The Morning Brief: Tiger Cubs May Have Gotten Scalped on Nokia Short

September 04, 2013   Stephen Taub

What is it with hedge funds and their penchant for missing out on hot stocks or getting them wrong? Shares of Nokia on Tuesday surged about 31 percent after the company agreed to sell its handset business to Microsoft for $7.2 billion. Yet not one hedgie ranks among the stock's top 20 holders. The largest hedge fund investor is Kenneth Griffin's Citadel, with nearly 1.9 million shares.

Meanwhile, Bloomberg reports that several hedge funds - including a few Tiger Cubs - had short positions on the stock. They include Discovery Capital Management, Blue Ridge Capital, Viking Global Investors, Lone Pine Capital, Maverick Capital and Brookside Capital Management. All but Brookside have roots with Julian Robertson Jr.'s Tiger Management.
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Research firm S&P Capital IQ is not too excited with the Microsoft-Nokia deal from Microsoft's standpoint. It does acknowledge the software giant's assertion that 80 percent of all Windows phones sold now are from Nokia, which should make Microsoft "more vertically integrated" with the deal. But given that Mr. Softee is in the midst of an internal restructuring, is looking for a new CEO and is now on the verge of integrating an acquisition, S&P warns investors: "We see these changes being potentially disruptive to sales and earnings." So it maintained its Hold recommendation on the stock.
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Two hedge funds disclosed large stakes in J.C. Penney. However, they were filed as passive investments. Larry Robbins' Glenview Capital Management disclosed that since the end of the second quarter, it more than doubled its stake in Penney to more than 20 million shares, or 9.1 percent of the total outstanding. In addition, Kyle Bass' Hayman Capital has scooped up more than 11.4 million shares of J.C. Penney, or 5.2 percent of the total outstanding. The disclosure was made in a 13G filing, suggesting the investment is passive. Penney's stock rose 1.92 percent to close at $12.72.

Hayman is more of a credit investor than a stock picker. In fact, at the end of the second quarter, it only owned three stocks and options in three others. In the Penney filing, Bass states the shares "were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect." Two weeks ago we reported he was accumulating shares of the embattled retailer, citing a report from CNBC. Hayman made big bucks in 2007 betting against subprime mortgages. Bass has since put his reputation on the line with a big bet on the demise of Japan - a bet he made before a stimulus program in the country sent its stock market on a tear and the yen into decline.
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Food industry veteran William Stiritz is the latest investor to take a big bet on Herbalife. The chairman and CEO of Post Holdings and chairman of Ralcorp disclosed he owns nearly 5.4 million shares of the multi-level marketer of nutrition supplements, or 5 percent of the total outstanding. Stiritz does not state his intentions, but the stake was disclosed in a 13G filing, meaning it is passive. The stock closed down 1.8 percent at $59.92, its lowest price in more than a month. Ooh!





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