Deutsche Bank AG (USA) (NYSE:DB) and Lumber Liquidators Holdings Inc (NYSE:LL) are trending in opposite directions after Deutsche Bank announced that it will take a 6.4 billion euro ($7.23 billion) write-down on its assets for its third quarter, while Lumber Liquidators agreed to settle its improper flooring imports case with the Department of Justice for $10 million. Shares of Deutsche Bank are down by 6.46% while shares of Lumber Liquidators are up by 9.47% in extended market trading. Let’s take a closer look at the two stocks and see what hedge funds think of them.
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Shares of Deutsche Bank AG (USA) (NYSE:DB) were previously down by 1.3% year-to-date as a weak European economy and a strong U.S dollar weigh on earnings. With today’s announcement, investors have more to worry about. Here’s an excerpt from the press release:
[Deutsche Bank] expects to incur charges that will materially impact third quarter 2015 results: An impairment of all goodwill and certain intangibles in Corporate Banking & Securities (CB&S) and Private & Business Clients (PBC) of approximately EUR 5.8 billion. This is largely driven by the impact of expected higher regulatory capital requirements on the measurement of the value of these segments as well as current expectations regarding the disposal of Postbank. An impairment of the carrying value of Deutsche Bank’s 19.99% stake in Hua Xia Bank Co. Ltd. of approximately EUR 0.6 billion. This reflects an updated valuation triggered by a change of the intent of the holding as Deutsche Bank no longer considers this stake to be strategic. Litigation provisions of approximately EUR 1.2 billion, the majority of which are not expected to be tax deductible. Final litigation provisions in the quarter may be affected by further events before we finalize and report third quarter results.
Because of the impairments, Deutsche Bank expects to report a net loss of 6.2 billion euros ($7.00 billion) for its third quarter and its board will likely cut or eliminate its dividend, which has stood at $0.75 annually for the past six years, a current yield of 2.87%. At its current valuation, shares look cheap, but Deutsche Bank’s stock hasn’t gone anywhere for a long time. Europe’s economy will need to improve for the odds to be in the bulls’ favor.
Our data shows that hedge funds were ambivalent towards Deutsche Bank AG (USA) (NYSE:DB) in the second quarter. Of the around 730 elite funds that we track, 12 of them owned $102.13 million worth of the company’s shares on June 30, versus five funds with $109.75 million in shares on March 31. Crispin Odey‘s Odey Asset Management Group established a new position of 1.74 million shares while Michael Messner’s Seminole Capital (Investment Mgmt) established a new stake of 259,600 shares.