It’s been a rocky week for U.S. stocks, with various economic data weighing on investors, as well as the developments in oil prices. The main event, however, was the Federal Reserve increasing interest rates for the first time since 2006. As investors are digesting the news, let’s take a look at four stocks that are trending today: Knight Transportation (NYSE:KNX), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Yahoo! Inc. (NASDAQ:YHOO).
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.
We’ll start with Knight Transportation (NYSE:KNX), one of the largest U.S. truckload transportation companies, which has lowered its 2015 fourth quarter guidance. The company said it now expects fourth quarter earnings to range between $0.31 and $0.33 per share as opposed to previous projections of $0.36 to $0.38 in earnings per share. Reduced non-contract opportunities and increased capacity have led to a decrease in total revenue per mile. The company also said it registered a higher driver pay inflation, which was triggered by wage increases in certain segments.
At the end of the third quarter, a little over 4% of Knight Transportation (NYSE:KNX)’s common stock was held by 19 funds from our database, down from 22 at the end of June. Robert Rodriguez And Steven Romick’s First Pacific Advisors holds the largest stake in the company among the hedge funds we follow. In its latest 13F filing, the fund reported 1.01 million shares valued at $24.2 million.
Amazon.com, Inc. (NASDAQ:AMZN) has made headlines today, after reports emerged that the e-commerce giant is looking to enter the air delivery business. According to The Seattle Times, Amazon is negotiating the lease of 20 Boeing 767 jets to reduce dependence on traditional carriers and avoid potential delays that have plagued the 2013 holiday season. Robert W. Baird analyst Colin Sebastian said Amazon sees third party carriers as a “bottleneck to their development,” having failed to adapt to the rapid rise of e-commerce.
Hedge fund sentiment towards Amazon.com, Inc. (NASDAQ:AMZN) improved during the third quarter, as the number of positions reported by elite funds rose to 113 from 103 a quarter earlier. Tiger Cub Chase Coleman is betting big on Amazon, having boosted his stake by 328% during the quarter. In its latest quarterly report, Tiger Global Management reported ownership of 3.19 million shares valued at $1.63 billion.