Editor’s Note: K12 Inc. (NYSE:LRN), Safeway Inc. (NYSE:SWY), United Rentals, Inc. (NYSE:URI), Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL)
SEC charges 23 hedge funds with illegal short sales (New York Post)
The SEC crackdown on rogue hedge funds continues. The federal regulator on Tuesday charged 23 funds with stock manipulation — improperly profiting from a company’s stock by shorting it five days before a secondary offering, and then buying shares in the offering. The $23 billion D.E. Shaw fund, one of the largest hedge funds in the country, was one of 22 firms settling with the Securities and Exchange Commission. D.E. Shaw paid $667,000 to settle the charges it improperly pocketed profits of $447,794. It did not admit or deny wrongdoing. The SEC has been trying to stop improper short-selling for years, and previously brought similar cases against such big names as Harbinger Capital, Touradji Capital, Level Global, Carlson Capital and Appaloosa Management.
Hedge fund head: Microsoft will beat Apple (CNN)
A top hedge fund manager said Tuesday that Microsoft Corporation (NASDAQ:MSFT) has a business model that makes it a better company than Apple Inc. (NASDAQ:AAPL) for the long-term. Jeffrey Ubben of ValueAct made the comments at the Value Investing Conference in New York. Ubben’s firm announced a $2 billion position in Microsoft earlier this year and is thought to be a driving force behind CEO Steve Ballmer’s decision to retire as well as Microsoft Corporation (NASDAQ:MSFT)’s new stock buyback and dividend increase announced earlier Tuesday. Ubben said he likes that Microsoft charges a lot of money, makes a lot of money, and has enterprise contracts that will last for years. He noted that Microsoft Corporation (NASDAQ:MSFT) is “in the plumbing” of big corporations.
Safeway Puts Up Defense After Hedge Fund Amasses Stake (New York Times)
The grocer Safeway Inc. (NYSE:SWY) has gone on the defense days after the activist hedge fund Jana Partners declared a 6.2 percent stake in the company. Safeway, based in Pleasanton, Calif., said on Tuesday that it had put into place a “poison pill” to prevent investors from acquiring more than 10 percent of the company. Its shares rose on Tuesday by 10.5 percent to $30.99, their highest level in more than a year. The $6 billion hedge fund Jana Partners is known for taking a behind-the-scenes approach to its campaigns, amassing large stakes in companies and agitating for change through talks with management.
Judge OKs U.S. SEC’s Falcone settlement (Hedgeworld)
A federal judge on Monday [Sept. 16] approved the U.S. Securities and Exchange Commission’s $18 million settlement with hedge fund manager Philip Falcone, the regulator’s first big case to include an admission of wrongdoing since a recent policy change. U.S. District Judge Paul Crotty in Manhattan called the civil sanctions, which include a five-year securities industry ban, “appropriate and proportionate to defendants’ admitted wrongful conduct,” and a “fair and appropriate resolution.” The settlement resolved SEC civil charges over Falcone’s management at his hedge fund, Harbinger Capital Partners.
U.S. hedge fund manager Tilson bets against K12, stock dips (Reuters)
Hedge fund manager Whitney Tilson said on Tuesday he is betting against online education giant K12 Inc. (NYSE:LRN), pushing the shares lower. “This is a growth story that is about to crash,” Tilson, who runs Kase Capital, said at the Value Investing Congress where he spoke publicly about his short betfor the first time. Tilson has been short the stock, where he borrowed the shares in the hopes of repaying the loan for less after the shares drop, for roughly a year. The bet has clearly weighed on his returns as the company’s stock price has shot up 70 percent this year.
How One Investor Made Billions on Berkshire Stock (Bloomberg)
Co-founder of defunct hedge fund Diamondback launches new firm (GlobalPost)
Richard Schimel will launch a new hedge fund later this year, less than 12 months after closing Diamondback Capital in the wake of an insider-trading investigation by the U.S. government. “The investment model at Sterling Ridge will focus on a single integrated portfolio that I will manage, similar to what I did in the main portfolio at Diamondback,” Schimel wrote in a letter to potential investors on Tuesday, a copy of which was obtained by Reuters.
Another investor may drop embattled hedge fund after prostitution arrest (Portland Business Journal)
Another major investor could soon bail on the giant hedge fund Common Sense Investment Management in the wake of the arrest of Common Sense CEO Jim Bisenius in a prostitution sting. The Business Journal obtained a confidential memo Portland wealth manager Arnerich Massena sent to clients after Bisenius’ arrest two weeks ago. In the memo, Arnerich Massena said it might end its two-decades-plus relationship with Common Sense as a result of Bisenius’ arrest and the hedge fund’s recent poor performance.
Marcato’s McGuire bets United Rentals will climb during recovery (GlobalPost)
Hedge fund manager Mick McGuire said on Tuesday that he is betting on backhoes and concrete mixers with a new investment in equipment rental company United Rentals, Inc. (NYSE:URI). McGuire’s Marcato Capital Management owns a 4.7 percent stake in United Rentals, and he expects fresh construction spending to give the company a big boost. Equally important is that contractors, still jittery after the recession, now appear more ready to rent than to own big equipment. “We are calling this renting the recovery,” McGuire said at the 9th annual Value Investing Congress in New York.
JIM CHANOS: These Are The Kinds Of Companies We’re Looking At Right Now (Business Insider)
Jim Chanos isn’t going to tell you exactly what he’s researching at his world renowned short-selling firm, Kynikos Associates, but he’ll give you an idea — a small one — of what he and his team are thinking about. He did that today on Bloomberg TV’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. Chanos says he’s looking at large companies that are growing by making a lot of acquisitions.
Hedge fund manager sentenced to 63 months in federal prison (Palm Beach Post)
Hedge fund manager Paul D. Pomfret was sentenced last week to 63 months in federal prison and ordered to repay $1.6 million after pleading guilty to wire fraud. Pomfret, 49, owns a home in Palm Beach and ran the hedge fund PDP Capital. A former Penn State football player, Pomfret was indicted last year for defrauding a South Carolina businessman who invested $500,000.
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