With all three indexes having bounced back strongly from their afternoon lows, Twitter Inc (NYSE:TWTR), Zynga Inc (NASDAQ:ZNGA), Glu Mobile Inc. (NASDAQ:GLUU), AAC Holdings Inc (NYSE:AAC), and Linn Energy LLC (NASDAQ:LINE) are each in the red as investors sell for different reasons. Let’s take a closer look.
Given that Insider Monkey has done a lot of research into what the smart money likes and doesn’t like, let’s also analyze relevant hedge fund sentiment toward these stocks. Why do we pay attention to hedge fund sentiment. Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).
Twitter Inc (NYSE:TWTR) shares continued to fall on Monday, as many former bulls become more guarded on the company’s future. The analysts at Evercore, for example, have a $22 price target and think Twitter is losing ground to faster rivals such as Snapchat and Instagram. Evercore’s Ken Sena wrote last week:
“Total minutes on the platform through November continue to fall in the mid-single digits domestically, while other social platforms demonstrate double-digit growth off of larger bases […] This is in spite of multiple major product launches, including Moments as well as the partnership with Google. Although we do not have December data yet, the data through November suggests to us that the Street’s 325mm MAU estimate (or 5mm net adds, reflecting an acceleration from 4mm in 3Q) may be too optimistic, and we maintain our 323mm estimate.”
Hedge funds have been less optimistic on Twitter Inc (NYSE:TWTR), as the number of elite funds long the stock fell by 20 quarter-over-quarter to 27 at the end of September. Shares of the “What’s Now” social media giant are down by 3.39% for the day.
In separate news, Zynga Inc (NASDAQ:ZNGA) shares are down by 1.14% in afternoon trading despite the NASDAQ index being 0.66% in the green. Shares of the social media gaming company could be off because shares of fellow game producer, Glu Mobile Inc. (NASDAQ:GLUU), have fallen by 18.3% so far on Monday. Last Thursday, Glu Mobile Inc. (NASDAQ:GLUU) launched ‘Katy Perry Pop’, a sequel-branch-off to the company’s hit ‘Kim Kardashian: Hollywood’. Investors could be selling Glu today because the preliminary install data isn’t as strong as the market expected. If ‘Katy Perry Pop’ underwhelms, Glu’s planned games for other celebrities will likely disappoint too. A total of 21 funds from our database amassed 18.7% of Glu Mobile Inc. (NASDAQ:GLUU)’s stock and 26 funds were long 23.5% of Zynga Inc (NASDAQ:ZNGA), according to the latest round of 13F filings.
On the next page, we examine AAC Holdings Inc, and Linn Energy LLC.