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The Morning Brief: Barclays Dings Hedge Fund Favorite Apple
Shares of hedge fund favorite Apple fell 1.6 percent, to close at $112.18, on Thursday after Barclays removed the stock as a “Top Pick” and trimmed its price target by a dollar, to $114. In a note to clients, the bank said it made these moves “to signal possible near-term tumult after the stock’s recent run.” The stock is up about 25 percent since mid-May.
“Our research indicates a recovery in global smartphone growth could be pushed out,” Barclays warns. “Plus, conversations with industry participants suggest iPhone sales trends could be at risk of petering out in coming months, similar to last year’s post-IP6S launch fallout.”
At the end of the second quarter, Apple was the fourth most widely held stock among hedge funds, with at least 139 reporting a position in the maker of the iPhone and iPad. For example, it is the largest holding of New York-based Greenlight Capital and the second largest U.S. long holding of New York-based AQR Capital Management.
It’s official. The Securities and Exchange Commission announced on Thursday it reached a settlement deal with Och-Ziff Capital Management Group and several of its top executives over bribery charges related to the firm’s investments in African companies. Under the deal, the New York firm will pay nearly $200 million to settle the charges, and CEO Daniel Och will pay nearly $2.2 million to settle charges that he and CFO Joel Frank caused certain violations of the Foreign Corrupt Practices Act (FCPA). Frank also agreed to settle the charges.
Och-Ziff also acknowledged it expected to enter into a deferred prosecution agreement with the Justice Department as part of a parallel criminal investigation. Also, its subsidiary OZ Africa Management GP agreed to enter into a plea agreement. The SEC said Och-Ziff is expected to pay a criminal penalty of $213 million.
The SEC says its order finds that Och-Ziff executives ignored red flags and corruption risks and permitted illicit transactions to proceed. It explains that the regulator discovered Och-Ziff’s misconduct while analyzing how financial services firms obtained investments from sovereign wealth funds. The SEC found that Och-Ziff used intermediaries, agents, and business partners to pay bribes to high-level government officials in Africa.
According to the SEC, these illegal payments led the Libyan Investment Authority sovereign wealth fund to invest in Och-Ziff funds. Other bribes were paid to secure mining rights and influence government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo, according to the SEC.
Specifically, the SEC said Och caused violations in two Och-Ziff transactions in the Democratic Republic of the Congo. He agreed to pay $1.9 million in disgorgement and $273,718 in interest to settle the charges. The order found Frank caused violations in transactions in Libya and the Democratic Republic of the Congo. The SEC will assess his penalty at some time in the future. Och and Frank agreed to the order without admitting or denying the findings. The SEC also said its investigation is continuing.
Shares of Valeant Pharmaceuticals International fell more than 5 percent, to close at $25.05. The controversial drug maker’s stock is down more than 16 percent since it broke above $30 at the end of August.
Meanwhile, shares of the two major car rental firms dropped sharply for the third straight day. Shares of Hertz Global Holdings fell yet another 3.65 percent, while Avis Budget Group dropped 3.13 percent. In the past three days the companies’ shares are down about 17 percent and 15 percent, respectively. As we noted earlier this week, the stocks are favorites among a number of hedge fund firms, including New York-based Glenview Capital Management, which is a major holder of both stocks.