This content is from: Portfolio

The Morning Brief: Hedge Fund-Owned Stocks Make Big Moves

Several stocks owned or being shorted by a number of high-profile hedge funds reported quarterly results after the market closed on Thursday that subsequently moved their stocks sharply.

Google reported second-quarter earnings that came in 12 percent below estimates. Revenues missed estimates by nearly 28 percent. As a result, the stock plunged more than 5 percent in after-hours trading.

Microsoft also reported results that came in below expectations. As a result its stock fell about 5 percent in after-hours trading.

Meanwhile, shares of Chipotle Mexican Grill surged around 7 percent in after-hours trading after the casual dining chain reported strong earnings in line with expectations on revenues that exceeded Wall Street estimates. Remember, this is a big high profile short of David Einhorn’s Greenlight Capital. The stock is now up more than 33 percent this year alone. Ouch!


How much money is currently invested in hedge funds? Well, it all depends upon whom you ask. For example, industry tracker eVestment Thursday reported that investors withdrew $10.1 billion more than they put into hedge funds in June. For the second quarter, the amount of money yanked from these funds exceeded money put into the funds by $4.25 billion. As a result, if you include performance, overall industry assets under management fell 2.5 percent, to $2.656 trillion at the end of June, according to eVestment.

Another industry tracker, HFR, sees it differently. It found that hedge funds took in $55.9 billion of new capital in the second quarter, while funds that experienced redemptions showed outflows totaling $41.4 billion, resulting in a net inflow of $14.5 billion. HFR figures total industry capital stood at $2.41 trillion at the end of the second quarter. That’s a difference of $215 billion. Now, keep in mind that eVestment and HFR always have different industry-wide figures. In fact, HFR’s numbers are closing in on eVestment’s figure.

However, what is perplexing here is that eVestment shows a net outflow of more than $4 billion in the second quarter while HFR says there was a $14.5 billion net inflow. Interestingly, HFR says performance was negative, on average, during the second quarter. And investor flows were just $14.5 billion. Yet it says total industry assets increased by $40 billion during the quarter. Peter Laurelli of eVestment explains that twice a year the firm's industry research division does an administrator survey that captures virtually all industry assets. Then each month the researchers look at data from a very large sample of many of the industry’s largest funds that report to eVestment’s public and private databases and use this data to estimate percent change for the industry. The survey’s refined annual results act as an annual check of the sample’s output.


Steve Cohen’s SAC Capital reported after the market closed that it owns 5.2 percent of WebMD Health Corp. It was disclosed in a 13G, suggesting it is a passive stake.


So much for the Japanese stock market rally being a fleeting fad. The Nikkei 225 has quietly rebounded by 19 percent since its correction bottomed five weeks ago.


The Securities and Exchange Commission ordered former Goldman Sachs board member Rajat Gupta to pay a $13.9 million penalty and barred him from serving as an officer or director of a public company for providing corporate secrets to former hedge fund manager Raj Rajaratnam. The SEC filed a complaint in late 2011 alleging that Gupta disclosed confidential information to Rajaratnam about Berkshire Hathaway’s $5 billion investment in Goldman Sachs as well as nonpublic details about the investment bank’s financial results in 2008.

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