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The Morning Brief: Hedge Fund Favorite Priceline Group Sinks

Shares of the online travel giant — a hedge fund favorite — tumbled after Credit Suisse cut its price target on the stock.

  • By Stephen Taub

Shares of The Priceline Group, one of the most widely held hedge fund stocks, fell 7 percent — to close at $1,906.08 — after Credit Suisse cut its price target from $2,150 to $2,070. It cites concern over the company’s room night growth. The investment bank points out in a note to clients that in its second-quarter earnings report, Priceline’s room-night growth did not beat the high-end of guidance as usual and third-quarter room-night growth outlook “was disappointing.”

The online travel giant is one of the hot stocks that have helped to propel the U.S. stock market’s gains over the past year. “Given a favorable demand environment with healthy macro trends and no significant changes to the competitive landscape in core Western markets, we are sticking with our outperform [rating] and remain constructive on PCLN given low market share, unparalleled track record of execution and the possibility that Priceline is de-emphasizing low gross profit room nights in some markets,” Credit Suisse adds in the note.

We won’t know for another few days which hedge funds held shares of Priceline at the end of the second quarter. At the end of the first quarter it was among the 25 most widely held stocks among hedge funds, with at least 91 holding a position, according to Goldman Sachs.

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Shares of Valeant Pharmaceuticals International plunged more than 10 percent on Wednesday, to close at $14.07. On Tuesday morning, Valeant reported a second-quarter loss that was significantly narrower than the previous year’s loss and much smaller than the consensus was forecasting. It also reduced its 2017 revenue guidance. The stock rose a little less than 2 percent on Tuesday. After Wednesday’s nosedive the stock is now under water for the year, after surging as much as 22 percent at one point. It is now down more than 20 percent from its late July high. One possible explanation for Wednesday’s decline: Nearly 1.5 hours after the market closed, Paulson & Co. disclosed that it sold 974,365 shares for $14.6595 per share, reducing its stake to 6 percent. It will be interesting to see who was bottom-fishing in the second quarter when quarterly U.S. stock holdings are filed over the next few days.

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The Soros Economic Development Fund indirectly participated in the $10 million Series B round of financing for EM3 AgriServices, an Indian private sector farm mechanization services company. Global Innovation Fund and Aspada Investment Company, an earlier investor, had directly invested in the financing. Aspada is a holding company and venture capital investor with a significant commitment from the Soros Economic Development Fund. Aspada also manages the portfolio of SONG, an early-stage venture capital fund backed by the Soros Economic Development Fund, Omidyar Network, and Google. SEDF is a nonprofit private foundation that is part of the Open Society Foundations, a network of charitable foundations created by Soros.

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The average hedge fund gained 1.21 percent in July, boosting the aggregate return for the year to 4.77 percent, according to data tracker eVestment. This was the ninth straight monthly profitable aggregate return for hedge funds. Gains were led by event driven-activist funds, which rose on average by 1.67 percent in July and 7.29 percent for the year. Equity-focused funds returned 1.66 percent in July and are up 7.28 percent for the year. The best performers were India-focused funds, up nearly 5 percent in July and nearly 25 percent for the first seven months.

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