The Morning Brief: Discovery, PointState Take Large Stakes in Peabody Energy

April 14, 2017   Stephen Taub


Robert Citrone’s Discovery Capital Management said in a regulatory filing it owns 29.6 percent of Peabody Energy’s shares.

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At least two high-profile hedge funds disclosed significant stakes in Peabody Energy, the embattled coal company that emerged from bankruptcy on April 3.

Robert Citrone’s Discovery Capital Management said in a regulatory filing it owns 29.6 percent of the shares. It acquired the stake after the company emerged from bankruptcy under a reorganization plan with debt holders. The company cut its debt by more than $5 billion. The stock started trading on Tuesday, April 4. In a 13D filing, Discovery said it acquired the shares for investment purposes and that it has no plans or proposals for the company. Separately, PointState Capital disclosed it owned more than 8.3 million shares, or 9.1 percent of Peabody Energy as of April 3. The filing was made in a 13G, meaning the investment is passive.

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Shares of Valeant Pharmaceuticals closed Thursday at its lowest price in more than eight years. The stock fell 1.25 percent to $9.48 and is now down about 35 percent for the year after plummeting 86 percent last year. There was no apparent news. The stock’s free-fall is a huge blow to hedge funds like ValueAct Capital, which recently added to its stake as the stock continued to tumble. At the same time, Pershing Square Capital Management finally threw in the towel on its ill-fated bet on the crumbling drug company. It will be very interesting to learn who held on to their position and who bottom-fished when the first quarter 13F filings are made public on or around May 15. Fun fact: Just one year ago the stock closed at what seemed like the very depressed, temporary price of $33.10. Wow!

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Point72 Asset Management disclosed that as of April 11 it owned more than 20.5 million shares of WPX Energy, or 5.2 percent of the petroleum and natural gas exploration company. The investment is passive, according to the filing made by Steve Cohen’s family office. We don’t know Point72’s position in the stock in the first quarter, but at year-end it owned nearly 5.6 million shares.

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The average hedge fund in Preqin’s database rose 0.68 percent in March, boosting the gain for the first quarter to 3.18 percent. This is the best first quarter of a year posted by hedge funds since 2013. Hedge funds that had more than $1 billion under management performed better than their small peers, gaining 3.98 percent for the year. By contrast, so-called emerging funds were up 3.27 percent, small funds 2.55 percent and medium-sized funds rose 2.91 percent.

Interestingly, funds of hedge funds, which actually lost 0.35 percent last year, gained 2.2 percent for the first quarter.


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