What Is Important: RICO for SAC Capital Advisors, Hedge Funds Favor Boeing
Top Hedge Fund Holdings
A look at which stocks the top 50 hedge funds own, without any need for comment (via Factset):
The 50 largest hedge funds increased their equity exposure by over 5% in Q 1 2013 This quarter, Boeing Co. was the favorite allocation of the funds. The stock experienced $1.6 billion in inflows, which amounted to nearly 250% of its Q4 value in the funds' aggregate portfolio. Boeing's shares are up 28.2% year to date ("YTD"), compared to 15.7% for the S&P 500. However, the largest dollar value increase in equity exposure arose from the January IPO of Norwegian Cruise Line Holdings Ltd which was backed in part by Apollo Global Management LP. It's also interesting to note that though the funds sold some exposure in Google Inc. (Cl A), the technology company was present of the majority (62%) of the fifty hedge funds portfolios This distinction was previously held by Apple. Two quarters ago, Apple was held by just as widely as Google and it was the largest equity holding of nearly one fourth of the funds. However, by Q1 2013, Apple was held by only 40% of the funds with only four carrying it as the top stock holding.
While the top 50 hedge fund managers largely increased their exposure to equities, the funds also made significant reductions to their stakes in two successful stocks in 2013: News Corp. (Cl A) and American International Group Inc. The funds reduced their holding in News Corp by 20.3% and the stock represented the largest individual equity sale in three of the fifty hedge funds. In addition, the funds reduced their exposure to AIG by 16.2%. With these sales, fund investors seem to be predicting a slowdown or reversal for these two issues, as AIG and News Corp have had very similar YTD returns as Boeing in 2013: 27.2% and 28.8%, respectively.
Italy's Crippling Recession
Italy's statistics bureau has issued a report on just how badly a recession has crippled its population. According to World Bulletin:
Millions of Italians cannot afford to heat their homes properly or eat meat as their country is racked by recession and soaring unemployment, said a report which found the number of people considered seriously deprived had doubled in the past two years.
The findings from national statistics institute ISTAT underline the scale of the challenge faced by the new coalition government of Enrico Letta, which has vowed to stimulate growth and tackle a youth jobless rate of almost 40 percent.
A recession that has lasted almost two years has taken a heavy toll on ordinary Italians who are increasingly digging into their savings, ISTAT said in its annual report.
Italy has the highest level in Europe of young people who are neither in education nor employment, at 23.9 percent, the study showed. In Italy's impoverished south, one in three people aged 15-29 fell into this group.
The number of people living in families considered to be seriously deprived has doubled in the past two years to 8.6 million, or about 14 percent of the population, ISTAT said.
RICO and SAC Capital Advisors
The Justice Department may hit SAC Capital Advisors and its founder Steve Cohen with the most brutal prosecution tactic possible, as far as tools for securities fraud go. According to the Wall Street Journal:
Federal prosecutors are considering charging hedge fund SAC Capital Advisors LP as a criminal enterprise through a powerful legal tool used against the Mafia and drug gangs, people familiar with the probe said.
It is rare for investment firms to be charged criminally under the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. Such a step would require approval from top Justice Department officials.
The potential RICO strategy comes amid an escalating investigation into whether SAC and its billionaire founder, Steven A. Cohen, traded on inside information. It is now crunchtime for the U.S. as it approaches a five-year legal deadline in July on whether to file securities-fraud charges in the probe.
Under RICO, prosecutors could file charges in connection with crimes committed over a decade, as long as any act that is part of the alleged enterprise occurred within the past five years. The law also contains stiff forfeiture provisions. Each fraud count could carry up to 20 years in prison.
Filed under: 24/7 Wall St. Wire, Market Open