The Morning Brief: Tepper Bests Peers; Illinois Opens Herbalife Probe

David Tepper’s Palomino fund lost just 0.55 percent in March, a much smaller decline than many of the high profile hedge funds with skin in the equity game. For the first three months the Short Hills, New Jersey–based manager and founder of Appaloosa Management was up a modest 1.55 percent, just shy of the 1.8 percent gain posted by the S&P 500. This is much better than many of the Tiger Cubs, who lost between 2 percent and 4 percent in the first quarter.
—
Herbalife’s integrity came under fire again on Thursday, as Reuters reported that the office of Illinois Attorney General Lisa Madigan is investigating the multi-level marketer of nutrition products, citing her press secretary. Civil rights groups have been lobbying the AG to investigate the company, claiming it is a pyramid scheme that targets minorities, according to the report. “We look forward to working with the Illinois Attorney General’s office to resolve the consumer complaints it has received,” Herbalife said in a statement. Other government officials probing Herbalife include the Federal Trade Commission and New York Attorney General Eric Schneiderman’s office. Investors who are in the stock in the face of Pershing Square Capital Management’s high-profile short bet against it and the recent rash of investigations seem unfazed by the latest news, bidding the stock down just $0.17, or 0.31 percent.
—
Hedge fund performance may have been volatile and unprofitable for many in the first quarter. However, it was the best quarter for hedge fund asset flows since the second quarter of 2007. As a result, total industry assets under management hit $2.931 trillion at the end of March, less than $7 billion from its all-time high, according to a new report from industry tracker eVestment. Total AUM in equity strategies exceeded credit for the first time in 18 months, according to the report. Investors also are still pouring money into activist strategies, pushing first-quarter inflows to more than $6 billion.
—
Wall Street reacted to Google’s quarterly results with a range of actions on Thursday morning. For example, Credit Suisse raised its estimates and its target price, to $735 from $725, and repeated its Outperform rating, asserting in a note to clients this is a “positive iteration point on the long-term investment thesis.” It added that despite the mixed set of financial results, it believes the most important takeaways from the report were the “positive inflection” in the cost-per-click decline rate. Stifel Nicolaus maintained its Hold rating and does not have a price target, noting: “A pullback below $500 creates a stronger risk-reward ratio, all else equal.” And then there is UBS, which trimmed its price target to $665 from $675, but maintained its Buy rating. The stock, which was recently split into two different classes, closed Thursday at $536.10, down 3.67 percent.
—
Shares of hedge fund favorite Micron Technology surged more than 6 percent Thursday after Sterne Agee raised its estimates and price target, to $32, for the chip maker after investor meetings. It cites an improving outlook in certain markets as well as valuation and an improving balance sheet.
—
It’s a fiesta for David Einhorn. Chipotle Mexican Grill shares fell more than 6 percent after it reported earnings that were below expectations. It also announced its first price increase in three years. In addition, the casual dining chain said it may buy up to $100 million of its shares. The stock, a big short position for Einhorn’s Greenlight Capital, is now down 2.6 percent for the year. However, it is off 15 percent since March 20.