The Morning Brief: ESL Slashes AutoNation Stake

Edward Lampert and his Bay Harbour, Florida hedge fund firm, ESL Partners, reduced their combined stake in AutoNation by more than 3.2 million shares — to 29.3 percent of the total outstanding — from 32 percent. Lampert personally owns nearly 16 million shares of the car dealership chain, while various ESL entities own about 19.6 million shares. Deutsche Bank recently raised its price target on the stock to $42 from $41, in part due to surging U.S. auto sales.

Tiger Global Management was up 1 percent in August, bringing its gains for the first eight months of the year to just 4 percent. The New York City hedge fund firm, headed by Charles (Chase) Coleman III and partner Feroz Dewan, was up 21 percent last year. As a result, Coleman made $350 million, ranking number 12 on the Institutional Investor’s Alpha Rich List.

Steve Cohen’s SAC Capital Advisors added 150,000 shares of Clearwater Paper, boosting its stake to 8.1 percent. The filing was made in an amended 13D, so it is not a passive position. However, in the filing the Stamford, Connecticut hedge fund furn stated that the position in the pulp and paper product manufacturer is “for investment purposes” and not for the purpose of “changing or influencing the control or management.”

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Adage Capital Partners has taken a 5.06 percent, passive stake in Onyx Pharmaceuticals, a biopharmaceutical company that develops medicines to treat cancer.

Credit Suisse Securities has initiated coverage of Third Point Re with an Outperform rating and a $15 target price. The reinsurer, which recently went public, was created by hedge fund manager Daniel Loeb of New York City-based hedge fund firm Third Point in part to invest much of the insurance premiums in Third Point’s funds. In recommending the stock, Credit Suisse cites the “excellent long-term track records” of Third Point CEO John Berger, an insurance industry veteran, and Loeb. It also points out that the company’s structure “is at least ten points more tax efficient” versus investing directly in the Third Point LP fund, a factor it believes is important to the retail/high-net-worth investor base that it believes will gravitate to the stock.

A new Keefe, Bruyette & Woods survey of chief investment officers found that more respondents expect to increase their allocations to alternative strategies while very few expect them to decrease. The survey participants seemed interested in various hedge fund strategies and specialized strategies, such as real estate, energy, and infrastructure.

Paul Singer’s New York City hedge fund firm, Elliott Associates, has raised its stake in Kabel Deutschland Holding AG to 10.9 percent of the total shares, becoming one its largest shareholders. Investors have by September 11 to decide whether to accept Vodafone Group Plc’s $10.2 billion takeover bid for the cable company.

At least two hedge fund databases have reported results for August. The HFRI Fund Weighted Composite fell by 0.70 percent for the month while eVestment figures the average hedge fund lost only 0.23 percent. For the first eight months of the year, HFRI Index is up just 3.87 percent while eVestment says the average fund is up 4.29 percent.

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