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Hedge Fund Hotel California: Smart Money Darlings Crash Up To 42% In One Week
Late last week, we reported that as of mid-August hedge funds are set to record their seventh consecutive years of market underperformance (unless the S&P crashes into year end, the Fed does not lose control, and hedge funds actually end up being "hedged").
Perhaps the main reason for this has been that over the past several years hedge funds have largely lost their stock-picker creativity (after all in a centrally-planned world the best returns come from levered beta, not targeted alpha) and courtesy of non-stop idea dinners (extensively swept for bugs beforehand) have made the same handful of stocks their top holdings. We presented the 50 most popular hedge fund stocks last week:
And while this "hedge fund" hotel strategy works on the way up, when everyone makes roughly the same profits, it is on the way down when these hedge fund hotels become "Hotel California" - hedge funds can check out, and sometimes they can even leave... with massive losses.
According to a Bloomberg analysis, many of these hedge fund hotel stocks, or companies where hedge funds hold a combined stake of at least 25%, suffered declines of as much as 42 percent in the recent stock market rout.
Bloomberg highlights the five biggest such losers in the past week among companies with at least $1 billion in market value, a period in which the Standard & Poor’s 500 Index fell 10 percent.
- Jumei International Holding Ltd.
The online cosmetics retailer’s American depositary receipts plunged 42 percent in the past week as the Chinese company issued sales guidance that was short of analysts’ estimates. Jumei has also been hit by a slide in U.S.-listed shares of Chinese companies after the People’s Bank of China devalued the yuan on Aug. 11. That’s bad news for hedge funds, which owned about 30 percent of ADRs listed in New York. Biggest U.S. hedge fund holders: Discovery Capital Management and Ardsley Advisory Partners
- SunEdison Inc.
Shares of the world’s biggest clean-energy developer were up 65 percent this year at the peak in June. The company has erased those gains and then some, plummeting 27 percent in the past week alone. Even forming an investment vehicle with Goldman Sachs Group Inc. worth $1 billion hasn’t stalled a decline in SunEdison’s stock that baffled analysts earlier this month. Hedge fund firms held a combined 48 percent stake in the company. Biggest U.S. hedge fund holders: Greenlight Capital, Third Point and Glenview Capital Management
- California Resources Corp.
The shares dropped 27 percent in the past week as the company’s bonds also declined. The oil producer has been under pressure from falling crude prices. Hedge fund firm BlueMountain Capital Management said in June that CRC’s common stock was “worthless” and its debt would have to be restructured. Hedge funds owned 30 percent of the shares as of the second quarter. Biggest U.S. hedge fund holders: Soroban Capital Partners, RR Partners and Cyrus Capital Partners
- Atara Biotherapeutics Inc.
The drug developer that went public in October lost 24 percent in the past week. Shares of the company, which have gained 43 percent this year, have been sliding since the company reported second-quarter earnings that missed expectations on Aug. 6. Hedge funds owned 26 percent of the stock. Biggest U.S. hedge fund holders: Baupost Group, Visium Asset Management, Bridger Management
- Whiting Petroleum Corp.
The shares have fallen 55 percent this year, including 21 percent in the last week as the price of oil has plunged to fresh lows. Whiting, the largest energy producer in North Dakota’s Bakken shale region, trimmed plans for this year’s capital spending when it announced second-quarter earnings results on July 29. Hedge funds owned 33 percent of the company. Biggest U.S. hedge fund holders: Paulson & Co., Citadel and Viking Global Investors
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Now, the only reason these hedge fund hotels tumbled as they did is that unlike Allergan, Apple, and Facebook, they were not deemed "systemic" enough for the hedge fund space. Because should AAPL ever be hit with a 42% drop, expect to see line of billionaires stretching around the Treasury building block, all demanding either the latest Tim Cook private letter to Jim Cramer, or, failing that, a bailout.
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Poor little hedge funds. Someone get a violin.
Or Joe walsh on guitar.
https://www.youtube.com/watch?v=U_qHU_6Ofc0
Yep. Living a life of illusion..
<<<--- My troll slave
"Monkey Hammered?"
As far as I can tell, hedge funds don't hedge anything except their fees and they are always on the winning end on that trade......
Did you know his Maserati does 185? Unfortunately he can't drive it any more. Some problem with his license or something from what I heard.
How about roach hotel, where they check in but don't check out?
Got to hand it to the PR merchants of the Hedge funds.
So many people think Hedge Funds are it, full of the best trading talent in the markets etc.
The reality is they're on the whole dross offering sub-standard returns for very very high fees.
98% of hedge funds are shit. There are only a few who are not weasels and scum bags including Ray Dalio, Chanos, Dr. Michael Burry and one or two more. Note that those mentioned are not tribesmen.
Alternatively these hedgie losers should just by blue chip stawks like MonSATAN, Face-Spy and crApple.
Being asked to disclose how you make money to clients drove the smart ones to manage their own money instead.
Most HF remaining are drek.
Most hedge fund ads sound like "Hey meester, you wanna meet my seester? She's a virgin"......
I used to invest in mutual funds but I got tired of the 20% to 30% losses and all the regulations and fees.
So now I invest with a hedge fund and I lose 40% to 60% but at least its unregulated and I can see where the fees go. I mean I have seen the hedge fund manager's yacht and mansion. So I got that going for me, which is nice.
"Mirrors on the ceiling, pink champagne on ice, and she said: 'We are all just prisoners here, of our own device.'"
I can't seem to kill the beast no matter how many times I stab it with my steely knife.
Someone should have done that to Don Henley and the other douchebag leader of The Eagles. Half literate libtards dope addicts. One of the shittiest bands ever who made it big thanks to slime Geffen.
Mojo Nixon said it best:
https://www.youtube.com/watch?v=Wm-o7_VVAoU
Don't hold back Freddie, tell us what you really think.
About hedge funds
Can I get my 2-and-20 back since you did so poorly? <raucous laughter erupts on the other end of the phone>
Some how I think they'll be okay......, until the wheels fall off the bus then I see Columbian neckties in their future.
Fuck 'em.
So much creativity indeed. Today's rally is supremely targeted towards those top 10 holdings with all the usual suspects ripping higher.
That's why Apple had to rally yesterday. Too many well connected funds would have went bye-bye.
Ditto NFLX. Up 10% at present. Muppet slaying at its finest!
The UNREALIZED GAIN scam is their best weapon. They all jump on a stock, run it up, and then start collecting fees on a faux market value. They get paid and the limited partners cant sell. "It says its worth X in the paper, isnt it?" This is the slimeist game in town. 95% of hedge funds are a scam.
Speaking of CA hotels and sunk investments.....it appears CAPERS is literally investing in the Kiev regime. http://mobile.reuters.com/article/idUSL5N10M3O620150812
I guess nobody got the world history and reality memo, Russians have been in Ukraine for 1000 years, Russians have nukes, Russians sacrificed 20,000,000 people for territorial sovereignty, Russians aren't commies anymore.
Russians will fight for their territory to the death.
Chump change. Move on. So many muppets. Same big fat fees.