Around the web

Ken Griffin lashes out at Crain’s Chicago Business’ Greg Hinz. (Capitol Fax blog)

Despite risks, Brazil courts the millisecond investor. (DealBook)

Timing just right for Markit. (DealBook)

Behavioral investing principles are more relevant than ever. (Institutional Investor)

And the most beloved stock by hedge funds is…. (ZeroHedge)

Occitan Capital Partners to close amidst losses. (FINalternatives)

Goldman: Hedge funds trailing S&P 500 by wide margin. (FINalternatives)

Think all Tiger Cubs are the same? Not so fast. (iiAlpha)

What is the AIFMD state of play? (Hedgeweek)

North Street Group acquires Hedge Fund Solutions. (eVestment)

Bulldog Investors targets Firsthand Technology Value Fund manager Kevin Landis. (FINalternatives)

Dish Network co-founder Charlie Ergen offers $2 billion for LightSquared spectrum. (FINalternatives)

Emerging markets hedge funds manage record $151 billion. (HFR, via FINalternatives)

Stevie Cohen unplugged. (Reuters’ Unstructured Finance blog)

Red Oak Partners cries foul over Digirad Corp. board vote. (FINalternatives)

Monarch Alternative Capital promotes five. (FINalternatives)

Bloomberg billionaires map. (Bloomberg)

Fordham University releases alternative investment survey. (eVestment)

People moves

SaLaurMor Capital hires Anat Leon. (Opalesque)

TBIG Market Opportunity Fund, L.P.

BOULEVARD CAPITAL PARTNERS LP

—Compiled by Angela Sormani

Last month, JGB yields hit an all-time low of 0.4% and have been grinding up ever since. The market is recognizing that the new government’s reforms are credible and mark an inflection point for the economy. Japanese investors are already reallocating overseas. Although the coincident economic data remains mixed – industrial production is still weak while retail sales are improving – the OECD’s leading indicators are turning up and the latest purchasing manager survey is back in expansion. After years of sluggish growth and persistent deflation, stronger growth and rising inflation will push nominal yields higher.

The government’s stimulus policies have been helped by the rally in stocks and the sell-off of the yen (just ask the exporters), but policymakers won’t want to see rates rise too high or too quickly. If that happens, the Bank of Japan might intervene and buy even more bonds to slow the rise in yields. Whether slow or fast, however, yields are going up and bond prices are going down. The Abe Trade is now firing on all pistons with quite a long way yet to go.

Find more articles like this at www.mcalindenresearch.com

Warren Hatch, PhD, CFA
Chief Investment Strategist
McAlinden Research - a division of Catalpa Capital Advisors, LLC

Around the web

Robin Hood tax: a long shot. (Financial Times)

Financial markets are at risk of a ‘big data’ crash. (Maureen O’Hara and David Easley in the FT)

U.S. Attorney in phone leaks has seen both sides. (NYTimes.com)

Ex-Diamondback Capital Management portfolio manager Michael Sedoy eyes fourth quarter launch for Kimmeridge Energy Advantage fund. (Hedge Fund Intelligence)

Moore Capital’s Louis Bacon to anchor $750 million senior loan fund. (Buyouts)

SEC Democrat Elisse Walter signals quick action on advertising rule. (FINalternatives)

Inspector General’s report on the CFTC’s oversight and regulation of MF Global. (Sen. Richard Shelby’s web site)

Ken Griffin’s rant on Illinois taxes and corporate cronyism very instructive – for those who care to learn. (Crain’s Chicago Business) Related

Credit Suisse is Asia’s second-largest prime broker, behind Goldman Sachs. (FINalternatives)

Arrowhead Capital Management’s James Fry goes on trial in Tom Petters-linked case. (FINalternatives)

Russia seeks to track Hermitage Capital’s Bill Browder. (FINalternatives)

World’s biggest funds of hedge funds. (iiAlpha)

Eddie Lampert’s ESL Investments boasts soaring stock portfolio. (iiAlpha)

Default swaps on junior bank debt fall on ISDA rule speculation. (Bloomberg)

CFTC said to be preparing ISDAfix Probe Talks in weeks. (Bloomberg)

KEENAN OVERSEAS LIQUID CREDIT FUND (CAYMAN) LTD.

HARSPRING CAPITAL, LP

Halkyon Alpha Fund LP

ROYSTONE CAPITAL PARTNERS LP

COATUE LONG ONLY PARTNERS LP

SecondMarket Active Mind Technology Fund, LLC

SecondMarket Boatbound Fund, LLC

RCH Energy Long Alpha Fund, L.P.

—Compiled by Angela Sormani

This is our second piece for Reuters. In our first piece, from May 7, we recommended WU, GES and TEVA. All three have posted nice gains for us since that date of 5%, 4% and 6%, respectively.

American Apparel APP ($2.00)
Buy Recommendation / 2014-2015 Target: $3.20 / Upside: 60% / P/E: N/A

We recently ran 330 consumer discretionary names through our 155-variable computer model. APP ranked # 317 out of 330. That is the bottom 5% and the first time in ten years I have ever recommended such a low ranking name. This is a special situation though. Below are excerpts from our 23-page> December 2012 report on Aeropostale, Guess, American Apparel and the Retail Apparel industry. The full-length report is available on request for those who agree to a free trial. APP has been an open recommendation of ours since August 30, 2012, is up 80% for us, and remains undervalued.

I do not remember ever recommending a name trading at $1/sh with a market cap below $150,000,000 but I did so in late August – it has been one of our best performing names and still has significant upside. In fact, of our 58 open recommendations, APP is one of just twelve trading with market cap < $600 mln; one of just three trading with market cap < $300 mln and the only name trading < $4 per share. APP does not score well on our 155-variable computer model. I do go against my model from time to time when I see a special situation as this is. In 2008, APP market capitalization topped $1,000,000,000 and then the stock collapsed, so this is not a typical small cap name … and it could go back towards where it was pre-collapse. Year-to-date, the shares have shown signs of life and comp store sales have been rising consistently for quite some time. APP has 254 stores spread out across 20 countries: US, Canada, Mexico, Brazil, UK, Ireland, Austria, Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China. The company, based in California, employs 10,000 and has e-commerce sites that serve 60 countries. APP does not use Asian sweat shops as their competitors do … in fact most of its products are Made in the USA.

Wide reach and young target: Retail operations principally target young adults ages 18 to 35 through an assortment of fashionable clothing and accessories with a compelling in-store experience. Wholesale operations have a dozen authorized distributors and approximately 10,000 screen printers and specialty companies. APP also has 12 different online stores that can be accessed at www.americanapparel.com. The design team is led by controversial American Apparel CEO, Dov Charney.

RFID ramp-up: Implementation of tighter inventory management systems through the RFID (radio frequency identification) program. In FY13, APP intends to complete the installation of RFID tracking systems in all of its stores. As of 31-Mar-13, it implemented RFID systems at approximately 222 stores worldwide.

Store Renovation: Continued store renovations to improve presentation and sales per square foot, with approximately 70 stores remaining to be renovated. Installation of traffic counters remaining to be completed in more than half of its stores to improve customer conversions. Full implementation of this technology is expected to be completed in FY13.

Productivity Improvement Program: Implementation of the Oracle ATG back-end online system for international store fronts and inventory productivity improvement continues which will result in further reduction in operating expenses and improvement in online sales performance. In addition, APP continues to seek improvements in store labor productivity and workers’ compensation exposure.

New e-commerce platform: In Sep-12, APP implemented a new online store platform to enable faster deployment of online stores to new international regions. As a result of the above initiatives, the company was able to reduce its inventory unit levels by approximately 20% in FY12.

New Distribution Center: In Jun-12, APP entered into a new operating lease agreement for a new distribution center located in La Mirada, California and expects to fully transition its distribution operations to this new facility in the first half of 2013. The new distribution center is expected to contribute to processing efficiencies and effectiveness and will reduce operating expenses and cost of sales. Although these programs have a short-term cost, their completion will allow for further growth in sales and profit margins that fall in-line with the industry.

*** As the projected EBITDA range continues to improve, the company has been able to refinance its high cost debt as we speculated and expected when we initiated coverage on this name on August 30, 2012 ***

Revenue and Profit Estimates: For FY13, the company maintained its outlook for adjusted EBITDA to be in the range of $47 million - $54 million. APP also expects net sales of at least $650 million for FY13. As the store count continues to climb, APP could break through the $1 bln in annual revenue mark by 2017-2018.

Quarterly Sales: For 1Q13, net sales increased 4% to $138.1 million as compared to $132.7 million recorded in 1Q12, on an 8% increase in comparable store sales and a 1% increase in wholesale net sales. Adjusted EBITDA improved by $1.4 million to a loss of $0.7 million in the reported quarter from a loss of $2.1 million in 1Q12. The marginal improvement was a result of retail and online sales growth and the related leveraging of fixed costs.

Gross Margin: Gross profit of $72.9 million for 1Q13 represented an increase of 4% from $70.1 million in 1Q12. Gross margin remained unchanged at 52.8% for 1Q13 versus 1Q12. Higher margins from an improved sales mix were offset by higher freight costs. Operating expenses of $83.3 mln for 1Q13 represented an increase of 4% from $79.9 million for 1Q12. Operating margin remained unchanged at 40% for both quarters. The increase in operating expenses resulted from higher share-based compensation charges, higher rent expense and lease termination costs, and higher expenses related to RFID.

American Apparel APP should go from 250 stores, $650 mln in annual revenues and no profit to 300 stores, $800 mln in revenues and $0.20 EPS by 2015. This would leave the stock with a fair value of > $3.00. Looking beyond 2015, CEO Charney sees the store count near 350 by the end of the decade with a saturation point coming at a store count well above 500. APP has been a very volatile stock the last two years since collapsing from its > $1 bln market cap and $14 share price during the recession. The CEO is holding 45,000,000 shares … 40% of shares outstanding. If he decides to sell any of his shares at this ~ $2 price point, that would pressure the stock. As I warned in my August notes, he is an eccentric, controversial and unpredictable personality who has been sued several times, so there is no telling what he will do. He has been cleared on most claims against him and in my most recent conversation with Investor Relations I was told that Charney is not selling shares and is convinced the market has undervalued APP shares and under-estimated him.

National Oilwell Varco NOV ($66.70)
Buy Recommendation / 2014-2015 Target: $84 / Upside: 26% / P/B: 1.4

This is our third time in NOV—most recently reinstated on November 16, 2012. The first two trades resulted in double-digit absolute and relative (to the S&P-500) gains for us (with short holding periods). We recently ran 780 names from the Russell-1000 through our 155-variable computer model. NOV ranked # 56 out of 780. One of the marks against NOV was on relative strength, but we see that as a contrary indicator. Below are excerpts from our 17-page May 2012 report on National Oilwell Varco, Oil States International, the Equipment & Services industry and the Energy sector. The report is available on request for those who agree to a free trial.

Offshore Rigs Drive Growth: NOV is a leading provider of rig equipment and a dominant player in the deep-water oil drilling industry. With a dominant market share near 70%, NOV has been taking advantage of an up-cycle in the international oil drilling industry since late 2010. It is estimated that secular growth in deep-water oil and gas drilling, the shift towards higher quality assets, the aging of offshore equipment, and an increased focus on safety will lead to a larger number of oil and gas drills by the end of the current cycle. High oil prices and renewed interest in developing offshore resources as an alternative to traditional onshore resources would also help in acquiring new orders. With rig building costs stabilizing at a lower equilibrium and with financing increasingly available, the investment environment is positive. NOV has recently floated additional offshore rig projects for Petrobras in Brazil.

Tech Advancements: In US land drilling, one of the main hurdles to fully maximize land rig capacity is the time needed to transport the rig to its new drilling location and prepare the rig to begin drilling. NOV developed Rapid Rig to solve this problem, with the capability of drilling in shallow-to-moderate well depth. The company introduced its Drake rig, designed as a fit-for-purpose drilling rig for the Marcellus shale plays, where the terrain demands a rig with a relatively small footprint. In addition, the company rolled out a new computerized application, Video Matrix Motion Detection to reduce non-productive time.

Expansion via Acquisitions: NOV has been strategically expanding through acquisitions which have been earnings accretive. In FY12 revenue from the Distribution & Transmission segment more than doubled to $2.05 bln, and that was due mainly to the acquisitions of Wilson and CE Franklin. NOV completed 17 acquisitions with an aggregate purchase price of $2.88 bln in FY12. Some of the named acquisitions of NOV during the fiscal year were NKT, Enerflow, Wilson Distribution, and Fiberspar. While some of the acquisitions will help NOV with complementary products such as down-hole tools, pumps and valves, others will enable forward integration through acquisition of distributor businesses.

Outstanding Distribution & Transmission segment Performance: NOV’s performance in FY12 received a boost due to strong performance from its Distribution & Transmission segment which provides supply chain management services to drilling contractors, exploration and production, pipeline operators and downstream energy processor companies worldwide through a network of 460 branches. The D&T segment generated $3.9 billion in revenue, an improvement of 110% versus FY11. Increased volume, greater cost efficiencies and continued favorable pricing which related to strong demand for this segment contributed to an increase in operating profit percentages.

Strong Balance Sheet: NOV is well-positioned with a healthy cash balance and the company is expected to benefit from its strong balance sheet and capitalization; availability of access to credit, a wide array of product and service offerings backed with a record level of orders. As of 31-Dec-12, the company reported cash and equivalents of $3.30 billion and total debt of $3.15 billion. The company paid $2.88 billion in cash for acquisitions in FY12. NOV has planned capital expenditures of ~ $600 million for FY13 as it continues to pursue certain expansion opportunities; including the completion of a new Flexibles plant in Brazil. The company had a 2012 year-end backlog of $11.8 billion, and $7.4 billion is expected to flow through in 2013.

Internal Advancements: The company has focused activities on replacing old mechanical and DC electric land rigs with improved AC power, electronic controls, automatic pipe handling and rapid rig-up and rig-down technology. It has also built out additional deepwater floating drilling rigs, including semi-submersibles and drill-ships to employ recent advancements in deep-water drilling to exploit unexplored deep-water basins. The replacement of fleet over the age of 25 years should help the company maintain the order bookings at a sustainable rate.

Replacement Market Opportunity: Contractors are retiring older models and substituting them with newer platforms in order to meet the requirements of unconventional drilling techniques. The outlook for shallow-water activity is improving. By 2015, following an estimated 150 deliveries, analysts expect the number of rigs > 30 years old will make up roughly 51% of the worldwide fleet. NOV, with its significant market share of rig packages is positioned to benefit from new jack-up rigs in this cycle.

Financial Advantage: Worldwide deep-water off-shore drilling and strong shale plays in North America contributed to the increased revenue for the Rig Technology segment and Petroleum Services & Supplies segment. Acquisitions made during FY12 contributed to the increase in revenue for 2012 compared to 2011.

NOV shares look attractive on an absolute and relative basis. It is out of favor and we see that as a contrarian indicator. It has lagged a bit in recent years on EPS and revenue growth, but at 1.4X book value, 9X cash flow, 11X earnings, with EV/EBITDA < 8 and P/S at 1.3, the shares are attractive and undervalued. EPS should rise from ~ $5.50 in 2013 to $6.50 in 2014-2015 with revenues going from $22 bln to $24 bln.

Marvell Technology MRVL ($11.30)
Buy Recommendation / 2014-2015 Target: $14 / Upside: 24% / EV/EBITDA: 6.4

We recently ran 780 names from the Russell-1000 through our 155-variable computer model. MRVL ranked # 469 out of 780. Below are excerpts from our March 2013 report on MRVL. The report is available on request for those who agree to a free trial.

Marvell was recently fined $1.1 billion due to infringement of patents claimed by Carnegie Mellon University. This ruling caused the MRVL share price to collapse to $7 late last year in what was a clear over-reaction to bad news. This created a buying opportunity and we went against our computer model on this name. It is still possible that the fine will be reduced (or eliminated). All Marvell products are manufactured outside the US and almost all revenues are coming from Asian customers.

Prospects remain solid and MRVL is gaining market share. MRVL continues to invest heavily in research and development and in Q1 announced that it developed a new quad-core processor for both low-priced tablets and smartphones. Marvell processors can be found in Samsung handsets for China Mobile among others; see below.

Supplier of fully integrated platform solutions: Marvell Technology’s core strength lies in development of complex System-on-a-Chip (SoC) devices in areas of analog, mixed-signal, digital signal processing and embedded ARM-based microprocessor integrated circuits. The company develops platforms that integrate hardware and software to provide optimum computing solutions as compared to individual components. MRVL has transitioned from a supplier of stand-alone semiconductor components to a supplier of fully integrated platform solutions lately. A critical part of its business has been the on-chip software, which acts as the “driver” for the functionality of the chip. These platforms cut across multiple end-markets; integrating components and technologies from different end-markets. MRVL’s PXA920 is a highly integrated 3G communications processor solution that targets the TD-SCDMA (Time Division Synchronous Code Division Multiple Access) smartphone market and addresses EDGE, WCDMA (3G), TD-SCDMA (China 3G) and 4G/LTE (long-term evolution) mobile network standards.

Outsourcing of manufacturing facilities: MRVL has largely been able to avoid the costs of owning and operating its own manufacturing facilities by outsourcing. MRVL currently outsources a substantial percentage of integrated circuit manufacturing to Taiwan and other foundries (primarily in Asia). This allows MRVL to focus its efforts on the design and marketing of the products. The company is planning to migrate to smaller geometric process technology following availability of smaller silicon chip sizes and lower power requirements in order to reduce cost and improve performance. Most of the company’s integrated circuits are fabricated using widely available CMOS (complementary metal oxide semiconductor) processes, which provide greater flexibility to engage independent foundries to manufacture integrated circuits at lower costs.

Low cost 3G platform for both smartphones and tablets: In Feb-13, MRVL announced Marvell PXA1088, a highly integrated quad-core application and communications mobile System-on-a-Chip. The Marvell PXA1088 solution incorporates the performance of a quad-core ARM Cortex-A7 with Marvell’s WCDMA and TD-SCDMA modem technology to provide a low cost 3G platform for both smartphones and tablets. Marvell’s new PXA1088 is compatible with its dual-core single-chip platform, enabling device partners to upgrade their next-generation mobile devices to quad-core without additional design cost.

Major chip supplier to China reaching out to global 3G and 4G broadband: Marvell Technology has become a major chip supplier to the Chinese market and its processors can be found in Samsung’s Galaxy line on China Mobile. Marvell is aiming its new chip at smartphone devices at (or below) the $125 price point. In Feb-13, Marvell announced the availability of LTE TDD/FDD capability on its quad-core platform. The platform will lend support for all global 3G and 4G broadband standards, enabling seamless global roaming; and the latest wireless connectivity technology. Next year, China alone is expected to buy 235 mln smartphones. Worldwide tablet shipments were ~ 120 mln in 2012, and are expected to top 400 mln by 2016. MRVL has a significant opportunity to benefit from this.

Expanding market share in the growing Solid State Drive business: SSD grew roughly 40% in FY13, and the company currently has ~ 50% share in the merchant silicon market. The company can maintain margins as customers transition from the 320 gigabyte per platter to 500 gigabyte. SSD adoption should be slow due to price sensitivity. Still, as the technology reaches a maturation phase, flash storage pricing will drop and drive SSD adoption. The company continues to expand its market share in its SSD business and is expected to post double-digit growth in the first quarter of 2014.

Acquisition of Networking-based companies: MRVL completed three business acquisitions and one asset acquisition in the last two years for approximately $124 million. In Dec-11, it acquired Xelerated Sweden, a company which specializes in network processing and programmable Ethernet switching solutions (for $75.2 million).

Revenue concentration: Western Digital accounts for more than 15% of its net revenue, and two other customers account for more than 10% of net revenue. Western Digital accounted for 19%, 21% and 24% of net revenue in FY12, FY11 and FY10, respectively. Asia has been the biggest market for MRVL. Sales to customers located in Asia represented approximately 88%, 81% and 89% of net revenue in FY12, FY11 and FY10, respectively.

Introduction of the industry’s first 4X4 802.11ac solutions: In wireless connectivity, the company introduced the industry’s first 4X4 802.11ac solutions, targeting the enterprise carrier and access point market. This 4X4 solution is designed to ensure seamless throughput of high-bandwidth, multiple-stream HD video across service provider gateways and set-top boxes. With the HD video distribution market gaining access to the mass market, these new solutions will enable MRVL to have a firmer grip early on (in a profitable industry). Marvell’s share in HDDs increased by roughly 5% in FY13 due to the ramp-up of 2.5-inch, 500-gigabyte per platter devices. We expect share gains on mobile platforms to continue over the course of the year.

Share repurchases and dividend payment: Marvell Technology repurchased 34 million shares in 4Q13 for a total of $283 million. Over the past ten quarters, MRVL has repurchased and retired ~ 184 million shares which represented ~ 27% of its outstanding shares. The company repurchased 57.3 million of its shares for $676.5 million in cash during the nine months ended 27-Oct-12. Marvell paid total dividends of $98.8 million in fiscal year 2013 and the dividend yield is currently 2.2%.

Improving results: MRVL’s HDD business in FY13 performed better than in FY12 due to share gains and 40% y/y growth in its SSD business. The networking market grew 2% y/y in FY13. Revenue for 4Q13 was reported at $775 million – an increase of 4% from $743 million in the same period last year. The increase was attributed to increased demand in mobile, wireless and storage customers. Cash flow from operations for 4Q13 was $205 mln versus $137 mln reported in the prior quarter, and free cash flow for the fourth quarter was $161 mln versus $113 mln in the previous quarter.

We initiated coverage on MRVL March 4 @ $10.27. The shares are up 20% in the last month versus single-digit gains for the S&P-500 and the Nasdaq. Yes, there has been a spike in the share price. That being said, EPS estimates for next year have risen sharply as well and the stock remains attractive on a valuation basis compared to other names in the industry. MRVL is currently trading at 12X (rising) estimates for next year, 0.9X its historical P/E multiple, 9X cash flow, EV/EBITDA of 6.4, and less than 2X sales. MRVL is sitting on $2 bln cash with no debt.

Standpoint Research is the only research firm to beat the S&P-500 by at least 500 bps with > 69% of its recommendations versus more than 150 active firms having a statistically significant sample size of recommendations on file. All 319 recommendations we made since 2008, and through May 6, 2013, have been time-stamped by Briefing.com, Bloomberg and Dow Jones. We did this the hard way — without taking a sector bet, market capitalization bet or beta bet. Ideas are generated by a 155-variable computer model I developed 1998-2003 … recommendations are made only after heavy fundamental and subjective overlays are applied. Standpoint Research is an Independent Research Provider with no conflicts of interest.

Standpoint Research, Inc. is an independent research provider, is not a member of the NASD or SIPC, and is not a registered securities broker or dealer. The information contained in this report and on the Standpoint Research website is produced by Standpoint Research and may not be published, broadcast, rewritten or distributed in any other manner without prior written consent from Standpoint Research. Any unauthorized use, duplication, redistribution or disclosure is prohibited by law and may lead to prosecution. The materials, opinions, and ideas expressed herein, are for general informational purposes only, do not specifically address individual financial objectives, financial situation or particular needs of the person purchasing them, and are subject to change without notice. Standpoint Research does not intend for any person or entity to rely on any such facts, opinions, and ideas, as we do not assure the accuracy or completeness of this report, or any of the materials or information set forth in it. Nothing in this report constitutes individual investment, legal or tax advice. Although the information and opinions contained herein have been obtained from sources believed to be reliable, Standpoint Research makes no representations as to accuracy, completeness or timeliness and does not assume any liability or responsibility for any loss to any person or entity that may result from any act or omission by such person or entity, or by any other person or entity, based upon this report and the information and opinions expressed herein. Standpoint Research may issue other reports that are inconsistent with this report and is under no obligation to bring these reports to the recipient’s attention. All opinions in this report reflect judgments made as of the original date of publication and past performance should not be taken as an indication or guarantee of future performance. Standpoint Research, its affiliates, directors, officers and employees may have long or short positions, or buy/sell options, with respect to one or more of the securities and companies mentioned in this report, may be engaging in transactions based on ideas relating to the securities and companies mentioned herein and/or may also hold positions in the securities and companies mentioned herein. Such positions and/or transactions may be contrary to the opinions and ideas expressed in this report and may have been established or engaged in prior to the writing of this report. This report shall not be construed as a solicitation or invitation to buy or sell securities relating to any of the companies mentioned herein.

DARCHUCK STEWART OMNISTRAT FUND, LP

Delta Income Fund LP

RHINO FUND LP

Rhino Small-Cap Financial Fund, LP

SecondMarket Ekso Bionics Fund, LLC>

CMWA International Small Cap Partnership LLC

Whitney Capital Series Fund LLC - Series B2

—Compiled by Angela Sormani

Cormorant Global Healthcare Offshore Fund, Ltd.

Cormorant Global Healthcare Fund, LP

Nishkama Capital Fund LP

Endicott Opportunity Partners IV, L.P.

MCM DIVERSIFIED FUTURES, LP

Xanthos Investment Partners LLC

—Compiled by Angela Sormani

Around the web

Dan Loeb Timeline: The playbook of an activist hedge fund manager. (DealBook)

Citi closes hedge fund office in Waterford. (eVestment)

Why hedge funds’ criticism of the Fed may be right. (DealBook)

Caynon Partners posts solid first quarter gains. (iiAlpha)

Vladimir Golubkov, CEO of SocGen Russia unit, held over suspected kickbacks. (Reuters)

SAC owes $549 million for Elan trades, investors say. (Bloomberg)

Government will provide names of alleged Martoma co-conspirators. (FINalternatives)

Artis Capital Management analyst Matthew Teeple pleads not guilty to insider trading. (FINalternatives)

Tourre hires new lawyer for CDO trial. (FINalternatives)

HedgeWorld and technology provider Gravitas are putting on a 45-minute lunchtime webinar on May 22 about the BYOD movement and the how to ensure secure remote access and file sharing. We’ll discuss the risks funds face in the BYOD world and some solutions that can allow safe remote data access for employees using their own mobile devices. I’ll be moderating the discussion with our speakers:

Patrick Mulvaney, executive director at Gravitas;
Philippa Oats, cloud storage specialist at EMC; and
Kevin Holl, chief technology officer at Evanston Capital Management.

Click here to register for this free webinar. Space is limited. The webinar starts at noon Eastern Time on May 22.

Around the web

A cryptographic key to the Sacramento Kings saga. (Bloomberg Businessweek)

Morgan Stanley CEO James Gorman defends bond-trading business strategy. (Reuters)

Forging its own path, Cantab Capital Partners finds success. (DealBook)

Ex-wife of SAC’s Cohen hires new lawyer in revived lawsuit. (DealBook)

CNBC excerpts: David Tepper, Appaloosa Management founder and CIO, on ‘Squawk Box’. (CNBC)

Barclay Hedge Fund Index gains 0.75% in April (+4.96% YTD); Pacific Rim equities up 13.50% in 2013. (Opalesque)

Will FoHF fall prey to the innovator’s dilemma? (InvestHedge)

Hedge fund job activity still robust in April. (HFObserver)

Backing up big data. (Bloomberg TV)

CNBC ratings down as markets rise. (New York Post)

Full IRS Inspector General report on ‘inappropriate’ targeting of conservative groups. (ZeroHedge)

CSV China Opportunities Fund (US), L.P.

Metacapital Rising Rates Fund, LP

ARDEN ADVISERS II, L.P.

TPH Energy Infrastructure Offshore Fund, LP

GESAF USA, LP

KLS Credit Opportunities Fund LP

Whitney Capital Series Fund LLC - Series W

Whitney Capital Series Fund LLC - Series LS11

OZ MESC Master Fund, L.P.

—Compiled by Angela Sormani

For borrowers, the drop in interest rates is great news. With mortgage rates so low, housing affordability remains at all-time highs. Corporate issuance has been booming, and even cash-rich companies like Apple are borrowing with rates this low. And Brazil’s Petrobras is about to offer the biggest emerging market bond issue ever.

For central bankers, while low rates can be good for growth and asset prices, some policymakers are starting to voice some concerns about the risk of a new credit bubble forming – but not enough to signal that they intend to reverse course any time soon. The most Ben Bernanke has said is that the Fed is “watching particularly closely” for signs of excessive risk taking. Meanwhile, the flood of liquidity is set to get even higher, thanks to the latest rounds of easing led by Japan. In this environment, all asset prices could go higher. According to Lipper, US fund flows are still strong for both stocks and bonds.

For investors, the asset allocation environment is shifting. With bond yields already pancake flat, bond prices are close to being capped out: there is not much more yield to reach for, at least for fixed income. The Barclay’s Aggregate Bond Index has already been lagging the S&P 500 since last November. As the global economy regains momentum and inflation begins to turn up, investors should consider shifting into assets with better total-return prospects like stocks, commodities, and real estate.

Find more articles like this at www.mcalindenresearch.com

Warren Hatch, PhD, CFA
Chief Investment Strategist
McAlinden Research - a division of Catalpa Capital Advisors, LLC

Around the web

True alpha – top holdings of highest-earning ‘guru’ David Tepper. (Forbes)

A social media view of SALT 2013 – the ‘Davos of Hedge Funds’. (DealBook)

Oil falls as Fed discusses QE exit. (Futures Magazine)

SEC Chair White agrees with calls for U.S. stock market review: official. (Reuters)

Ex-Blackrock star Mark Lyttleton held in City trading probe. (Sky News)

SEC focus may lead to 2012 Stock Act being amended. (NPR)

Ex-JPMorgan credit trader Tolga Uzuner readies Brocade Capital Management. (Financial News, via FINalternatives)

An SEC settlement that seems to favor Falcone. (DealBook)

Bloomberg’s privacy breach and the new church/state divide. (Forbes)

Bloomberg isn’t the only company able to spy on users. (Forbes)

Do hedge funds manipulate stock prices? (Journal of Finance, via MoneyScience)

Risk management and firm value: evidence from weather derivatives. (Journal of Finance, via MoneyScience)

Morgan Stanley Alternative Investment Partners launches alternative mutual fund. (FINalternatives)

Dell seeks more info on Icahn offer. (FINalternatives)

Hedge funds enjoy May inflows. (FINalternatives)

StanChart falls after Muddy Waters flags bad debts. (Reuters)

Quote milestone signals U.S. market weakness.(The Trade News)

Hedge funds sue Porsche – again. (FINalternatives)

Why hedge fund managers should never buy sports teams. (iiAlpha)

Managing the people side of risk. (McKinsey & Co.)

Kenneth Langone ‘terrified’ Jamie Dimon would resign after JPM chairman/CEO role separation vote.

CBOE’s Bill Brodsky eases way for N.Y. transplants. (Crain’s Chicago Business)

People moves

Stream Capital hires hedge fund industry vet Katherine Hill. (eVestment)

Dreman Inflation Advantage Fund, LP

Meadowood Capital Onshore Fund, L.P.

Shale Community BanFund, LP

Altum Credit European Fund, L.P.

1798 US Special Situations Fund LP

LIBREMAX VALUE PARTNERS, LP

Apis Deep Value Fund Offshore, Ltd.

—Compiled by Angela Sormani

Around the web

Presenting flash trading detectives at work. (ZeroHedge)

This video of one half-second of high-frequency trading is insane, terrifying. (Nanex, via HuffPo)

That was Seth Tobias’ widow flipping Joakim Noah the bird at the Bulls-Heat game Wednesday night. (Deadspin)

Trustee weighs pursuing banks in Peregrine Financial collapse. (WSJ’s MoneyBeat blog)

Goldman’s Gary Cohn can’t escape the ’squid’. (DealBook)

If hedge funders are so smart, why are they so relentlessly wrong? (The Atlantic)

What happens in Vegas for hedge funds. (DealBook)

Why hedge fund big shots hate Ben Bernanke. (Forbes)

Loeb says Japan rally in early stages. (WSJ’s MoneyBeat blog)

The mutualization of hedge funds – will it be successful? (iiAlpha)

Leon Cooperman: stocks are the place to be. (Hedge Fund Intelligence)

Dow Jones interviews Robert Khuzami. (YouTube)

Billionaire Paul Singer: The U.S. has a debt problem and the Fed is making it worse. (Forbes)

Ex-Sen. Judd Gregg (R-N.H.) said to be top candidate to lead SIFMA. (Bloomberg)

Peak 6 raises $1 billion for new hedge fund. (Crain’s Chicago Business)

Hedge funds add 0.69% in April as most strategies rise. (FINalternatives)

Andurand oil fund up 25% in three months. (FINalternatives)

Hall Commodities returns 6.7% on metals, energy in April dry run. (Bloomberg Businessweek)

Paloma Access LLC

Oracle Forex Fund II, LP

DG Credit Opportunities, LP

AM Global Core Fund, LLC

Whitney Capital Series Fund LLC - Series O

EOP IV-A, LP

Chrysaetos Global Opportunities Fund, LP

—Compiled by Angela Sormani