Morning Coffee: Redemption for one Goldman Sachs analyst. Banking’s big martial mistep
As of the end of the third quarter, Apple was the third most-held stock by U.S. hedge funds, behind only Microsoft and Amazon. So, when the iPhone maker issued its first sales warning in nearly a decade late Wednesday afternoon, it was the professionals who took the biggest beating. Meanwhile, one Goldman Sachs analyst stood a bit taller.
AQR Capital Management, Millennium, D.E. Shaw and five other big-name hedge funds saw the value of their holdings plunge roughly $2.13 billion after Apple issued new guidance, according to Bloomberg. Quant fund AQR suffered paper losses of around $732 million alone on Thursday when Apple stock fell as much as 9% (after tumbling in after-hours trading the previous day.) With Apple being its biggest holding as of Sept. 30, Boston hedge fund giant Adage Capital saw its stake fall by roughly $500 million. Meanwhile, Millennium may have lost as much as $300 million, according to the data.
However, it’s worth noting that Bloomberg’s calculations are based on shares held as of the end of Q3 and don’t account for short positions or options. Investors can only hope their fund managers thinned their Apple holdings during the final three months of the year. – Or better yet: they listened to one prescient Goldman Sachs analyst and shorted the stock.
Back in November, Goldman analyst Rod Hall cut his price target on Apple shares from $209 to $182, noting that he was concerned that end demand for new iPhone models was “deteriorating,” and that Apple may have “miscalculated” its strategy. Hall had previously cut the tech company’s price target an additional two times in October and early November. This came after he and other Goldman analysts admitted in a September note to clients that they needed to “eat our hat somewhat on our cautious stance” on Apple as the stock surged into autumn. Hall can now spit that hat out as he is the most bearish analyst that covers Apple, according to Business Insider.
He took a bit of a bow – or as much of one as an equity analyst can take – in a note sent to clients on Thursday. "We have been flagging China demand issues since late September and Apple's guidance cut confirms our view,” he wrote. Slow clap…
Elsewhere, a UBS investment banker has left the firm after her husband agreed to pay more than $500k in fines to settle an insider trading lawsuit. The SEC accused the husband of UBS’s Annie Wang of eavesdropping on his then-fiancée’s work calls and trading on the information that he overheard. Wang wasn’t accused of any wrongdoing – and the bank backed her up – but she is reportedly no longer with UBS, according to Bloomberg.
Activist hedge fund Third Point was down roughly 11% last year. Dan Loeb’s firm was one of many notable hedge funds to post double-digit declines in 2018. David Einhorn’s Greenlight Capital reportedly declined an eye-opening 34% last year. (WSJ)
Investors who are blaming quants for recent market turmoil are “insane,” according to AQR founder Clifford Asness. “We’ve done lousily, and I’m not blaming others,” he told the FT. “I’m sick of people saying this without a theory for why (quants exacerbate volatility). Markets move for reasons like corporate news, economic data, or what the president or the central bank says.” (FT)
Independent investment bank Houlihan Lokey saw its profits more than double in Europe in 2018 as the firm continues to expand outside of the U.S. (Financial News)
UBS Chairman Axel Weber dismissed rumors that the Swiss bank was considering merging with Deutsche Bank or any other firm. (Reuters)
A mini flash crash hit the currency markets this week, possibly due to Asian traders being on vacation coupled with the “twilight hour” – or the period of time when U.S. traders are heading home but before markets open in Singapore and Hong Kong. (WSJ)
Here’s the inside story on VC firm August Capital, which abruptly ended fundraising and returned limited partner commitments without first consulting with some general partners and principals. The staff was apparently blindsided, and many still don’t know why the move was made. “Younger people there will need to leave in order to continue their careers,” said one limited partner. (Axios)
The average Manhattan apartment is now priced at less than $1 million, the lowest figure in three years. (Bloomberg)
Compensation for senior management at London alternative asset manager Cheyne Capital nearly doubled last year as profits increased by roughly 80%. (The Telegraph)
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