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Morning Brief: Marcato Boosts Stake in UGGs Maker Decker

The activist hedge fund firm headed by Mick McGuire upped its stake in the company but hedged its bet at the same time.

  • By Stephen Taub

Marcato Capital Management has set up a hedge on its stake in Decker Outdoor Corp. In a regulatory filing the activist hedge fund firm said it bought 750,000 shares of Decker for $64.58 apiece, boosting its stake in the footwear maker best known for its UGGs brand to 8.4 percent of the total outstanding. At the same time, it bought 750,000 put options referencing 750,000 shares, with a strike price of $80. They are exercisable through January 19, 2018.

As we earlier reported, last month Marcato, headed by Mick McGuire, disclosed a 6.1 percent stake in the company and nominated a full slate of ten candidates to the board. “Deckers has enjoyed a strong, profitable brand with UGG for many years, yet has failed to translate this enviable position into growth in earnings and shareholder

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More bad news for one of David Einhorn’s high-profile short positions. Credit Suisse raised its price target on Caterpillar from $133 to $146 and raised its 2017 estimates in light of results from a recent deal survey. “For the U.S. dealers, strength in demand was broad-based and continued to surprise on the upside,” the investment bank stated in a note to clients. Shares of the heavy equipment maker rose 0.57 percent on Wednesday, to close at $131.29. They are now up more than 40 percent for the year. In its fourth quarter 2016 letter, Einhorn’s Greenlight Capital said it was short Caterpillar and other similar industrial cyclicals.

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Shares of activist target Chipotle Mexican Grill fell 3.36 percent, to close at $318.24, after Bank of America Merrill Lynch downgraded the shares to underperform from neutral and slashed its price target from $390 to $285, according to Thestreet.com. The investment bank also reduced its earnings estimates for 2018 and 2019. Among the reasons: the company’s labor costs are too high. The stock is now down more than 35 percent from its mid-May high.

Last December the casual dining chain agreed to add four board members as part of a compromise settlement with Bill Ackman’s Pershing Square Capital Management. At the end of the second quarter Pershing Square was the largest shareholder; the stock was the activist firm’s third-largest long.

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