This content is from: Portfolio

The Morning Brief: Alcoa Trades Expanded Board for Elliott’s Support

Alcoa said it will expand its board of directors to 15 by adding three new members. In exchange, New York hedge fund Elliott Management, which holds a 7.5 percent interest in the aluminum company, has agreed to support the company’s slate of director nominees at the 2016 annual meeting. Alcoa recently said it plans to split into two companies in the second half of 2016.

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Viking Global Investors has taken another big stake in an energy company. The Greenwich, Connecticut hedge fund disclosed Monday that it owns 6.5 percent of Encana Corp., a producer of natural gas, oil and natural gas liquids. Since the beginning of the year, Viking has taken stakes exceeding 5 percent in four energy companies.

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It is no secret that Pershing Square Capital Management suffered its worst year ever, dropping 20.5 percent in 2015. However, recent documents disclosed by the New York firm provide some interesting insight into what drove the losses, besides the headline highlights. Yes, Valeant Pharmaceuticals International was Pershing’s biggest loser, accounting for 11.4 percent of the loss, or more than half. Altogether, losing positions generated a 28 percent loss for the funds headed by William Ackman. This was offset by an 8.7 percent profit from mostly three positions—Allergan, Mondelez International and Zoetis. We also learned that Pershing Square lost 9.3 percent from its longs but another 5.6 percent from its shorts. Many long-short funds last year were saved by their shorts, which offset bigger losses on their longs. Interestingly, Pershing Square has lost money on its shorts in eight of its 12 years, underscoring how difficult it is to make money from the strategy. For his part, Ackman remained upbeat entering the new year, saying in one report: “Despite our missteps, we believe our portfolio holdings today trade at a substantial discount to intrinsic value partially because of certain unique market dislocations.”

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Shares of both classes of hedge fund favorite Alphabet—Google to everyone else—surged more than 6 percent in aftermarket trading after the Internet search behemoth sailed right through Wall Street’s quarterly forecasts. This could help set up a pretty good day for the Nasdaq.

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Another hedge fund favorite, Facebook, surged 2.6 percent in regular trading on Monday on heavy volume.

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