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The Morning Brief: Herbalife Rewards the Bulls; Level Global to Settle SEC Charges

Herbalife keeps rolling along. The nutrition supplements company—and subject of a pitched battle among activist investors--reported first quarter earnings of $1.27 per share, easily beating the consensus estimate of $1.06 per share. Revenues were in line with expectations. However, the company’s second quarter guidance came in below expectations. In after hours trading, the stock rose slightly after gaining 1.25 percent in the regular session on Monday. The company is in the middle of a highly public tug of war between William Ackman’s New York-based Pershing Square Capital Management, which is heavily short the stock, and legendary investor Carl Icahn, who is long and earlier this year got two of his nominees named to its board of directors.

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Speaking of Ackman, he and other J.C. Penney bulls are hyping a survey commissioned by Whitney Tilson, co-founder of the Value Investing Congress and managing partner of Kase Capital, showing that shoppers may return to the ailing retailer under certain conditions. Some 62 percent of current customers said it’s very or somewhat likely that they would shop at J.C. Penney more than they do now if the retailer brought back its old pricing policy and selection of items, the survey found. Among former shoppers, 54 percent said it’s likely they’d come back. Of course, actions speak louder than survey responses, especially given that J.C. Penney’s revenues dropped more than $3.7 billion in the most recent fiscal year. The stock climbed 1 percent, to $17.17, on Monday.

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The now-defunct hedge fund Level Global Investors has agreed to pay more than $21.5 million to settle charges that its co-founder and others engaged in insider trading, according to the Securities and Exchange Commission. The regulator filed civil charges in January 2012 alleging that Level Global co-founder Anthony Chiasson, former analyst Spyridon "Sam" Adondakis, and six other defendants including the hedge fund firm Diamondback Capital Management, traded securities of Dell and Nvidia using illegal insider information. Under the settlement deal, Level Global neither admits nor denies the SEC's allegations. Adondakis previously pleaded guilty to criminal charges and settled civil charges with the SEC.

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Hedge funds are betting against French bonds, figuring the country’s stepped up investment in the public sector will fail to boost the economy. According to Reuters, the amount of French bonds that have been loaned out has risen 17 percent from an October low to more than $54 billion, suggesting a surge in short-selling. Keep in mind that investors were hurt by the same trade last year when the European Central Bank pledged to buy government bonds.

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One of the most opulent hedge fund galas in London won’t take place this year. For the first time since 2002, the charity Absolute Return for Kids (also known as ARK) will not be holding its annual blowout fundraiser. It is not clear whether the charity is trying to distance itself from the opulence and excess associated with the event or whether it is simply unhappy that last year’s dinner raised just $14.5 million pounds—a little more than half its 2007 peak. In the past the well attended dinner included entertainment from Elton John and Prince and speakers such as the Duke of Cambridge, former U.S. President Bill Clinton and Queen Rania of Jordan. Earlier this month ARK was chosen as the official charity of 2013 for the GAIM investment conference, the huge European alternative investment confab. London hedge fund firms BlueCrest Capital Management and Clive Capital and the New York hedge fund firm One William Street Capital Management are among six corporate patrons of the charity. ARK was founded by Arpad “Arki” Busson, the founder of investment firm EIM and boyfriend of actress Uma Thurman.

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