Baupost’s Seth Klarman: the Fed has broken the stock market [Q4 Letter]
Baupost founder Seth Klarman told investors that the large amounts of stimulus that have been poured into the world's economies are masking the severity of the problems caused by COVID-19. Q4 2020 hedge fund letters, conferences and more In a letter seen by the
- US: Dow: 13047.50 (0.09%), S&P 500: 1403.44 (-0.11%), NASDAQ: 3069.27 (-0.19%)
- Europe: CAC: 3405.79 (0.20%), DAX: 6964.69 (0.46%), FTSE: 5657.86 (-0.25%).
- Asia-Pacific: Australia: 4278.80 (-0.57%), China: 2037.68 (-0.29%), Hong Kong: 19145.07 (-1.49%), India: 5225.70 (-0.92%), Japan: 8679.82 (-1.10%).
- Metals: Gold: 1694.00 (-0.12%), Silver: 32.33 (-0.25%), Copper: 3.53 (1.73%)
- Energy: Crude Oil: 95.36 (0.06%), Natural Gas: 2.80 (-2.07%)
- Commodities: Corn: 7.90 (-1.77%), Soya Bean: 17.47 (-1.17%), Wheat: 8.67 (-2.36%)
- Currency: Euro (€) / US Dollar ($) (EURUSD): 1.2603 (-0.28%), British Pound Sterling (UK£) / US Dollar ($) (GBPUSD): 1.5905 (-0.19%), US Dollar ($) / Japanese Yen (¥) (USDJPY): 78.3950 (-0.05%)
- 10 year US Treasury: 1.596% (0.024)
Market and Economy News Update
U.S. markets end largely unchanged: U.S. markets closed flat on Wednesday as investors remained cautious ahead of a crucial European Central Bank meeting later this week. Investors were also awaiting the latest U.S. employment data on Friday. The Dow Jones Industrial Average (INDEXDJX:.DJI) eked out a gain of 11.54 points, or 0.09 percent, to close at 13,047.48. The S&P 500 (INDEXSP:.INX) erased 1.50 points, or 0.11 percent, to finish at 1,403.44, while the NASDAQ Composite (INDEXNASDAQ:.IXIC) slipped 5.79 points, or 0.19 percent, to end at 3,069.27.
Oil prices rise marginally higher: Oil prices edged higher in a seesaw session on Wednesday ahead of a European Central Bank meeting to discuss a plan involving unlimited purchases of near-term bonds of euro-government debt to ease the region’s debt crisis. Crude oil for October delivery rose 0.1 percent, to settle at $95.36 a barrel on the New York Mercantile Exchange. Brent oil for October settlement fell 0.4 percent to $113.75 a barrel on the London-based ICE Futures Europe exchange.
Stocks in Focus
- Nokia Corporation (ADR) (NYSE:NOK) plunged 16 percent after the company introduced two new Lumia smartphones, based on the newest version of Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone software, at a news conference in New York.
- Google Inc (NASDAQ:GOOG)’s Motorola Mobility unit unveiled three new smart phones, Droid Razr HD, Droid Razr Maxx HD and Droid Razr M, in a bid to challenge bigger rivals Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co.
- Social gaming Zynga Inc (NASDAQ:ZNGA) jumped 3.2 percent after releasing a sequel to its 2009 hit videogame, “Farmville,” with new polygonal 3-D graphics.
- Electronic-payment technology provider VeriFone Systems Inc (NYSE:PAY) reported third quarter earnings excluding one-time items of 75 cents a share, 5 cents above the average analysts’ estimate. Revenue rose 54 percent to $489.1 million from the year ago quarter, but trailed estimates of $498 million. The company forecast better than expected current quarter and full-year earnings, but revenue outlook disappointed.
- H&R Block, Inc. (NYSE:HRB), the country’s largest tax preparer, posted first quarter loss excluding certain items of 38 cents per share, better than estimates of a loss of 39 cents per share. Revenue fell 4 percent, to $96.5 million, missing Street expectations for $101.2 million.
- Executive-recruitment company Korn/Ferry International (NYSE:KFY) reported first quarter earnings of 22 cents a share on revenue of $187 million, beating Street estimates for 18 cents a share on revenue of $181 million. The company provided better than expected current-quarter revenue guidance.
- Supermarket chain Supervalu Inc. (NYSE:SVU) will close approximately 60 underperforming stores this year, which should help the company generate up to $90 million in cash over the next three years.
- Wal-Mart Stores, Inc. (NYSE:WMT), the world’s largest retailer, is optimistic about fourth quarter sales in the United States, despite increased pressure from rivals such as Dollar General Corp. (NYSE:DG) and Supervalu Inc. (NYSE:SVU), Bill Simon, chief executive of its U.S. unit told investors today.
- News Corp (NASDAQ:NWSA) has cut the bonuses of four of its top executives as a result of the UK phone hacking scandal.
- Yelp Inc (NYSE:YELP) ended 6.3 percent higher as Chief Executive Jeremy Stoppleman painted an upbeat portrait of the online business review site’s growth prospects
- Casino operator MGM Resorts International (NYSE:MGM) announced its strategies to develop an $800 million gambling, hotel and entertainment project in Springfield, Massachusetts.
- Analysts at Credit Suisse initiated coverage of Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) with an “underperform” rating and a price target of $6.
- Dutch lender ING Groep N.V. (ADR) (NYSE:ING) (AMS:INGA) raised about $3 billion selling 54 million shares of Capital One Financial Corp. (NYSE:COF).
- Supermarket chain Safeway Inc. (NYSE:SWY) announced plans to spin-off its gift card business, Blackhawk Network Holdings Inc., with an initial public offering sometime in the first half of 2013. However, analysts at Cantor Fitzgerald reiterated their “sell” rating on the stock.
- Office supply retailers Office Depot Inc (NYSE:ODP) closed significantly higher after the company left unchanged its full-year profit and free cash flow outlook at the Goldman Sachs Annual Global Retailing Conference.
- Memphis-based Verso Paper Corp. (NYSE:VRS) ended 13.5 percent lower after the company called off talks of a possible merger with bankrupt Ohio rival, NewPage Corp.
- Canadian gold mining company AuRico Gold Inc (USA) (NYSE:AUQ) (TSE:AUQ) plunged 21 percent after cutting its full-year production forecast as the company focuses on underground development at its Ocampo mine in Mexico.
Hedge Fund News Update
- Hedge fund managers Ray Dalio, Michael Platt, Chase Coleman, Clifford Asness and Leon Cooperman have been named in the Bloomberg Markets‘ latest list of the 50 most influential people in finance.
- US hedge fund Strategic Value Partners has hired Goldman Sachs Asset Management veteran, Steve McGuinness, as senior managing director.
- Brummer and Partners, Sweden’s largest hedge fund manager, has raised $500 million for a new fund that will launch in October, and invest in equities, corporate bonds and government bonds.
- Swiss fund of hedge funds Altin AG is up 2.58 percent through August, much better than the 1.75 percent that the average fund of funds has returned this year.
Brokerage Upgrades and Downgrades on Wednesday, September 05, 2012
- AMN Healthcare Services, Inc. (NYSE:AHS) was raised to “buy” from “neutral” by analysts at Citigroup with a target price of $11.
- Cross Country Healthcare, Inc. (NASDAQ:CCRN) was lifted to “buy” from “neutral” by analysts at Citigroup with a target price of $7.
- Codexis, Inc. (NASDAQ:CDXS) was upgraded to “neutral” from “underweight” by analysts at Piper Jaffray with a target price of $2.
- Eli Lilly & Co. (NYSE:LLY) was raised to “outperform” from “market perform” by analysts at Sanford C. Bernstein with a target price of $52.
- Estee Lauder Companies Inc (NYSE:EL) was lifted to “hold” from “sell” by analysts at EVA Dimensions.
- McKesson Corporation (NYSE:MCK) was upgraded to “buy” from “neutral” by analysts at Mizuho with a target price of $99.
- Northland Resources SA (TSE:NAU) was raised to “buy” from “neutral” by analysts at Goldman Sachs with a target price of $6.20.
- Parex Resources Inc. (TSE:PXT) was lifted to “outperform” from “market perform” by analysts at Raymond James.
- Qlik Technologies Inc (NASDAQ:QLIK) was upgraded to “overweight” from “equal weight” by analysts at Morgan Stanley with a target price of $28.
- Time Warner Inc. (NYSE:TWX) was raised to “buy” from “neutral” by analysts at UBS AG with a target price of $50.
- Vitamin Shoppe Inc (NYSE:VSI) was lifted to “buy” from “neutral” by analysts at Bank of America.
- Alpha Natural Resources, Inc. (NYSE:ANR) was downgraded to “outperform” from “strong buy” by analysts at Raymond James with a target price of $8.
- Advanced Micro Devices, Inc. (NYSE:AMD) was lowered to “neutral” from “buy” by analysts at UBS AG with a target price of $4.
- Cliffs Natural Resources Inc (NYSE:CLF) was cut to “underperform” from “neutral” by analysts at Credit Suisse with a target price of $30.
- James River Coal Company (NASDAQ:JRCC) was downgraded to “market perform” from “outperform” by analysts at Raymond James.
- Louisiana-Pacific Corporation (NYSE:LPX) was lowered to “reduce” from “hold” by analysts at TD Securities with a target price of $12.50.
- Medicis Pharmaceutical Corp (NYSE:MRX) was cut to “neutral” from “buy” by analysts at Goldman Sachs.
- Peabody Energy Corporation (NYSE:BTU) was downgraded to “market perform” from “outperform” by analysts at Raymond James.
- PolyOne Corporation (NYSE:POL) was lowered to “market perform” from “outperform” by analysts at Wells Fargo & Co.
- Walter Energy, Inc. (NYSE:WLT) was cut to “market perform” from “outperform” by analysts at Raymond James.