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The Morning Brief: Valeant Slips as Investors Bail

As its shares continue to tumble, Montreal-based Valeant Pharmaceuticals International has lost some more support from investors. For example, on Wednesday, Stifel Nicolaus cut its price target on the stock from $285 to $200 but argued that the shares “are grossly undervalued based on trends in its broader business.” The bank added that the beleagured drug company “remains firm in its strategies and advances forward with most franchises intact.” Meanwhile, Tiger Eye, a New York-based Tiger Seed headed by Benjamin Gambill III, disclosed that it had unloaded its entire stake of more than 290,000 shares of Valeant some time in the third quarter. At one point, the stock represented 4.75 percent of Tiger Eye’s U.S. equities portfolio. It is not known when or why it sold the stock, but Tiger Eye is known to have little tolerance for regulatory risk. In the next few days, when most hedge funds finally file their 13Fs, we will learn what other firms sold their shares, stood pat or added to their positions in September. We earlier reported that Lone Pine Capital’s Lone Cypress fund and Viking Global Investors, both based in Greenwich, Connecticut, maintained their positions in the third quarter.

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Jeffrey Smith’s Starboard Value is once again applying pressure on Media General. In a letter sent to top management and the board of the Richmond, Virginia company, the New York activist expressed support for a possible acquisition of the company by Nexstar Broadcasting Group, based in Irving, Texas. Starboard earlier said it opposed Media General’s currently pending acquisition of Des Moines, Iowa-based Meredith Corp. and urged it to consider Nexstar’s unsolicited offer. However, Smith also expressed surprise and frustration over Media General’s “significant delay” in determining that Nexstar’s acquisition proposal “could reasonably lead to a superior offer,” which was a key provision of an earlier waiver granted by Meredith to Media General. Starboard is also irked that Media General’s management and board would not consider the earlier offer of $17 per share. “Unless and until Media General fully explores a potential transaction with Nexstar, we do not see how you could even consider asking shareholders to approve either the current Meredith transaction, or any revised Meredith proposal,” Starboard added in its letter. Starboard earlier said it built a 4.5 percent stake in Media General following the acquisition announcement.

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Besides liquidating its entire stake in Valeant Pharmaceuticals International, Tiger Eye also disclosed that it sold its position in Apple in the third quarter. And it liquidated sizable stakes in CDK Global and Disney. Meanwhile, Hologic, based in Bedford, Massachusetts, which makes medical products geared toward women’s healthcare, became Tiger Eye’s second-largest holding after boosting its holding by 55 percent. The hedge fund also established a new position in Alphabet, Google’s holding company, which is now its tenth-largest holding.

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Jonathon Jacobson’s Highfields Capital Management boosted its stake in DuPont by nearly eight-fold in the third quarter. As a result, the Wilmington, Delaware-based chemical and agribusiness giant became the Boston-based manager’s fifth-largest holding. Highfields also raised its stake in its four largest positions. As a result, its largest holdings as of the end of September are McDonald’s, CBS, Microsoft and Franklin Resources. In late July, Dallas-based AT&T bought DirecTV, which had been its largest position at the end of the second quarter.

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Shares of Saint Peters, Missouri-based SunEdison fell another 15 percent to $4.90 on Wednesday after UBS cut its price target from $9 to $6 and maintained its Neutral rating, citing lower margins and other factors. What’s more, the bank warns investors, “We suspect further stumbles on guidance execution could result in further downside revisions.”

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Macro Risk Advisors said it raised $332,000 from its fourth annual charitable trading day on October 29. All of the net commissions earned from option, stock and exchange-traded-fund trades will be donated to four organizations: Blythedale Children’s Hospital, Project A.B.L.E., One Love Foundation and the Navy SEAL Foundation. Each will receive $83,000.

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