Deutsche Bank Fine Hits Credit Suisse and RBS Hard, Plus 3 Other Stocks That Are Getting Beaten Down Today

The markets are trading in the red on Friday despite better-than-expected inflation data, as anxious investors await the Federal Reserve’s policy meeting scheduled for next week. According to the US Commerce Department, the Consumer Price Index (CPI) increased by 0.2% in August, versus the expected 0.1% gain.

Among the stocks that are losing value today are VimpelCom Ltd (ADR) (NASDAQ:VIP), Concordia International Corp (NASDAQ:CXRX), Royal Bank of Scotland Group PLC (NYSE:RBS), Credit Suisse Group AG (ADR) (NYSE:CS) and Gerdau SA (ADR) (NYSE:GGB). Let’s find out why these stocks are plunging and also see what the smart money thinks of them.

Through extensive research that covered the portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Telenor Reducing Stake in VimpleCom

VimpelCom Ltd (ADR) (NASDAQ:VIP)’s stock has lost 4% of its value after the company’s co-owner Telenor ASA said that it was selling 142.5 million VimpelCom ADSs, or about 8.1% of its stake in the Netherlands-based telecom company. Telenor said its underwriters had priced its offering of VimpelCom’s American Depositary Shares (ADSs) at a price of $3.50 per ADS, resulting in net proceeds to Telenor of about $486.28 million. Telenor has given the underwriters a 30-day option to buy up to 21.37 million additional ADSs. The offering is expected to close on or about September 21. VimpelCom will not receive any of the proceeds from the sale. A total of ten hedge funds in our database were long VimpelCom Ltd (ADR) (NASDAQ:VIP) as of the end of the second quarter.

UK Government Readying to Take Control of Drug Pricing

Concordia International Corp (NASDAQ:CXRX)’s stock is getting hammered today, losing over 17% after the UK’s Health Service Medical Supplies (Costs) Bill was proposed in the House of Commons on Thursday, which would prevent drug companies from raising the price of common drugs, which Concordia was singled out for having done by the U.K’s National Health Service earlier this year. The proposed bill, if approved, will amend the National Health Service Act 2006, allowing the government to control drug pricing and apply penalties and fines. Concordia is already under $3 billion of debt and its U.S. business in facing formidable challenges. 15 hedge funds in our system were bullish on Concordia International Corp (NASDAQ:CXRX) as of the end of June.

On the next page, we’ll discuss why shares of Royal Bank of Scotland, Credit Suisse and Gerdau are losing value today.

Royal Bank of Scotland Down Amid Fears of Justice Department Fine

Royal Bank of Scotland Group PLC (NYSE:RBS) shares have lost over 5% today after the US Justice Department asked Deutsche Bank AG (USA) (NYSE:DB) to pay $14 billion to settle an investigation into mortgage-backed securities. Investors are concerned that Royal Bank of Scotland could face a similar fine, as U.S. authorities have charged several banks over selling second-rate mortgage-backed securities recently, including Citigroup Inc (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC). As of the end of June, RBS had a reserve of $6.61 billion to cover litigation and fines, but the amount didn’t include any fines by the Department of Justice. On Wednesday, JPMorgan estimated that Royal Bank of Scotland will have to pay $3 billion to the Justice Department. Jim Simons’ Renaissance Technologies owns 1.81 million shares of Royal Bank of Scotland Group PLC (NYSE:RBS) as of the end of the second quarter.

Credit Suisse’s Stock Also Losing Value

Credit Suisse Group AG (ADR) (NYSE:CS) is down by approximately 4.9% so far today on the same news as RBS. Given that Deutsche Bank and Credit Suisse each sold about $14 billion worth of mortgage-backed securities, it could be facing a similarly hefty fine as the one just levied on Deutsche Bank. In other news, Reuters reported that Jeremy Stoler, a director in the commercial mortgage division of Credit Suisse’s asset finance group has left the bank. Mr. Stoler joined the Swiss financial services company around three years ago. Credit Suisse’s stock is down by approximately 39% so far this year. Ken Fisher’s Fisher Asset Management is one of the 13 funds in our database that had stakes in Credit Suisse Group AG (ADR) (NYSE:CS) at the end of June.

ITC Ready to Increase Duties on Steel Imports

Gerdau SA (ADR) (NYSE:GGB)’s stock is down by over 3.6% today as it faces blowback from the International Trade Commission’s recent announcement of its plans to impose antisubsidy duties on steel imports. The commission said the U.S. steel industry is being “injured” by subsidized imports from countries like Brazil, India, Korea, China, and Russia. Last week, Zacks Investment Research dropped its rating on the Brazil-based steel company to ‘Hold’ from ‘Buy’. The firm thinks that Gerdau faces risks in the form of increasing raw material costs, foreign currency fluctuations, and debt. At the end of the second quarter, 13 funds tracked by Insider Monkey owned shares of Gerdau SA (ADR) (NYSE:GGB).

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