RTRS - FAR-RIGHT'S MARINE LE PEN TO GET MOST VOTES IN FIRST ROUND OF FRENCH ELECTION WITH 27-28 PCT, FILLON 20-21 PCT, MACRON DOWN BY 5 POINTS TO 17-18.5 PCT - ELABE POLL
T-Mobile US: Potential Strategic Combo -- Gabelli & Co. (63.92)
Gabelli believes that T-Mobile US should command a 7.5-8.5x EBITDA multiple in a buyout/consolidation scenario. The broad communications sector in the U.S. continues to consolidate. While, in the near-term, the wireless industry will likely remain at four national players, in the long-run, they expect further consolidation. They continue to view TMUS as essentially the only way for a domestic or foreign company to enter the U.S. wireless market in a meaningful way. Potential acquirers of TMUS could include Comcast, SoftBank/Sprint, Charter/Liberty, DISH, foreign carriers, and/or private equity. Firm calculates a 2018 PMV of $75 per share, growing to $115 per share in 2021.
Gapping up
In reaction to strong earnings/guidance:
- CYH +20.3%, RIC +16.3%, XCRA +11.6%, HLX +8%, EXAS +7.2%, VIPS +6.9%, LL +6.1%, EROS +5.6%, OPME +3.6%
- MDR +3.3%, WMT +3.2%, CTG +3%, AAP +2.4%, MDWD +2.4%, CYRN +2.3%, NRZ +2%, M +1.9%, NDSN +1.7%, HD +1.7%, EXPD +0.9%, WLK +0.6%
M&A news:
- DGAS +16.6% (enters into a definitive agreement to merge with an affiliate of Peoples Natural Gas; Delta shareholders will receive $30.50 in cash/share)
- PLKI +16.4% (Restaurant Brands (QSR) is in advanced discussions to purchase PLKI, according to Bloomberg)
- FCH +15.8% (Ashford Hospitality Trust (AHT) submits non-binding proposal to acquire FelCor for a total consideration of $9.27 per share)
- TROX +14.4% (to acquire the TiO2 business of Cristal for $1.673 bln of cash and Class A ordinary shares)
Select metals/mining stocks trading higher: CLF +2.9%, AKS +2.5%, X +1.5%, MT +1.3%, HBM +1.2%, AUY +0.8%, .
Other news:
- DCTH +46.3% (study demonstrated that 45.7% of patients with ocular melanoma that metastasized to the liver who underwent percutaneous hepatic perfusion using investigational Melphalan/HDS experienced a complete or partial response)
- EYEG +34.1% (enters into exclusive, worldwide licensing agreement with Valeant Pharmaceuticals (VRX) )
- APOP +20.1% (announces 'positive' final results from its clinical trial of ApoGraft in healthy donors)
- IDXG +19.5% (announces the initiation of a collaborative research program with Viatar CTC Solutions to detect and characterize early cancer in liquid biopsies)
- VCEL +8.2% (FDA has designated the investigation of ixmyelocel-T for reduction in the risk of death and cardiovascular hospitalization in patients with chronic advanced heart failure due to ischemic dilated cardiomyopathy as a Fast Track Development Program)
- VALE +7.6% (new shareholders' agreement was filed, executed by Litel Participações S.A., Litela Participações S.A., Bradespar S.A., Mitsui & Co., and BNDES Participações
- RBS +5.4% (provides update on remaining State Aid obligation)
- EW +5.3% (CardiAQ testing has been completed; enrollment has resumed )
- BCLI +4.2% (signs an agreement w/ CCRM to support the market authorization request for NurOwn)
- PGH +3.1% (announcs plan to reduce its outstanding debt through the use of $530 mln cash on hand)
- MDLZ +2.6% (following confirmation that KHC withdrew transaction with UL/UN)
- GRPN +1.9% (continued strength)
- SRPT +1.8% (enters into an agreement to sell its Rare Pediatric Disease Priority Review Voucher for $125 million)
- AEHR +1.5% (receives an order in excess of $4 mln from a subcontractor to its lead customer for the FOX-XP Test and Burn-in System)
- SCON +1.4% (receives a U.S. Patent for an aspect of the RCE-CDR system architecture used in manufacturing Conductus HTS wire)
- GIS +1.3% (following confirmation that KHC withdrew transaction with UL/UN)
Analyst comments:
- JAG +3.7% (initiated with a Outperform at Credit Suisse)
- SBLK +3.1% (upgraded to Buy from Hold at Deutsche Bank)
- ADNT +1.3% (initiated with a Overweight at Morgan Stanley)
Gapping down
In reaction to disappointing earnings/guidance:
- DAKT -25.8%, MNTA -18.4%, HSBC -6.2%, DDS -4.9%, CYOU -4.2%, AMRI -3.5%, SOHU -3.2%, WAB -3%, MGIC -2.6%, UIHC -2.5%
- CBRL -1.6%, AU -1.3%, PWR -1.2%, CRMT -0.6%
M&A news:
- UL -8.5% (Unilever and Kraft Heinz (KHC) jointly confirm that KHC has amicably agreed to withdraw its proposal for a combination of the two companies )
- UN -8.3%, KHC -5%
Other news:
- TRVN -33.4% (announces its Phase 3 APOLLO-1 and APOLLO-2 pivotal efficacy studies of oliceridine)
- CDTX -32.6% (reports that the Phase 2 RADIANT clinical trial in acute vulvovaginal candidiasi did not show sufficient efficacy to justify further development)
- MNTA -18.9% (receives notice of warning letter from FDA to contracted Glatopa; Approval of the Glatopa 40 mg ANDA will be dependent on resolution of Pfizer (PFE) facility compliance issues)
- DRYS -18.8% (enters into $200 mln stock purchase agreement with Kalani Investments)
- IMMU -3.4% (files a federal lawsuit and a motion seeking injunctive relief against venBio Select Advisor and venBio's four director candidates)
- GMS -3.1% (commences 6 mln common stock offering by its existing stockholders, including certain affiliates of AEA Investors LP)
- ING -1.1% (in sympathy with HSBC earnings)
Analyst comments:
- FCX -3.7% (downgraded to Sell from Hold at Deutsche Bank)
- EIGI -3.2% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
- DKS -1.1% (downgraded to Perform from Outperform at Oppenheimer)
- OHI -0.9% (downgraded to Hold from Buy at Jefferies)
- BLMN -0.8% (downgraded to Neutral from Overweight at JP Morgan)
What a difference a year makes… {IBXXC2D1 Index }
European coco bonds are rallying hard, just 12 months after the asset class was thrown into turmoil.
The main Markit index covering the bonds – the riskiest class of bank debt – touched its highest ever level yesterday, the latest data show. It is up nearly 30 per cent since its lows last February.
European coco bonds, which are issued by banks and designed to take losses at times of distress, collapsed in price early last year as fears over the future of the continent’s banking sector mounted.
The debt, which is also known as “additional tier 1 capital (AT1)” because it contributes towards a bank’s capital requirements, typically moves in tandem with bank equities, which have also staged a recovery over the past year. The Euro Stoxx banks index, a gauge of the share prices for major lenders, is up 28 per cent since last February’s lows.
The original coco sell-off centred around the prospect of missed coupons on a Deutsche bank AT1 bond, as well as uncertainty over regulatory rules for triggering coupon cancellation. Losses are imposed when a bank’s capital falls beneath a certain threshold.
In 2016, the bonds came under intense criticism because of their perceived capacity to heighten market distress around European banks. Since then, regulators have moved to clarify their approach, effectively reducing the potential level at which bonds are forced to stop payments.
Unlike bonds sold by non-financial corporates or sovereigns, coco bonds are not being bought as part of the European Central Bank’s quantitative easing program. They typically come with coupons of 6-8 per cent, and are perpetual with an option to be called by the issuer after several years.
Full pdf attached
* Hedge Fund Consensus Buy List
- Bank of America (BAC): This is the second consecutive quarter that hedge funds have accumulated BAC shares. Managers including Tiger Management, Blue Ridge Capital, Coatue Management, Third Point, and Lone Pine Capital all started brand new stakes. This is mainly a play on rising interest rates and the potential for less regulation. A few funds also decided to buy other megabanks like Wells Fargo (WFC) and JPMorgan Chase (JPM), while others added smaller regional banks to the portfolio. That said, BAC was by far the most consensus pick both in terms of quantity of funds and size of position.
- Symantec (SYMC): Hedge funds including Tiger Global, Coatue Management, and Lone Pine Capital all initiated positions in SYMC. During the fourth quarter, Symantec acquired LifeLock (LOCK), an identity theft protection service, for $2.3 billion. This will join SYMC’s existing Norton cybersecurity offering as it looks to diversify its product offering. The company also announced a new CFO during the quarter. Back in August, Symantec also purchased Blue Coat, an internet security firm, for $4.65 billion.
- Monsanto (MON): Merger arbitrage names attracted many managers this quarter. Monsanto shares were bought by the likes of Berkshire Hathaway, Glenview Capital, and Greenlight Capital. The company is being bought by Bayer AG (pending regulatory approval) for $66 billion, or $128 per share in cash. There seems to be some skepticism from other investors around the deal’s potential to close, as there’s currently a wide deal spread. MON shares currently trade around $109.
- Time Warner (TWX): Farallon Capital, Paulson & Co, and Third Point all scooped up shares of TWX during Q4. The company is being acquired by AT&T (T), pending regulatory approval. On the campaign trail, Donald Trump hinted he would try and block the deal. However, now that he’s in office, it’s unclear if he’ll still pursue that action. Various media reports have hinted that Trump’s administration would look for various conditions to be placed on the merger, even going as far to suggest Jeff Zucker should step down or the CNN television network should be spun-off. TWX shareholders will receive $107.50 per share comprised of $53.75 in cash and $53.75 in AT&T stock. Per the deal, “The stock portion will be subject to a collar such that Time Warner shareholders will receive 1.437 AT&T shares if AT&T’s average stock price is below $37.411 at closing and 1.3 AT&T shares if AT&T’s average stock price is above $41.349 at closing.”
* Hedge Fund Consensus Increase List
- Shire (SHPG): Hedge funds such as Bridger Management, Omega Advisors, Tiger Management, Viking Global, Maverick Capital, and Lone Pine Capital all accumulated more shares of SHPG during Q4. This stock has also been listed by a few sellside firms as a ‘best idea for 2017.’ Management has been working on integrating Baxalta and commercializing Xiidra.
- Microsoft (MSFT): Tiger Management, Farallon Capital, Lone Pine Capital, Viking Global, and ValueAct Capital all added to their positions during the fourth quarter. (However, it’s worth highlighting that in the first quarter ValueAct has been reducing its MSFT stake.)
- Liberty Global (LBTYK): This is the fourth consecutive quarter that shares of John Malone’s European cable giant have been accumulated by hedge funds in the newsletter. Managers such as Viking Global, Glenview Capital, Brave Warrior Advisors, and SPO Advisory all bought more. Shares had previously sold off for a couple of reasons: ‘Brexit’ fears hit the company’s UK cable unit, Virgin Media, and it earns revenues in British Pounds (the Pound saw a steep decline post-Brexit vote). The company in general is also facing more competition in some of its markets (like the Netherlands) but has been buying back more stock given the increased volatility in its shares. This has been a longtime favorite among hedge funds
- Facebook (FB): In reality, this is more of a ‘mixed activity’ name. It’s included on this list though because there certainly were a lot of funds adding to their positions. Tiger Management, Appaloosa Management, Blue Ridge Capital, Maverick Capital, and Viking Global all enlarged their FB position sizes. That said, a decent number of other managers were also out trimming their stakes, so just keep that in mind.
* Hedge Fund Consensus Sell List
- Kinder Morgan (KMI): This stock was liquidated by the likes of Berkshire Hathaway, Lone Pine Capital, and Pennant Capital during the fourth quarter.
- Teva Pharmaceutical (TEVA): Managers such as Bridger Capital, Glenview Capital, and Viking Global all sold their positions. Teva closed on its acquisition of Allergan’s (AGN) generic drugs business.
- AIG (AIG) Warrants: Funds such as Blue Ridge Capital, Fairholme Capital, and Hound Partners all liquidated their longstanding AIG Warrant positions. This was an extremely successful investment for many of them as they bought the TARP warrants right after the financial crisis and rode them higher as insurance giant AIG recovered.
* Hedge Fund Consensus Decrease List
- Charter Communications (CHTR): This is the fourth consecutive quarter CHTR positions have been trimmed by various managers. The company closed on its acquisition of Time Warner Cable and Bright House and is now the second largest cable player in the US. The stock is up 80% over the past year and the funds that have been selling are trimming their positions by 10-15% for the most part to lock-in some profits and for risk management purposes most likely, as position sizes have swelled due to the share gains. Funds that trimmed their stakes in Q4 include Third Point, Blue Ridge, Tiger Global, SPO Advisory, and Lone Pine.
- Alphabet (GOOG): Hedge funds that reduced their exposure to Google’s parent company during the fourth quarter included Pennant Capital, Tiger Global, Maverick, Coatue, and Lone Pine. That said, the company continues to be a core holding for many hedge funds as some managers also own the other share class (GOOGL).
- Apple (AAPL): Maverick Capital, Appaloosa, Third Point, and Coatue all sold some AAPL shares during Q4. The stock has performed well, and some funds probably wish they held onto those shares a bit longer, as the stock has done nothing but go up in 2017 thus far. It’s gone from a low of $88 last May to current highs of $136. Sales of the iPhone have met or exceeded expectations after sentiment on the name had soured a bit in 2016. The company is set to release the next iteration of the iPhone (rumored to be either iPhone 8 or iPhone X) later this year. They’re also rumored to be working on projects centered on television and automobiles, while CEO Tim Cook has also mentioned augmented reality as an area of interest for the company.
- Mastercard (MA): This has been a long-term holding for various funds and many have just locked-in some profits as shares continue their march higher. Maverick, Tiger Global, Blue Ridge, and Viking all trimmed their positions during the fourth quarter. Some funds have added Visa (V) shares to the portfolio recently as well, so it might be a case of simply shifting some of that exposure. Many managers choose to own both V and MA, as they’re pure plays on the payment processing oligopoly and don’t bear credit risk.
Medtronic beats by $0.01, reports revs in-line; reaffirms FY17 guidance (78.88)
- Reports Q3 (Jan) earnings of $1.12 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $1.11; revenues rose 5.0% year/year to $7.28 bln vs the $7.22 bln Capital IQ Consensus. U.S. revenue of $4.106 billion represented 56 percent of company revenue and increased 4 percent. Non-U.S. developed market revenue of $2.193 billion represented 30 percent of company revenue and increased 6 percent, or 7 percent on a constant currency basis. Emerging market revenue of $984 million represented 14 percent of company revenue and increased 9 percent, or 11 percent on a constant currency basis; non-GAAP operating margin was 29.1 percent, representing a 130 basis point improvement.
- Co reaffirms guidance for FY17, sees EPS of $4.55-4.60, excluding non-recurring items, vs. $4.56 Capital IQ Consensus. The co continues to expect fiscal year 2017 revenue growth to be within the mid-single digit range on a constant currency, constant weeks basis, which is consistent with the company's long-term, mid-single digit constant currency revenue growth expectation. The company expects revenue growth for the fourth quarter of fiscal year 2017 to be in the lower half of the mid-single digit range on a constant currency basis. While the impact from foreign currency exchange is fluid, if current exchange rates remain similar for the remainder of the fiscal year, the company's full year revenue and fourth fiscal quarter would both be negatively affected by ~$20 million to $40 million. The company continues to expect fiscal year 2017 diluted non-GAAP EPS growth to be in the double digits on a constant currency, constant week basis, which is consistent with the company's long-term, double digit constant currency EPS growth expectation
- "In Q3, we achieved solid results across all of our business groups and geographies," said Omar Ishrak, Medtronic chairman and chief executive officer. "At the same time, we produced meaningful operating profit growth based largely on our synergy programs from the Covidien integration, as well as our focus on operating excellence initiatives."