This content is from: Portfolio

The Morning Brief: Despite Ackman, Herbalife Creeps Up

Have you seen Herbalife’s stock lately? It has been quietly but consistently climbing in recent weeks and on Wednesday jumped another $0.31 per share after surging by 3.6 percent at one point in the day, closing at $51.56. Herbalife is now up about 37 percent for the year and about 67 percent since the beginning of March. Although William Ackman’s Pershing Square Capital Management has a big negative bet on the stock, it has not hurt the New York hedge fund too much. It is up 6 percent this year through April 12.

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Hedge funds embraced health-care stocks in a big way in the first quarter. According to an analysis from S&P IQ, the sector experienced net purchases of $4.8 billion, more than any other industry. Health care was followed by industrials with $1.5 billion and energy with $1.1 billion. Valeant Pharmaceuticals International enjoyed the most buys, totaling $3.7 billion, but also saw $1.4 billion in sells. The buying was led by William Ackman’s Pershing Square Management, which acquired more than 19 million shares. Actavis, which successfully fended off Valeant’s hostile takeover bid, saw several firms take new positions, making it the second-largest recipient of buying, with $2.6 billion. According to regulatory filings, John Paulson’s New York-based Paulson & Co. boosted its Actavis stake by about 150 percent, to 5.64 million shares while Stephen Mandel, Jr.’s Greenwich, Connecticut-based Lone Pine Capital established a new 1.8 million share position. Another big buyer was O. Andreas Halvorsen’s Greenwich, Connecticut-based Viking Global Investors.

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Tiger Global Management, which this week announced a major shake-up in its public investments business, made yet another private investment. The New York firm’s private equity business led a $5 million financing round for Chaayos, an Indian-based tea chain, according to crunchbase.com. For a change, it wasn’t an Internet company.

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Deutsche Bank trimmed its price target on hedge fund favorite Micron Technology from $34 to $32 but kept its Buy rating. The investment bank cited continued weakness in the personal computer business, but added: “We believe it is likely the last estimate cut before demand strengthens in the back half of the year. While we acknowledge that the magnitude of the DRAM [dynamic random access memory] price drop is larger than we expected, we also believe the move is somewhat priced in to the stock.” Micron has long been a top holding of David Einhorn’s Greenlight Capital—the fifth largest shareholder—which boosted its stake in the first quarter. O. Andreas Halvorsen’s Viking Global Investors is the seventh-largest holder while Seth Klarman’s Baupost Group is the ninth-largest.

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The folks who follow Computer Sciences at Deutsche Bank apparently don’t track the maneuverings or tactics of activist hedge fund managers. How else can you explain the investment bank being caught flat-footed when the information-technology services firm Tuesday announced plans to separate into two companies and to pay a special cash dividend to shareholders of $10.50 per share. The stock jumped about 2.4 percent Wednesday to nearly $70 on the news. In response, Deutsche Bank raised its price target on the stock from $55 to $73 but retained its Hold recommendation. “The real surprise was CSC will also pay a special one-time cash dividend,” the report states. Really? You’re surprised that a target of an activist, especially Jana’s Barry Rosenstein, instituted a large one-time dividend? Consider Jana’s history with Computer Sciences. In late February, Jana nearly tripled its stake in the company to 5.9 percent of the total shares outstanding. Jana said at the time that it held discussions with management and the board of directors regarding potential strategic alternatives and the company’s capitalization and capital allocation. Now this.

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