This content is from: Portfolio

The Morning Brief: Carl Icahn Joins Fannie and Freddie Bandwagon

Add Carl Icahn to the list of billionaire investors betting on Fannie Mae and Freddie Mac. Icahn in March shelled out about $51 million to buy the stakes of the mortgage financiers from Bruce Berkowitz’s Fairholme Funds, according to a Reuters report, citing a court filing. Other investors betting the government will back off on its plan to wind down the two companies include William Ackman’s Pershing Square Capital Management and John Paulson.

Jeffrey Smith’s New York–based hedge fund firm Starboard Value said it has withdrawn its request for a special meeting of Darden Restaurants shareholders, which was designed to stop the restaurant company’s plans to sell its Red Lobster unit. In a letter to the board, Starboard once again asserted that the company’s board “committed to an irreversible, poorly structured, and clearly value destructive sale of Red Lobster” prior to the special meeting. Instead, Starboard said it is committed to its proxy fight, which aims to replace a majority of Darden’s board.

Daniel Och’s flagship multistrategy fund, managed by his hedge fund firm, Och-Ziff Capital Management, gained 1.42 percent in May, putting it into positive territory for the year. The fund is now up 0.61 percent through the first five months of 2014. On the other hand, the firm’s OZ Europe Master fund lost 1.02 percent last month and is now down 2.28 percent for the year, while its OZ Asia Master Fund eked out a paltry 0.20 percent gain in May, slightly reducing its loss to 8.52 percent for the year. In addition, the New York–based firm — one of the only hedge fund firms to be publicly traded — reported that assets under management stood at $44.6 billion as of June 1, a net increase of $1.1 billion in the past month. This includes performance and capital flows.

Kenneth Griffin’s Citadel disclosed that it owns more than 2.6 million shares of XPO Logistics, or 5 percent of the total outstanding. This is roughly double the size of stake in the provider of freight transportation services at the end of the first quarter.

Credit Suisse on Tuesday downgraded the shares of Allergan to Neutral from Outperform following Valeant Pharmaceuticals’ latest takeout offer. It tells clients in a note that while “incremental upside” in the 10 percent to 15 percent range is plausible, it sees an equal downside risk in the stock if Valeant walks away from its hostile pursuit. And although Credit Suisse thinks a deal could wind up being completed at closer to $190 to $200 per share, it believes Valeant’s latest takeover offer, valued at $183 per share, “is close” to what it thinks Allergan shareholders are looking for and warrants consideration. Valeant is teaming up with Ackman’s Pershing Square for the bid.—
Credit Suisse also raised its price target on hedge fund favorite Apple to $600 from $560 following Apple’s Worldwide Developer Conference, where the company announced what the investment bank deems “a significant update to its iPhone and iPad software in iOS 8 and increased mobile and web integration for the Mac OS in Yosemite.” Even so, it maintained its Neutral rating on the stock.

The Credit Suisse Liquid Alternative Beta Index rose 0.61 percent in May, boosting its gain for the year-to-date to 1.60 percent. The Long/Short Equity strategy was the strongest performer in May, rising 1.81 percent and 2.82 percent year-to-date. The LAB series of indices tries to replicate the aggregate return profiles of hedge fund strategies using liquid, tradable instruments.

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