Shares of Facebook — the most popular hedge fund stock — sank nearly 6 percent on Thursday, to close at $119.95, after the social media giant reported very strong quarterly results but warned that current quarterly revenue could be lower than many investors were anticipating. As a result, on Thursday morning several investment banks cut their price targets on the stock. They include Deutsche Bank, which reduced its target from $170 to $150, and UBS, which trimmed its target from $155 to $150. However, UBS reassured clients, asserting, “We believe Facebook remains poised as a key long-term holding for investors.”
A more bullish Credit Suisse raised its earnings estimates and retained its $170 price target. At the end of June, at least 169 hedge funds held a position in Facebook, more than any other stock. In addition, 25 Tiger-related funds — or roughly half — held a position in Facebook.
___
Shares of Allergan, another top holding among hedge funds, fell 4.6 percent, to close at $188.77, after the drug maker reported third-quarter results that came in below some analysts’ estimates. In response, Deutsche Bank cut its price target on the stock from $278 to $250.
However, the bank stressed that it was sticking with its buy recommendation, noting that while growth for some products was soft, the company’s critical eye care and aesthetics franchises continued to perform well. It also noted that Allergan doubled its share buyback plan to $10 billion and announced a new dividend. At the end of June, at least 139 hedge funds held a position in Allergan’s stock, equal to Apple, making the two stocks tied as the fourth-most-popular hedge fund stock.
___
Shares of hedge fund favorite Fitbit lost more than one-third of their value on Thursday after the maker of health and fitness tracking devices served up weak future guidance. In response, CNBC’s Jim Cramer railed at the company and chief executive James Park, accusing him of not being in touch with the company’s sales trends.
“Mr. Park, I think, has lost any credibility and I think that Fitbit is now done,” Cramer said. “I think everybody who wants a Fitbit has one.”
At the end of the second quarter, London-based Odey Asset Management Group was the fourth-largest investor, while three New York-based Tiger-related funds were among the top 12 investors: Coatue Management, SRS Investment Management, and Bloom Tree Partners.
___
Fitch Ratings downgraded the long-term issuer default ratings of Och-Ziff Capital Management Group and its related entities from BBB- to BB+, following the company’s release of its third-quarter earnings and report of its recent decline in assets. In addition, Fitch reiterated its negative rating outlook, which it had reduced from stable back in July.
“The downgrades reflect Fitch’s expectation of significantly lower future earnings generation capacity following the announced management fee concessions that OZM has agreed to beginning in the fourth quarter of 2016,” Fitch states in its announcement. The average management fee declined to 1.01 percent from 1.23 percent in the third quarter. Although Och-Ziff said it plans to cut compensation and non-compensation expenses, Fitch stresses “the degree of expense offset is uncertain at this time.”
