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The Morning Brief: Stock Slide Lifts Short Sellers
The stock market’s selloff at the end of last week was especially helpful to short sellers of the most high profile targets that had been surging this year. Shares of Green Mountain Coffee Roasters, which David Einhorn’s Greenlight Capital singled out as a short over one and a half years ago, dropped nearly 5 percent on Friday, to $74.48, after falling 4.2 percent the previous day. However, keep in mind that the stock was already up 80 percent or so this year before the recent slide. What’s more, last week KeyBanc raised its price target on the stock to $90 from $80.
Meanwhile, Herbalife’s stock has been sliding of late, and is now down more than 8 percent in the last three trading days. Even so, the stock is still up over 40 percent this year alone. The stock is a big short position in William Ackman's portfolio at Pershing Square.
Requests to redeem from hedge funds rose slightly in June compared to the prior month. Hedge fund administrator SS&C GlobeOp's forward redemption indicator rose to 3.88 percent in June, up slightly from 3.77 percent in May. The firm attributed the increase to “typical semi-annual redemption activity, with investors using the mid-year point to review their portfolios and to release cash to spend elsewhere.” Total assets under administration on the GlobeOp platform represent approximately 10% of the estimated assets currently invested in the hedge fund sector. GlobeOp’s forward redemptions as a percentage of its assets under administration have trended significantly lower since reaching a high of 19.27 percent in November 2008.
Dan Loeb’s Third Point Offshore Investors was up about 0.3 percent for the five trading days through Wednesday, better than the S&P 500. This captures the market’s big drop on June 19 but not the one on Thursday, June 20. For the year, the hedge fund’s U.S. dollar shares are up 15 percent, while its sterling shares are up 16.4 percent.
If you buy Deutsche Bank’s view that domestic individual investors will fuel the next leg of the Japanese stock market, keep this in mind, courtesy of David Baran, co-CEO of Symphony Financial Partners Co.: About 1.5 million Japanese retail investors have reportedly already been registered with major brokerage houses to open a tax-exempt savings account, or NISA. These are due to be launched on January 1, 2014 under one of prime minister Shinzo Abe’s more stock market-focused reform proposals. The plan would allow individual to invest one million yen (a little less than $12,000) annually for the next five years. “This should be attractive given Japan’s progressive income tax structure,” says Baran in an e-mail message from Japan.