TheChek News Flow

PayPal (PYPL): Hedge funds like Omega Advisors, Pennant Capital, Coatue Management, and Lone Pine Capital all bought PYPL shares during the first quarter. Now an independent publicly traded company for a few quarters, more funds have had a chance to digest PayPal’s results on a standalone basis. The mobile payments company recently was spun-off from eBay (EBAY). PYPL was featured in the equity analysis section of the Q3 2015 issue of the newsletter if you want to play catch up on the thesis.

Baxalta (BXLT): Funds such as Paulson & Co, Third Point, Farallon Capital, and Lone Pine Capital all disclosed brand new stakes in Baxalta during the quarter. This is a risk arbitrage play as the company received a takeover offer from Shire (SHPG).

Gaming & Leisure Properties (GLPI): Hound Partners, Third Point, JANA Partners, and Omega Advisors all built new stakes in GLPI during Q1. GLPI is basically a real estate company that acquires and leases back gaming properties to casino companies. GLPI recently acquired the real estate assets of Pinnacle Entertainment (PNK). During Q1, shares of Gaming & Leisure surged from $25 to $30 and have since headed even higher to $33.

Facebook (FB): Andreas Halvorsen’s Viking Global bought a massive $2.29 billion stake in the quarter, making it its top position. Other managers that initiated FB positions include the likes of Appaloosa Management and Paulson & Co. The company has really been firing on all cylinders by monetizing mobile, rolling out ads on its Instagram app, and further developing its WhatsApp messaging service and Oculus virtual reality platform. The company has garnered more incremental dollars from advertisers due to its massive audience and targeting.

Liberty Global (LBTYA): Paulson & Co, Greenlight Capital, Glenview Capital, Coatue Management, and Berkshire Hathaway all added to their pre-existing positions during Q1. The company is a collection of cable assets across Europe. Liberty recently announced a joint venture with Vodafone (VOD) in the Dutch market that will combine LBTYA’s broadband with VOD’s wireless operations in order to better compete with rivals. Shares of LBTYA have also been under arbitrage pressure as the company recently acquired Cable & Wireless (CWC.LN) to boost its operations in Latin America. (Liberty Gobal also has a separate tracking stock for its Latin American assets with the tickers LILA / LILAK.)

Alphabet (GOOGL): This is the third straight quarter that Alphabet has been accumulated by prominent funds. The only difference this time around is that they favored GOOGL shares versus the GOOG share class they previously had been buying. Coatue Management, Glenview Capital, Lone Pine Capital, and Viking Global all boosted their holdings. New CFO Ruth Porat has taken many ‘Wall Street friendly’ steps in terms of capital allocation and transparency to better help the company show investors just how much its Google cash cow is generating. A reminder: Alphabet is the new name for the holding company that owns Google, YouTube, and all of their other ‘moonshot’ businesses like self-driving cars that are now run as separate entities.

EMC (EMC): This is a risk arbitrage play as privately held Dell submitted a takeover for EMC. Funds such as Greenlight Capital, Farallon Capital, and Baupost Group all boosted their exposure to the name during the quarter. This is a large takeover and EMC also owns VMWare (VMW). If the deal completes, then Dell would control VMW operationally via 87% of voting rights but only own around a 28% interest. The deal is supposed to close before October of this year but first EMC shareholders must vote in June and it must pass various regulatory approvals as well.

Pfizer (PFE): Funds like Paulson & Co, Appaloosa Management, and JANA Partners bought more shares in the open market during Q1. However, it’s hard to know for sure whether they’ll keep them. This is because this was an event-driven and transformational play as PFE and Allergan (AGN) were set to merge. However, the US government implemented rules to discourage tax inversions, which made the PFE/AGN, deal unlikely to go through. As such, the companies went their separate ways.

Apple (AAPL): Once upon a time, this stock graced the ‘consensus buy’ list but those days are now long gone and the company finds itself on the other side of the spectrum. Hedge funds that liquidated their AAPL positions include Appaloosa, Coatue, Tiger Management, and Carl Icahn. That last name is probably the most notable as he built a massive stake in the company in 2013 but had become increasingly worried about China and the company’s exposure there which caused him to exit his stake. The company’s first quarter results showed a year-over-year slowdown in revenue for the first time since 2003 as its flagship iPhone product has started to saturate the market.

Valeant Pharmaceuticals (VRX): Like Apple, this was once a company that was being heavily accumulated by hedge funds but now finds itself being dumped en masse. Coatue, JANA, Lone Pine, and Viking Global all exited their stakes. To oversimplify: the company was attacked by Hillary Clinton for its drug pricing practices, short sellers flagged its use of specialty pharmacies, and investors began to worry about its massive debt load. Over the course of the past few quarters, VRX has fallen off a cliff, diving from $260 to current levels of $27.

American International Group (AIG): This has been a successful investment for numerous managers, but none more than Bruce Berkowitz’s Fairholme Capital. They built up a stake during the financial crisis but finally sold their last shares of common stock in Q1. As the company has rebounded from the financial brink, other funds that sold out include Glenview, Hound, and JANA.

Williams Companies (WMB) and Energy Transfer (ETE): These two stocks are grouped together because the reason funds were selling is the same. Williams and Energy Transfer were set to merge but the deal has become doubtful as ETE seems to be looking for ways to exit. As oil prices cascaded lower over the past year, so did shares of each. Funds that threw in the towel on WMB include Coatue, JANA, Lone Pine, and Perry Capital. Managers that dumped ETE shares include Coatue, JANA, Perry, and Viking.

Allergan (AGN): This has been one of the more crowded hedge fund trades in recent memory. Funds such as JANA, Pennant, Omega, Farallon, Blue Ridge, Viking, Third Point, and Paulson all reduced their exposure to the name. This stock could possibly appear on this list next quarter as well considering that the company’s merger with Pfizer (PFE) was recently called off, eliminating the primary catalyst some had invested under. That said, AGN has now shifted from a risk arbitrage stock to a capital deployment optionality story. It should soon close on the massive sale of its generics business to Teva Pharmaceuticals (TEVA), which will substantially deleverage its balance sheet. AGN has recently announced a $10 billion buyback as well.

Charter Communications (CHTR): Shares of this cable company have steadily risen from $160 to now well over $230 as news hit that the company’s takeover of Time Warner Cable (TWC) has been approved by the FCC and other regulators. Funds that trimmed their stakes in the first quarter include Glenview, Farallon, Coatue, Blue Ridge, and Lone Pine.

TransDigm Group (TDG): This is probably a case of profit taking as this has been a longstanding position for

numerous hedge funds. Just pull up a chart of TDG and you’ll basically see a straight upward march from the bottom left of the chart to the upper right. Funds that took some profits include Hound, Pennant, Maverick, Viking Global, and Lone Pine. This is an aerospace roll-up that’s been executed nicely by CEO Nick Howley though the company is quite levered.

Mastercard (MA): This is likely another case of profit taking given that MA has also been a longstanding holding for many of these managers and shares have been climbing higher ever since its IPO years ago. Blue Ridge, Tiger Global, Berkshire Hathaway, and Lone Pine all reduced their position size in this payment processing company.