This content is from: Portfolio

The Morning Brief: Starboard’s Darden Moves Pay Off, Again

Here’s more vindication for Starboard Value’s successful 2014 proxy fight against Darden Restaurants: On Friday the Lakeland, Florida-based operator of Olive Garden, LongHorn Steakhouse and other casual dining restaurants reported better-than-expected second quarter earnings and raised its forecast and boosted its dividend by 14 percent. In response, the stock surged 7 percent, to close at $62.50. However, this is down from its 52-week high of $66.72. The New York-based hedge fund firm, headed by Jeffrey Smith, remains Darden’s largest shareholder.

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Total hedge fund assets rose by $11.2 billion in November, bringing total industry-wide assets to $3.09 trillion, according eVestment. This includes $3.2 billion from new investments and $8 billion from performance gains. Altogether, investors have added $69.5 billion during the first 11 months of the year. Flows have gone to large, multistrategy funds as well as systematic equity strategies and certain large managed futures products, eVestment notes in its monthly report.

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A total of 257 hedge funds were liquidated in the third quarter, up from 200 the previous quarter, according to Chicago-based data tracker Hedge Fund Research. This is the highest number of closures since the first quarter of 2014. Altogether, 674 funds have liquidated in the first nine months of the year, up from 661 during the comparable period last year. On the other hand, 269 new funds were launched in the third quarter, up from 252 the previous quarter. Altogether, 785 funds have launched in the first three quarters of the year, down from 814 last year during the same period.

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UBS raised its price target on TerraForm Power by 50 percent, from $6 to $9, citing the revised terms of the company’s recent deal to acquire the Vivint Solar portfolio of residential rooftop solar systems under the planned merger of Vivint Solar with a subsidiary of SunEdison. UBS says the renegotiation of the deal is “positive.” However, the investment bank still thinks the shares are overvalued.

Bethesda, Maryland-based TerraForm Power, a subsidiary of Maryland Heights, Missouri-based SunEdison, holds a portfolio of wind and solar assets. The investment bank tells clients in a note it is concerned “about the weakened corporate governance” between TerraForm Power and SunEdison, which it believes could lead to additional dilutive transactions. So it retained its sell recommendation. Shares of TerraForm Power surged nearly 3 percent on Friday to close at $12.74 on an otherwise horrid day for stocks. SunEdison jumped more than 4 percent, to close at $6.51. David Tepper’s Short Hills, New Jersey-based Appaloosa Management disclosed earlier this month that it owned 9.9 percent of TerraForm’s stock. At the end of the third quarter, New York-based BlueMountain Capital Management disclosed it owned 6.33 percent of the shares.

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