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Morning Brief: Greenlight Buys Sizable Stake in MetLife Spinoff

The hedge fund purchased shares of life insurance and annuities provider Brighthouse Financial during the fourth quarter.

David Einhorn’s Greenlight Capital has established a sizable position in Brighthouse Financial, making the MetLife spinoff one of the hedge fund firm’s five largest disclosed long positions. In its fourth-quarter letter sent to investors and obtained by Institutional Investor’s Alpha, Greenlight said it paid an average price of $57.92 for the shares of the insurance and annuities provider, which formerly comprised most of MetLife’s U.S. retail business.

“BHF appears to be a traditional spinoff — an underperforming and unloved part of a larger, more successful company,” Greenlight said in the letter. “The tone of the spin-off road show was noticeably downbeat, with management advancing a business plan that does not sound particularly exciting for shareholders.”

Analysts are “too pessimistic” about the company’s prospects, Greenlight said in the letter, drawing a contrast with many of its short positions “that don’t appear to have any cushion built in for a bear market.”

Greenlight, which returned 1.6 percent last year, said it added several other small positions in the fourth quarter. They include Ensco, an operator of offshore rigs, media giant Time Warner, which it previously had owned, and social media giant Twitter. It also exited VanEck Vectors Gold Miners ETF and Hewlett Packard Enterprise, an enterprise information technology company.

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Shares of hedge fund favorite Merck jumped almost 6 percent January 16 to close at $62.07 after the health-care giant announced promising results from a drug trial for a new treatment for lung cancer. At the end of the third quarter, Merck was the fifteenth most widely held stock among hedge funds, with at least 147 of them reporting a position in the company, according to research and analytics firm Novus.

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Hertz Global Holdings, a favorite holding among hedge funds and activists, plunged nearly 15 percent January 16 to close at $20.93 after rival Avis issued pessimistic guidance for 2018. Investors apparently fear Hertz will be similarly impacted. Carl Icahn is by far the largest shareholder of Hertz, with about 35 percent of the shares, while Glenview Capital Management is the fourth largest shareholder with about 6 percent of the shares, according to regulatory filings. Balyasny Asset Management owns 5 percent of Hertz’s stock.

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