The U.S. dollar is stronger in early Wednesday activity as traders look forward to today’s release of the domestic employment report. With the bulk of the second quarter earnings season now over, many investors are more confident about the strength and sustainability of the U.S. economy’s growth rate.
In this article, we’ll examine five stocks that are trending among the stronger dollar backdrop this morning. They are Biogen Inc (NASDAQ:BIIB), American International Group Inc (NYSE:AIG), Etsy Inc (NASDAQ:ETSY), Avis Budget Group Inc. (NASDAQ:CAR), and Electronic Arts Inc. (NASDAQ:EA). We’ll also use SEC filings to determine what the smart money thinks of each stock.
Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 765 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).
Potential M&A in Pharma Sector
Biogen Inc (NASDAQ:BIIB) is in the spotlight after the stock surged by over 9% on Tuesday on the back of a Wall Street Journal article stating that Merck & Co., Inc. (NYSE:MRK) and Allergan plc Ordinary Shares (NYSE:AGN) were both interested in buying the company. Given that its shares are off considerably from their high of around $500 per share last year, Biogen’s stock is arguably vulnerable to a take-over offer. Interest rates are also low, meaning that an acquisition could potentially be accretive for the buyer. Despite the two conditions, the potential for a take-over is not guaranteed, as communication between the suitors and their target has been preliminary and informal and Biogen’s management may not be interested in selling the company. Hedge funds were slightly less bullish on Biogen Inc (NASDAQ:BIIB) in the first quarter, as the number of funds in our database with holdings in Biogen Inc (NASDAQ:BIIB) fell by seven quarter-over-quarter to 64 as of the end of March.
AIG Reports Strong Results
American International Group Inc (NYSE:AIG) is in the green in extended market trading after the insurer reported earnings of $0.98 per share for the second quarter, beating the average analyst estimate by $0.05 per share. AIG’s property and casualty adjusted combined ratio was 89.5, versus 94.6 a year earlier, and book value per share when excluding AOCI and DTA, but including dividend growth, was $61.78, up by 5% during the quarter. The company’s Board authorized the repurchase of an additional $3 billion worth of common stock, which currently amounts to about 5% of the float. Carl Icahn‘s Icahn Capital LP was one of the top shareholders of American International Group Inc (NYSE:AIG) at the end of March, with a stake of over 44 million shares.
On the next page we’ll find out why Etsy, Avis Budget Group, and Electronic Arts are trending today.