Stocks Turning Heads Today: Conn’s, Hertz, NorthStar Asset Management, More

With Hilary Clinton having reached the magic number of pledged and un-pledged delegates, it now looks like the race between her and Donald Trump is officially set. The markets are relatively unaffected by the news this morning, with the Dow, S&P, and NASDAQ all modestly in the green. Among the stocks showing more bounce are Zimmer Biomet Holdings Inc (NYSE:ZBH), LDR Holding Corp (NASDAQ:LDRH), Hertz Global Holdings Inc (NYSE:HTZ), NorthStar Asset Management Group Inc (NYSE:NSAM), and Conn’s Inc (NASDAQ:CONN). Let’s dig a little deeper into the reasons why each stock is buzzing and use 13F SEC filings to see how the world’s greatest investors are positioned among the five stocks.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 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).

A Merger in the Medical Devices Sector

Zimmer Biomet Holdings Inc (NYSE:ZBH) is acquiring LDR Holding Corp (NASDAQ:LDRH) for $37 in cash per share, or about $1 billion in total. LDR shares have predictably surged on the news. by over 63%, while Zimmer shares have been strangely quiet, down by 1.8% so far in morning trading. LDR is a medical device company that designs and commercializes novel and proprietary surgical technologies for the treatment of patients suffering from spine disorders. Zimmer Biomet’s acquisition of LDR will significantly expand the company’s portfolio in the $10 billion spinal market. With respect to 2016, Zimmer Biomet reiterated its guidance of adjusted EPS of $7.85-to-$8.00 on revenue increases of 2%-to-3% year-over-year, on a constant currency basis. The acquisition, which is expected to close in the third quarter, is expected to be neutral to adjusted EPS in 2017 and to be accretive the year after that.

Of the 766 elite funds in Insider Monkey’s database, 45 funds owned Zimmer Biomet Holdings Inc (NYSE:ZBH) on March 31, while 15 were long LDR Holding Corp (NASDAQ:LDRH).

Carl Icahn Really Likes Hertz 

Hertz Global Holdings Inc (NYSE:HTZ) is almost 2% higher after Carl Icahn‘s Icahn Capital LP reported owning 15.24% of the company in a 13D filing. The fund added to its 63.7 million-share position at the end of March by accumulating about 1.00 million shares in the $9.88-to-$9.96 range this month. Hertz is expected to spin off its equipment-rental business, Herc Holdings, on the 30th of this month. Rental car pricing could also be improving after fleet capacity cuts. Hertz Global Holdings Inc (NYSE:HTZ) was in 47 elite funds’ portfolios at the end of March.

On the next page we examine why NorthStar Asset Management and Conn’s Inc are heavy movers today.

An Activist Opposes Three-Way Merger 

In an activist letter, the fund Land and Buildings wrote that it doesn’t believe NorthStar Asset Management Group Inc (NYSE:NSAM)‘s announced merger with Northstar Realty Finance Corp (NYSE:NRF) and Colony Capital Inc (NYSE:CLNY) provides fair value to shareholders. Land and Buildings believes the shareholders of Colony Capital are disproportionately enjoying the benefits of the merger and has called for a meeting with the company’s special committee concerning the merger. Lands and Buildings maintains its belief that Northstar Asset Management is worth closer to $20 per share given its stable income streams and growth potential. 53 top funds held shares of NorthStar Asset Management Group Inc (NYSE:NSAM) at the end of March.

Conn’s Same-Store Sales Decline

Conn’s Inc (NASDAQ:CONN) is 3% in the red after the retailer reported its May 2016 sales and delinquency data. For the month, the company had a 60-plus day delinquency rate of 8.9% and its same-store sales declined by 6.7% when excluding the impact of the company’s April 2015 decision to exit digital cameras, video game products and certain tablets. Conn’s Inc (NASDAQ:CONN) shares have been beaten-up, being down by 63% year-to-date and the company needs same-store sales to stabilize before investors can be more certain of the company’s prospects. The number of funds in our system that were shareholders of the stock rose by three quarter-over-quarter to 13 as of the end of the first quarter.

Disclosure: None