This content is from: Portfolio

The Morning Brief: The Heat Is on SAC; Citadel’s Abercrombie Play

SAC’s Steve Cohen is no doubt feeling the heat being turned up under his firm. Prosecutors Tuesday charged Matthew Martoma, a former portfolio manager at CR Intrinsic (a wholly owned division of SAC Capital), of using illegally obtained inside information to make profits and avoid losses of about $276 million, in what Manhattan U.S. Attorney Preet Bharara called “the most lucrative inside tip of all time.” The 38 year-old, who worked at CR Intrinsic between 2006 and 2010, was arrested earlier in the day in Boca Raton, Florida. He is accused of receiving the non-public information from a doctor who served as an adviser to Elan Corp., a pharmaceutical stock owned by CR Intrinsic, on the clinical trial of an Alzheimer’s Disease drug. Cohen is not named in the complaint; however, it does refer to Martoma speaking to “the owner” of the hedge fund where he was employed. For example, the government states that at some point in July 2008 “Martoma and the hedge fund owner instructed a hedge fund trader” to sell the firm’s entire position in Elan, for example. “Mr. Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government’s inquiry,” an SAC spokesman said in a statement Tuesday afternoon. Stay tuned.

Here is yet more confirmation that hedge funds maintained their allegiance to Apple’s stock. According to a fresh analysis by Goldman Sachs, the consumer electronics giant was by far the most popular stock among hedge funds, found in 231 portfolios at the end of the third quarter. The second most popular stock — Google — was held by 177 hedge funds. Rounding out the top-10 list: AIG, Microsoft, Qualcomm, JPMorgan Chase, Citigroup, Wells Fargo, Bank of America and Yahoo. A relatively unknown Canadian oil and gas company attracted a surge of attention from the hedge fund set in the third quarter. About 24 percent of the market cap of Nexen was owned by hedge funds, up from just 1 percent at the end of the June quarter, according to Goldman Sachs. The largest new investors in the third quarter included Farallon Capital Management, Mason Capital Management, Eton Park Capital Management and D.E. Shaw. Several hedge funds run by high-profile managers are up more than 20 percent through October. They include Michael Hintze’s CQS Directional Opportunities Feeder fund, up 28.93 percent; David Tepper’s Palomino fund, up 24.12 percent; and Leon Cooperman’s Omega Overseas Partners, up 22.08 percent. We previously reported that Dan Loeb’s Third Point Ultra is up 22 percent, while Ricky Sandler’s Eminence fund is up 21.5 percent. Shares of Groupon surged 8.53 percent to $3.37 after Tiger Global disclosed late Monday that it amassed a 9.9 percent stake in the struggling Internet coupon company. Chase Coleman and his cohorts certainly know the Internet. But this is a tough one to embrace given the high competition and low barriers of entry into the business.

Ken Griffin’s Citadel Advisors reported it owns 6.3 percent of retailer Abercrombie & Fitch. The hedge fund disclosed the stake in a 13G, suggesting it is a passive investment. At the end of the third quarter, Citadel had huge offsetting call and put positions in the stock in addition to a relatively small position in the common stock.

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