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The Morning Brief: John Paulson to Launch Health Care Fund

John Paulson’s New York-based Paulson & Co. is launching a new hedge fund, the Paulson Long-Short Fund, which will specialize in health care stocks. According to a letter dated June 16 and obtained by Alpha, the new fund’s focus will include pharmaceutical “and related technology and consumer sector investments.” It will be headed by Guy Levy, who will serve as portfolio manager. “Guy’s talent and expertise in healthcare, pharmaceutical and related sector investing have added significantly to our performance over the past five years,” Paulson states in the letter about the new fund, which was first reported by CNBC.com. Paulson and other partners also plan to seed the new fund with $500 million. The fund will have a three-year lock-up. In the same letter, Paulson also announced that Sheru Chowdhry and Ty Wallach were appointed co-portfolio managers of the Paulson Credit Opportunities Fund. Chowdhry and Paulson will have trading authority. “These changes will allow me to continue to focus on event investing, provide opportunity for growth internally and maximize the potential to grow our capital at above average rates of return over the long term,” Paulson states in the letter. Last year, most of Paulson’s funds lost money. The credit fund is up 4 percent this year, while the Enhanced fund is up 19 percent, according to reports.
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Shares of hedge fund favorite Micron Technology plunged more than 18 percent on Friday, to $19.66, after the chip maker reported earnings and revenues that missed analysts’ forecasts for the fiscal third quarter. The company blamed the weak personal computer market, which in turn has squeezed prices for its dynamic random-access memory (DRAM). In response, a number of investment banks cut their price targets on the stock, but mostly kept their ratings on the stock. For example, Deutsche Bank trimmed its target from $32 to $28 but still rates it a Buy. “While we have expected a soft guidance, we are disappointed with the magnitude of the miss,” it states in a note to clients. Stifel Nicolaus established a buy recommendation on Friday but cut its price target from $41 to $34. “We believe management has the correct strategy by increasing exposure to more stable, less commoditized markets, and decreasing PC exposure,” it states in a note to clients. UBS cut its price target from $35 to $27 but retained its Buy rating. Morgan Stanley, which downgraded the stock last week, cut its price target from $21 to $19 on Friday. “Micron guided the August quarter well below our estimates, as pricing was worse and costs were unexpectedly higher reflecting lower production growth,” the bank states in a note to clients.We recently noted that UBS had cut its price target on Micron from $38 to $35, citing soft demand for its semiconductors ahead of the launch of Microsoft’s Windows 10 operating system. At the end of the first quarter, three of the top nine shareholders were New York-based Greenlight Capital, which for awhile has counted the stock among its largest positions; Greenwich, Connecticut-based Viking Global Investors; and Boston-based Baupost Group.
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The New York Post reported viewing a video from 2005 of Herbalife’s then-new chief executive officer Michael Johnson lambasting his troops for their business practices, lamenting that success was a “lottery ticket,” with few making it to the top ranks. Johnson accused distributors of sometimes engaging in “false promises, claims, in hopes for product, for money, for recruiting, for customers, for pyramiding,” according to the report. The 71-minute lecture plays into the hands of Pershing Square Capital Management’s William Ackman, who has famously shorted the shares of the multi-level marketer of nutrition products, asserting that it is a pyramid scheme, or a Ponzi scheme. Sure enough, on Friday afternoon, the New York hedge fund manager fired off a letter to Johnson expressing his concerns and calling on him to release the video. “We encourage Herbalife employees, distributors and others with similar materials to come forward,” the letter adds. “There appears to be a pattern of admissions by Herbalife’s top management and top distributors confirming Herbalife’s deceptive practices, which have been captured on videotape.” The stock fell a little over 2 percent on Friday, to $53.75.
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Cevian Capital II GP disclosed it owns 5.3 percent of ABB. The fund, based in Jersey in the Channel Islands, says in a 13D filing that the position in the provider of power and automation technologies was made for investment purposes, but then uses boiler-plate language to suggest it will monitor the company and possibly take future action. London-based Cevian Capital, the fund’s manager, had $13.7 billion under management at the beginning of the year, ranking number 48 among all hedge funds in the world, according to Alpha’s Hedge Fund 100 ranking.
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Tiger Global Management continues to be an active investor in private companies. The latest deal: It participated in the $80 million Series D financing for Postmates, which allows users to ship items with the same city for same-day delivery.
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Chicago-based Citadel disclosed that it established a nearly 1.1-million-share stake in 8point3 Energy Partners, or 5.4 percent of the total outstanding. The partnership, formed by First Solar and SunPower Corporation to own and operate solar energy generation assets, went public on June 19, closing the first day at $20.49. The stock closed down 1.7 percent on Friday, to $19.66.

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