The Morning Brief: Tesla Zooms Past Hedge Funds

Shares of Tesla Motors — one of the best stocks most hedge funds don’t own — surged another 14 percent on Tuesday to close at $248.18. It is now up about 67 percent this year alone and seven-fold since the end of 2012. Tuesday’s rapid runup came after Morgan Stanley raised its price target on the company to $320 from $153, noting that Tesla said it will team up with partners to build the world’s largest Li-ion battery pack facility in the U.S., which it believes would disrupt a trillion-dollar electric utility industry. “If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again,” Morgan Stanley writes in a note to clients. Too bad few hedge funds count it among their top holdings. The only two hedge fund firms that rank among the company’s top 25 holders as of year-end had very small positions — D.E. Shaw and Citadel. And they each trimmed their holdings in the fourth quarter as well.

Another company has blinked first in its tussle with two activist hedge funds. Williams Cos. reached an agreement with Keith Meister’s Corvex Management and Eric Mandelblatt’s Soroban Capital Partners whereby Mandelblatt will immediately be appointed to the Williams board of directors. In addition, Meister or a mutually-agreeable industry expert will be appointed to the board at the regularly scheduled November 2014 board meeting. Under the deal, Corvex and Soroban have agreed to a standstill provision and other provisions. Corvex and Soroban also agreed not to launch a proxy fight at the 2014 annual meeting or any subsequent meeting as long as their representatives serve on the board.
“Corvex and Soroban have engaged in numerous discussions related to the company’s strategic plan to drive continued value creation, and we are pleased to have reached this agreement,” said Frank MacInnis, chairman of Williams, in a press release. The two investment firms have over $2.5 billion invested in the energy company. New York-based Soroban, which has over $5 billion in assets under management, was founded by Mandelblatt, one of the founding partners and portfolio managers of TPG-Axon Capital. New York-based Corvex also manages more than $5 billion. Prior to founding Corvex, Meister served in a variety of roles working for Carl Icahn, including chief executive officer and vice chairman of Icahn Enterprises.

Edward Lampert and his hedge fund firm, ESL Partners, continue to trim their stake in AutoNation. Lampert sold about 260,000 of shares he personally owns, while ESL unloaded more than 2.55 million shares, reducing their combined stake in the auto retailing giant to 23.3 percent from 25 percent. All of the shares was sold in the open market for roughly $51 to $52 per share.

Tiger Global Management continues to trim its stake in TAL Education Group, the China-based after-school tutoring services provider. The New York hedge fund and private equity firm now owns 4.3 percent of the total shares after selling two million shares, mostly for somewhere between $24 and $25 a share. It no longer is required to report future sales now that its stake has fallen below 5 percent.

Alan Howard’s BH Macro Ltd. is off to a slow start. The London-based fund, which invests substantially all of its assets in Brevan Howard Asset Management’s Brevan Howard Master Fund, lost nearly 1 percent in the first three weeks of February and is now down 2.29 percent for the year. Although the fund gained only 2.61 percent last year, it has never suffered a losing year.

BNY Mellon is moving further into the hedge fund industry after agreeing to acquire the remaining 65 percent of HedgeMark International that it does not currently own. HedgeMark provides hedge fund managed account and risk analytic services. BNY Mellon has held a 35 percent stake since 2011. HedgeMark helps in the structuring, oversight, and risk monitoring of hedge funds and specifically dedicated managed accounts, also known as single investor funds, according to a press release.