The Morning Brief: HFR Index Posts Strong Gain in March

April 10, 2017   Stephen Taub

The hedge fund tracker reports that hedge funds continued their five-month wining streak last month.

Hedge funds posted their fifth-straight monthly gain in March and their twelfth positive month in the past 13 months, according to HFR. The hedge fund data collector’s HFRI Fund Weighted Composite Index rose 0.24 percent in March, better than the Standard & Poor’s 500 stock index and the Dow Jones industrial average, and gained 2.3 percent for the first quarter.

HFR’s Equity Hedge (Total) Index rose 0.64 percent in March and 3.62 percent for the quarter, driven by gains from technology, fundamental growth, and healthcare. HFR’s technology index added 5.60 percent for the quarter.

"Hedge funds gained in March as the Federal Reserve proceeded with a widely anticipated interest rate increase concurrent with a weakening of the Trump trade, and as U.S. equities concluded a strong first quarter with mixed performance in March," stated Kenneth Heinz, president of HFR, in a press release.

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Several investment banks sharply raised their price targets on popular hedge fund stock Constellation Brands after the wine, beer, and spirits giant reported quarterly earnings that easily beat expectations. UBS, for example, lifted its target from $162 to $176 in response to the earnings report, stressing in a note to clients that the "beer business continues to fire at all cylinders" while in wines/spirits, the company "plans to grow profits ahead of sales." However, it maintained its neutral rating on the stock.

Credit Suisse raised its price target from $165 to $182 and raised its estimates, but maintained its neutral rating on the stock. It points out that the company’s Corona and Modelo beer brands "are the outright stars" in the U.S., adding it expects that outperformance to continue. But, it cautions, "We remain cautious that growth of the Mexican beer portfolio is decelerating and the company doesn’t have many additional levers to pull." It adds: "A key risk to our target price and Neutral rating is a slowdown of the key growth brands."

At year-end, Constellation was the second-largest U.S. long held by Tiger Cub Lone Pine Capital, which in turn was the fifth-largest shareholder. Tiger Cub Viking Global Investors was the ninth-largest investor, while Third Point ranked eleventh overall, as the stock was the firm’s fourth-largest U.S. long position. The stock was also the largest long of two other smaller firms with roots in Tiger Management: Valinor Management and Samlyn Capital.

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Shares of Ardagh Group SA surged 3.4 percent after multi-strategy specialist Canyon Partners disclosed it owns 10.5 percent of the Luxembourg-based maker of packaging for the food and beverage markets.


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