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A Look At Five Of Today’s Top Losers And Developments Behind Their Moves

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The American markets are set to end the year slightly lower, while European markets, touted for a slump by analysts, have ended 2015 on a high note. Italy is up by 13% and Germany and France are up by 9.5% each, while the U.S. markets are mostly flat with small chances for a massive movement so close to the end of the year. So far today, U.S. stocks have been trading lower amid falling oil prices. In this article we’ll take a look at some of the biggest losers, namely Anavex Life Sciences Corp. (NASDAQ:AVXL), Pep Boys – Manny Moe & Jack (NYSE:PBY), Chesapeake Energy Corporation (NYSE:CHK), Freeport-McMoRan Inc (NYSE:FCX) and Seadrill Ltd (NYSE:SDRL).

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 102% over the ensuing 38 months, outperforming the S&P 500 Index by nearly 53 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

The prospect of a potential SEC investigation is putting more pressure on the shares of Anavex Life Sciences Corp. (NASDAQ:AVXL), which are down by as much as 5% during the first hours of trading today. The company denies any wrongdoing, having stated its willingness to cooperate with the regulatory agency in a recent filing. Anavex said it “believes the subpoena and investigation relate to the recent unusual activity in the market for the company’s shares,” not any wrongdoings by its executives or directors.

Shares of Pep Boys – Manny Moe & Jack (NYSE:PBY) are also down this morning, as the bidding war between Icahn Enterprises and Bridgestone Corp has come to an end, with Carl Icahn emerging as the winner. The car parts and repair chain is set to be acquired by Icahn’s company for approximately $1 billion or $18.50 a share, after Bridgestone refused to match Icahn’s latest offer. The corporate raider was pleased with the outcome, stating that he has been looking to buy a company like Pep Boys since the acquisition of Auto Plus earlier this year.

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The Pep Boys – Manny Moe & Jack (NYSE:PBY) fan club registered a massive exodus during the third quarter, with the number of elite funds invested dropping to 18 at the end of September from 29 a quarter earlier. John Orrico and his fund, Water Island Capital, are set to profit handsomely from this deal, having established a position that amassed 1.52 million shares at the end of September.

Chesapeake Energy Corporation (NYSE:CHK) is turning into a real headache for Carl Icahn, as the troubled energy company is trending ever lower. With oil prices down by more than 3% today, shares of Chesapeake Energy have followed suit, dropping by as much as 9% during the first hours of trading. So far this year, the stock is the worst performer from the S&P500, down by 77.4%.

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At the end of September, roughly 25% of Chesapeake Energy Corporation (NYSE:CHK) common stock was held by 34 hedge funds, up from 33 at the end of June. Robert Pitts shares Icahn’s bullishness on this stock, having himself established a $67.6 million position during the quarter. His fund, Steadfast Capital Management, reported ownership of 9.23 million shares of Chesapeake Energy in its latest 13F filing.

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