Do Hedge Funds Agree with Mr. Market as these Stocks Fall on Weak Outlook?

The shares of Capstone Turbine Corporation (NASDAQ:CPST) and Dunkin Brands Group Inc (NASDAQ:DNKN) have slid significantly today after both firms had announced weak guidance for the latest quarter and full-year. Insider Monkey’s comprehensive hedge fund data show that hedge funds preferr one of these two stocks more than the other and the sentiment was trending in opposite directions for each of them between April and June.

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Capstone Turbine Corporation (NASDAQ:CPST)’s stock is down sharply at nearly 25% as the firm announced that the strong dollar as well as in the oil and gas market will negatively affect revenue for the firm’s second quarter. Earnings for the quarter are below the management’s expectations, the company announced, as the strong dollar has pushed clients to delay orders and shipments. Jim Crouse, Capstone’s executive vice president of sales and marketing, said that they have about 75 microturbines with a capacity over 13 MW that were supposed to be delivered in this quarter but will now be shipped in the next quarter. Additionally, the company said that its Russian distributor, one of their biggest customers until recently, has not made any significant payments in the quarter  ended September 30. However, Capstone said that it had made moves to remedy the increased cash burn. The company indefinitely indefinitely postponed an upcoming employee merit increase, cut hourly overtime, eliminated temporary workers, converted variable cash compensations to stock grants.

Capstone Turbine Corporation (NASDAQ:CPST) registered an inflow of capital from hedge funds, with investors we track owning $5.56 million worth of the company’s shares at the end of June, down by 7.11% from the end of March, as the stock decreased in value by 36.82%. According to our data, there were nine hedge funds long on the stock, up by five from the previous quarter. Their holdings, however, amassed just 4.10% of Capstone at the end of June. Thomas E. Claugus‘ GMT Capital owned 5.49 million shares of Capstone, representing a new position. Israel Englander’s Millennium Management also initiated a stake containing 3.12 million shares in the second quarter.

Meanwhile, Dunkin Brands Group Inc (NASDAQ:DNKN)’s stock has dropped by a substantial 10% as it reported light guidance during the analyst day. The firm said that it expects earnings per share to be in the range of $1.87 to $1.91 for 2015, which is below the consensus estimate of $1.92. The company also forecasted revenue growth between 6% and 8% for the full fiscal year. In the third quarter, it said, same-store sales for locations, open for at least one year, are expected to grow 1.1%. For the full year, it said it expects same-store sales to grow 1% to 3% for both Dunkin’ Donuts and Baskin-Robbins stores. Dunkin’ Donuts same-store sales were expected by analysts to grow by 3.32% and 2.7% for Baskin-Robbins. Moreover, the firm announced plans to close 100 Dunkin’ Donuts stores by the end of the next year.

Nonetheless, Insider Monkey’s data show that hedge funds were bullish on Dunkin Brands Group Inc (NASDAQ:DNKN) at the end of the second quarter. There were 15 hedge funds long Dunkin Brands at the end of the quarter, down by five from the end of March, and the value of their stakes fell by 22% to $331.8 million, despite an over 15% appreciation of the stock. The collective holdings of hedge funds were equal to 6.30% of Dunkin Brands. Eashwar Krishnan’s Tybourne Capital Management owned 2.24 million Dunkin Brands shares at the end of June, up by 36% quarter-over-quarter. Brett Barakett’s Tremblant Capital reduced its stake by 6% to about 1.09 million shares.

Disclosure: None