The Morning Brief: In Blow to Ackman, Herbalife’s Shares Surge 11.6 percent

May 08, 2017   Stephen Taub


The hedge fund titan’s bold bet against the multi-level marketer continues to go against him.

Bill Ackman’s controversial negative bet on Herbalife continues to give him nightmares. Shares of the multi-level marketer of health and nutrition products surged 11.6 percent on Friday, to close at $69.40. The company reported first-quarter revenues and earnings that beat consensus forecasts. It also lifted its guidance for the rest of the year.

Herbalife’s surge comes after Pershing Square Capital Management earlier unloaded its huge, losing stake in Valeant Pharmaceuticals International. As a result, it had moved into positive territory in April. Pershing Square Holdings, Ackman’s public fund, reported it gained 4.6 percent for the month and is up 1.9 percent for the year.

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Shares of Greenlight Capital short Tesla rebounded by 4.4 percent, to close at $308.35, after dropping 5 percent on Thursday after the company reported quarterly results. In addition, UBS, which has had a sell recommendation on the stock, warned clients the electric car maker and solar company is "still facing many challenges in the second half." UBS says it is cautious on the Model 3 launch timing and potential profitability. So, it lowered its 2017 estimate — in other words, it widened its expected loss — and maintained its sell rating and $160 price target.

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The HFRI Fund Weighted Composite Index gained 0.59 percent in April, boosting its gain for the year to 3.09 percent. In a press release, HFR noted that last month managers were "positioned for the upcoming European elections and investors reacted to progress on new tax and healthcare legislation." The Event-Driven index led April performance, thanks to activist funds. HFR’s Activist sub-strategy index rose 2.03 percent last month, its best gain since December. The Merger Arbitrage index rose 1.1 percent in April.

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April was another rough month for CTAs, as all five indices tracked by Société Générale were down last month. The SG Trend Index was off 1.03 percent, as 80 percent of the index’s constituent CTA trend strategies contributed negative performance, according to the investment firm. It is down 1.88 percent for the year. The broader SG CTA Index was off just 0.15 percent for the month as 8 out of the 20 constituent strategies contributed positive performance. It is down slightly for the year.


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