The Morning Brief: TCI’s Hohn Goes All In On Hedge Fund Favorite Charter

Chris Hohn talked up the shares of hedge fund favorite Charter Communications on Thursday at the Sohn Conference in London. The founder of TCI Fund Management said he expects large stock buybacks — possibly as much as 35 percent of the shares — and thinks the cable and broadband giant may even one day receive a takeover overture from Verizon, according to Reuters. “Margins are going to be much higher than consensus assumes,” said Hohn, whose firm owned 4.4 percent of the shares at the end of the third quarter, making it the second-largest shareholder. “We think Verizon over time will buy Charter.” At the end of the third quarter, at least 133 hedge funds owned shares of Charter, according to portfolio intelligence platform Novus.com. The stock is the largest U.S. long holding of Lone Pine Capital, which is the company’s ninth-largest shareholder. The shares closed at $278.81, roughly unchanged.
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Morgan Stanley initiated coverage of hedge fund favorite Alibaba Group Holding with an overweight rating and a $130 price target. “We believe Alibaba’s most valuable asset is the rich data generated by its ecosystem, fostering business beyond e-commerce, while AliCloud is poised to emerge as a lucrative growth driver,” it told clients in its report. Alibaba is a major e-commerce company in China. AliCloud is the company’s public cloud business, which competes with Amazon Web Services. “We view Alibaba as an emerging IT giant,” Morgan Stanley added. The stock enjoyed a surge in hedge fund interest in the third quarter. Altogether, 133 hedge funds owned shares in the company, including 62 that took initial positions in the most recent quarter, according to Novus.com. Just nine hedge funds exited the stock. The shares closed at $93.17, up a little less than 1 percent.
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Blue Mountain Capital Management disclosed it owns 11.7 percent of International Seaways, a Dubai-based marine shipping company. In an initial 13D filing, the hedge fund firm says it bought the stock for investment purposes. It also used boiler-plate language to say it may speak with the company, other shareholders, or third parties in the future to discuss strategic alternatives.
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Elliott Management Corp. boosted its stake in Arconic from 10 percent to 11.1 percent. The Alcoa Corp. spin-off focuses on the faster-growing aerospace and automotive industries. In a regulatory filing, Elliott asserts that following the separation of the companies, Arconic’s shares “are dramatically undervalued and represent an attractive investment opportunity.” It also says it intends to engage in private discussions with the company regarding opportunities to improve operating performance and enhance shareholder value. Back in February, Alcoa worked out a deal with Elliott, which owned 7.5 percent of the shares at the time, under which the aluminum giant agreed to expand its board of directors and the hedge fund agreed to support the company’s slate of director nominees at the 2016 annual meeting.
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Shares of Restoration Hardware slumped 18 percent, to close at $31.95, after the home furnishings retailer cut its guidance, blaming the elections and the late delivery of its catalogs to customers. The stock is now down 60 percent in less than a year. At the end of the third quarter, Empyrean Capital Partners and Point72 Asset Management, the family office of Steven Cohen, were among the top-ten holders.

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