This content is from: Portfolio

The Morning Brief: Funds Pare Stakes in AIG, Apple; European Stocks Are Going Gangbusters.

David Tepper’s Appaloosa Management, Louis Bacon’s Moore Capital and Richard Perry’s Perry Capital, among other hedge fund shareholders, cut their stakes in American International Group, one of the had-to-own stocks in the industry, in the second half of 2012. Even so, Perry still counts the insurance giant as his No. 1 holding after unloading 1.7 million shares, or more than 11 percent. Perry’s $510 million position at the end of March accounted for more than 16 percent of the firm’s $3.15 billion stock portfolio, which itself was 16 percent larger than it was at year-end.

Several hedge fund managers slashed their stakes in Apple in the first quarter, including Tiger Cubs Charles (Chase) Coleman III of Tiger Global Management, John Griffin of Blue Ridge Capital and David Tepper’s Appaloosa Management. Blue Ridge dumped its entire 530,000 share position in the tech giant. However, Tepper told CNBC on Tuesday that he bought some Apple stock where shares dipped in April. The shares dropped 3.38 percent on Wednesday to close at $428.85.

Recession? What recession? European stocks are trading at their highest levels since June 2008. The Stoxx Europe 600 Index has raced to its best start in a year since 1998, rising 10 percent so far this year. But not many people are dancing in the streets. The gross domestic product of the 17-nation euro zone fell by 0.2 percent in the first quarter compared to the final quarter of 2012, according to Eurostat, the Luxembourg-based statistics office of the European Union. In the fourth quarter of 2012, growth contracted by 0.6 percent. France has slipped back into recession for the first time since 2009.

None of this is surprising to Michael Hintze, the founder and head of CQS, a London-based $11.8 billion multistrategy asset management firm. Hintze sounded the alarm on France’s economic predicament in an April report, warning of the implications on the rest of the European countries. France represents 14.4 percent and 19.6 percent of the EU and euro zone GDP, respectively, and accounts for 14.2 percent of the European Central Bank’s capital, his report notes. France lies not only at the core of the euro zone but is also “one of the original architects” of the EU, Hintze says. “Clearly, a loss in confidence in France would likely have far-reaching consequences; its impact on the EU, the broader global economy and markets.”

The Dow Jones Credit Suisse Hedge Fund Index rose 1.39 percent in April, bringing its gains for the first four months to 4.99 percent. All of the dozen or so strategies it tracks have made money this year except dedicated short biased funds, which lost 3.45 percent in April and 11.72 percent for the year. Managed futures are the best performer this year, up 7.29 percent.

Locked in a proxy fight with hedge fund Moab Capital Partners, the board of directors of laundry systems provider Mac-Gray Corp. fired the latest salvo, touting shareholder friendly moves it has made in the past decade. For example, it points out that it has approved double-digit dividend increases for three straight years, including a 45 percent increase announced in February 2013. The company, which operates debit-card and coin-operated laundry facilities in multihousing facilities, also cites $185 million in debt reduction since 2004. “Your board consists solely of independent directors who are highly qualified for their roles and fully dedicated to enhancing the company’s value for its shareholders,” it states. The annual meeting is scheduled for May 30. Moab, which owns 9.2 percent of the stock, has nominated two of its own people to the board. Last week Moab submitted it point-by-point response to a comprehensive presentation made by Mac-Gray.

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