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Morning Brief: D.E. Shaw Owns 5.4 Percent of Herbalife

The multistrategy hedge fund firm is now one of the multilevel marketing company’s biggest shareholders.

  • By Stephen Taub

D.E. Shaw disclosed after the stock market closed for trading on Monday that as of January 18, it owned nearly 4.75 million shares of Herbalife, or 5.4 percent of the total outstanding of the multi-level marketer of nutrition products. This probably makes the multistrategy hedge fund giant one of the company’s top-ten shareholders. At the end of the third quarter, D.E. Shaw owned 2.75 million shares of Herbalife. The stock surged more than 4 percent on Monday, to close at $83.31. It is up nearly 20 percent this year alone and is up about 60 percent since last March. Herbalife, of course, has been the target of a high-profile negative bet by Bill Ackman’s Pershing Square Capital Management.

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Meanwhile, Ackman’s Pershing Square Capital Management publicly released its fourth-quarter letter, which provides a little more granular insight into what caused the activist firm to post a 4 percent loss last year, its third consecutive annual loss. For example, its Pershing Square L.P. fund posted a 3.3 percent gain in its long book and a 3.4 percent loss in the short book. Pershing Square Holdings posted a 1.5 percent gain on its longs and a 4.1 percent loss on its shorts.

Altogether, the concentrated firm made money on six individual stocks, led by Restaurant Brands International and Automatic Data Processing. It also lost money on six individual positions, led by its negative bet on Herbalife, followed by long positions in Mondelez International and Fannie Mae/Freddie Mac. Entering 2019, the firm was managing about $8.8 billion, down about 40 percent from $14.9 billion just two years ago.

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Starboard Value has nominated three directors to the board of directors of Stewart Information Services Corporation. They include Starboard partner Gavin Molinelli. The other two nominees are Roslyn Payne, president of Jackson Street Partners, a real estate venture capital and investment firm, which she co-founded in 1988, and George Scanlon, who recently served as the chief executive officer of title insurance giant Fidelity National Financial. The activist hedge fund firm headed by Jeffrey Smith currently owns 9.7 percent of Stewart, which provides title insurance and real estate transaction services.

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Another week, another hike in hedge fund favorite Amazon.com’s price target. This time it is Citigroup, whose analyst lifted the target from $1,400 to $1,600, according to CNBC. It also retained its buy recommendation. The bank asserts that advertising will drive growth at the e-commerce giant. Shares of Amazon jumped another 1.1 percent, to close at $1,417.68, on an otherwise down day for the broad stock market.

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Barclays upgraded Allergan to overweight and raised its price target from $220 to $230, asserting that the drug giant’s aesthetics franchise is “undervalued” at current levels. “Our confidence in the durability of the aesthetics franchise, led by Botox, was validated by a survey we conducted; aesthetics remains a key earnings driver” and should drive a premium to Allergan’s current valuation, the investment bank tells clients in a note. It added that until now it remained on the sidelines due to risks surrounding Allergan’s legacy drug portfolio. At the end of the third quarter, 121 hedge funds held a position in the stock, 14 more than the previous three-month period, according to research and analytics firm Novus. Of the 121, 31 were new positions in the September period.

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