David Tepper’s hedge fund exits Facebook, Delta and others
David Tepper’s Appaloosa hedge fund is so over Facebook.
The fund completely exited its position in the tech darling during the second quarter, it disclosed in a regulatory filing on Friday — after being in the stock for less than a year.
Tepper also exited Bank of America, Cabot Oil & Gas, Delta Airlines, Pfizer and Valeant Pharmaceuticals during the quarter.
Page Six has reported that someone impersonating Tepper is trolling Facebook trying to win dates with women.
It is not known if the troll had any impact on Tepper, known to be a private person, exiting the stock. Tepper could not immediately be reached for comment.
Smaller reigns supreme in hedge funds
When it comes to hedge funds, the little guy has the upper hand.
Smaller hedge funds — those with less than $100 million in assets under management — have notched the greatest year-to-date gains, standing at 4.1 percent, according to data released by Preqin.
By comparison, funds whose assets exceed $1 billion averaged year-to-date gains of just 0.54 percent, the worst class of performers in terms of size.
Preqin showed largely positive data for the hedge fund industry after a rough patch. Their trailing 12-month performance entered into positive territory for the first time since December, up 1.58 percent.
So far this year, hedge funds are up 3.67 percent.
“After a difficult start at the beginning of the year, 2016 has now proved to be a positive year for hedge fund performance, with July marking the fifth straight month of industry gains,” Preqin said in Friday’s report.
As for the recent success of smaller funds, their size is proving to be an advantage in a challenging environment.
Earlier this week, Barclays released a study of the hedge fund industry and concluded that the hedge fund industry has become too big for the opportunities in it.
“As hedge funds become larger, their investable universe can often be diminished (e.g., due to position limits) as it is often not ‘worth it’ to invest in smaller situations that can hardly move the profit and loss needle,” Barclays wrote.
The Restaurant Group strategy review to recommend sale of 40 restaurants - The Times
The Restaurant Group [LON:RTN] has conducted a strategic review that will recommend the sale of a portfolio of the UK-based company’s restaurants, according to a report in The Times. The newspaper did not cite a source for the information, which appeared near the end of a report about The Restaurant Group’s appointment of Andy McCue as chief executive.
It is thought that the review concluded that TRG should begin a sale process for as many as 40 underperforming restaurants, the item said. TRG’s Frankie & Benny’s brand would account for most of the restaurant disposals, according to the newspaper.
TRG Chairman Debbie Hewitt said TRG will reveal the outcome of the strategic review in a couple of weeks, the report continued.
The item noted previously-reported talk that TRG has attracted takeover interest from private equity firms.
The Restaurant Group’s market capitalisation stood at GBP 839m (EUR 971m) at the close of trading in London on Friday, 12 August.
Restaurant Group plc
On the mid-cap index, Restaurant Group enjoyed its best day in more than seven years after the under-pressure Frankie & Benny’s owner ousted its chief executive Danny Briethaupt, replacing him with the former boss of betting company Paddy Power. Andy McCue will join the group on September 17. Ivor Jones, of Peel Hunt, said: “We believe it is also encouraging that McCue has led a business through a takeover, which may be in the medium-term future for Restaurant Group.” Shares leapt 40.9p, or 10.9pc, to 417.7p.
EasyJet flies higher on M&A chatter
Shares in no-frills airline easyJet ascended to its highest level in more than three-weeks as it became the latest victim of takeover chatter.
Rumours swirled the City that a private equity fund was interested in swooping in on the low-cost carrier. However, traders talked down the idea of an outright bid, saying it was “unlikely”.
But some City analysts said the stock price move could be attributed to Sir Stelios Haji-Ioannou, the outspoken founder of the FTSE 100 company. They suggested it is always possible Sir Stelios may want to reduce his holding. His family currently own a 33pc stake in the business.
Shares have had a turbulent time since the Brexit vote, slumping 28.2pc. Just last month chief executive Carolyn McCall conceded that the pound’s dramatic fall since the referendum on June 23 had cost the airline £40m, as it increased the airline’s cost and made it more expensive for Britons to travel abroad.
2 Overlooked U.K. Plays on a Weakening Post-Brexit Pound
FirstGroup and Balfour Beatty, FTSE 250 components, could take advantage of sterling’s 13% tumble since the vote to leave the EU.
Shares of the United Kingdom’s largest companies have ramped up following the post-Brexit slump in the value of the British pound, but some smaller firms have missed the party despite standing to benefit just the same.
Since the U.K. referendum in June, the benchmark FTSE 100 index, comprising the biggest companies, has climbed more than 8%, while the broader FTSE 250 index has gained little more than 2%.
It isn’t difficult to explain. The British pound has retreated more than 13% from its pre-vote high against the dollar. A weaker sterling inflates earnings generated in stronger currencies.
The FTSE 100, whose constituents collectively earn about 80% of their revenue outside the U.K., has been the biggest beneficiary. The FTSE 250, whose components largely have a more domestic bias, has lagged behind. But in some cases, the baby has been tossed out with the bathwater.
Shares of transport company FirstGroup (ticker: FGP.UK) fell more than 13% after the referendum, although they have since retraced most of those losses.
Yet FirstGroup generates about two-thirds of its revenue in North America, where its First Student business operates a fleet of 47,000 school buses and its First Transit unit is one of the largest providers of public-transit management and contracting. It also owns Greyhound, and operates bus and rail services in the U.K.
Its profit picture show signs of brightening. FirstGroup sees profit margins at First Student rising to at least 9% this year, compared with 7.1% last year. “If you assume current rates stay where they are, you have quite an upgrade on the translation,” due to the decline in the value of sterling, says Matthew Tillett, a portfolio manager at Allianz Global Investors.
He estimates profits this year could accelerate at least 5%.
The Aberdeen, Scotland–based company has a troubled past. It piled on debt to fund expansion in 2007 at what turned out to be the top of the market. In a bid to maintain its dividend, it underinvested in its businesses, and profitability deteriorated, prompting a rights issue in 2013. Its stock has fallen more than 60% in the past five years.
However, new management has gotten FirstGroup back on track. The company has invested 1.1 billion pounds ($1.43 billion) on new buses, allowing it to catch up with rivals.
FirstGroup also could benefit from refinancing its 2007 debt, on which it pays interest at an average of 6.3%. Its longest-dated maturity is a 2024 6.9% bond that currently trades at a substantial premium to par, equating to a 2.15% yield to maturity.
If FirstGroup could refinance all of its debt at the current rate, free cash flow would rise by £79 million this year, Tillett reckons. While this won’t all happen at once, FirstGroup has a number of maturities arising over the coming years. Currently, free cash flow is estimated at £104 million this year, up from just £20 million last year.
FirstGroup is forecast to earn net income of £139 million, or 12 pence per share, this year, on sales of £5.46 billion, rising to £160 million, or 14 pence, on £5.60 billion in sales the following year. At Friday’s close of £1.03, its shares trade for attractive multiples of 8.4 times this year’s earnings and 7.4 times next year’s. The company has American depositary receipts (FGROY) that were trading on Friday at $1.26.
Investors are wary because of the company’s past missteps. Tillett thinks the shares can jump 50% to 100% over the next two to three years as cash flows rise, the dividend is reinstated, and the balance sheet improves. “In my view, the investment proposition today looks compelling,” he says.
ANOTHER COMPANY WHOSE PROSPECTS could be underappreciated is Balfour Beatty (BBY.UK), a London-based infrastructure-services provider that last year generated more than half of its revenue outside the U.K.
Balfour Beatty is expected to return to profit this year after two years of losses due to poor contract discipline and high costs. New management has strengthened governance, controls, and processes.
The company this year is forecast to report net income of £79 million, or 11 pence a share, on revenues of £7.13 billion. In 2017, it is projected to earn £117 million, or 17 pence a share, on £7.25 billion in sales.
At Friday’s close of £2.41, the stock trades for 14.3 times next year’s estimated earnings. The shares are still almost 5% below the level they traded at prior to the referendum result.
Allianz Global Investors’ Tillett likes the fact that the £1.25 billion value of Balfour’s infrastructure assets covers much of its £1.67 billion market cap, and that the company is debt free. With improvement in profit margins, the stock could be worth £3 on a sum-of-the-parts basis.