defined as “multi-asset global markets, mainly directional.” However, it is not clear which specific markets the fund was exposed to.

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The recent rise in interest rates has no doubt hurt credit funds. One example: The Midway Market Neutral Fund, which lost 3.60 percent in May, net of fees and expenses, its third consecutive monthly loss. As a result, the New York hedge fund is down 2.94 percent for the year-to-date. “We are never pleased with negative performance,” it told clients in its May report. “However, recent weakness will provide opportunities to deploy our significant cash balance to acquire quality bonds at cheaper prices. We therefore remain constructive on the opportunity looking forward.”

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Alexander J. Roepers’ Atlantic Investment Management cut its stake in glass container manufacturer Owens-Illinois to 4.9 percent after selling more than 1.5 million shares at between roughly $27 and $28 per share from May 2 to June 18. The New York hedge fund firm runs the AJR, Cambrian and Cambrian Global funds.

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Morningstar reports that single-manager hedge funds in its database gained $1.3 billion in assets in April. Merger arbitrage hedge funds were the most popular, pulling in a net $1.6 billion, followed by multistrategy hedge funds, which gained $483 million. The strategies that suffered the biggest net outflows of capital in April were global macro ($434 million), long-only equity ($180 million) and distressed securities ($171 million).

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More bad news for Greenlight Capital’s David Einhorn. Even on a day the overall stock market took a big hit, shares of the hedge fund manager’s once-touted short, Green Mountain Coffee Roasters, surged more than 3 percent to close at $81.76. The stock is now up more than 85 percent this year alone.

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