The Trading Day Couldn’t End Early Enough For These 4 Stocks

Platform Specialty Products Corp. (NYSE:PAH), Baozun Inc. (NASDAQ:BZUN), Dr. Reddy’s Laboratories Ltd. (NYSE:RDY) and NetEase Inc. (NASDAQ:NTES) began and ended the day in red territory on a shortened trading day on Friday, following various headlines including insider trading, earnings results, a regulatory violation, and an analyst initiating coverage. We’ll consider how these stocks are being traded among top hedge funds in addition to studying the recent negative catalysts to see if we can expect the companies to overcome them.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds has returned 102% since the end of August 2012, beat the S&P 500 Index by 53 percentage points (see the details here).

Platform Specialty Products Corp. (NYSE:PAH) lost 4.86% today, a few days after its top executives bought shares in the company, which sent shares soaring. Platform Specialty Products Corp. (NYSE:PAH) Chairman Martin Franklin, its COO Benjamin Gliklich, and its CFO Sanjiv Khattri bought approximately 1 million shares, with Franklin and Berggruen Holdings buying 500,000 shares apiece, news which was announced on Monday. The executives expressed confidence in their business and its ability to generate free cash flow, which prompted the purchase. Shares are down by 47% this year.

Out of 730 hedge funds which Insider Monkey follows, 40 funds held $1.38 billion worth of shares of Platform Specialty Products, or 51.80% of the company’s outstanding stock. Pershing Square, headed by top investor Bill Ackman, holds 42.74 million shares of the company, which are valued at $540.63 million.

Baozun Inc. (NASDAQ:BZUN) dropped 7.47% following the release of its third-quarter 2015 results, despite a greater than 57% increase in total net revenue. Baozun Inc. (NASDAQ:BZUN) reported total net revenue of RMB587.6 million, or US$92.5 million. It also booked net income of RMB72.4 million, or US$1.1 million, which swung the company into positive territory after reporting a net loss in the prior-year period.

“We are pleased with another quarter of robust financial and operational results, mainly driven by strong growth from our existing online stores and the expansion and optimization of our portfolio of brand partners,” Baozun Chairman and CEO Vincent Qiu said. “The number of our brand partners increased by 10 during the quarter to 109.”

Through the end of September, five funds in our database held 2.50% of the company’s outstanding stock.

Dr. Reddy’s Laboratories Ltd. (NYSE:RDY) fell 5.63% on the news that the U.S. Food and Drug Administration found deviations and violations against current good manufacturing practice (CGMP) in three of the company’s manufacturing facilities in India.

The FDA said “the methods used in, or the facilities or controls used for, their manufacture, processing, packing, or holding do not conform to, or are not operated or administered in conformity with, CGMP.” The FDA also concluded that the company needs to be responsible for investigating the causes of the violations and for preventing their re occurrence. If Dr. Reddy’s Laboratories Ltd. (NYSE:RDY) fails to do so, the FDA may not allow the company’s products which were manufactured in those facilities to be admitted into the United States.

In a Form 6-K filed on November 25, the company issued a statement saying “Dr. Reddy’s has always adhered to all disclosure requirements both of the Securities and Exchange Commission (SECs) and Indian Stock Exchanges; including accounting practices as per the International Financial Reporting Standards (IFRS) and the Indian Accounting Standards. The Company has no further comment on what might be advertorial Press releases by law firms and refutes all allegations.”

14 hedge funds in Insider Monkey’s database held 4.90% of the company’s outstanding stock through the end of September. Fisher Asset Management, a mutual fund managed by billionaire Ken Fisher, holds 4.96 million shares of the company valued at $317.09 million.

China-based NetEase Inc. (NASDAQ:NTES) dropped off by 3.20% after spiking on Wednesday on the heels of coverage of the company’s stock being initiated by Goldman Sachs, which set a “Buy” rating and $190 per share price target on it. Shares of the Chinese online game developer are up by 65% on the NASDAQ this year.

Insider Monkey’s database shows 26 of the funds it tracks held $2.39 billion worth of NetEase Inc.’s (NASDAQ:NTES) outstanding stock on September 30. Orbis Investment Management, led by William Gray, holds 11.45 million shares of the company.

Disclosure: None