After surging in the morning, major U.S stock indexes performed a repeat of yesterday’s trading activity by falling in the afternoon. Among the stocks driving these declines, we will highlight Skullcandy Inc (NASDAQ:SKUL), which was trading down more than 30.5%, as well as Ascena Retail Group Inc (NASDAQ:ASNA), Boot Barn Holdings Inc (NYSE:BOOT) and Sunedison Inc (NYSE:SUNE), all down by double digits. But, what is driving these large dips? And how do the hedge funds in our database feel about these companies? Let’s find out.
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012 (see more details).
The largest decliner in this list is Skullcandy Inc (NASDAQ:SKUL), which has lost more than 30.5% in Tuesday trading after management cut its fourth-quarter guidance on Monday evening. The company now expects fourth-quarter earnings of $0.20-to-$0.22 per share, down from its previous outlook of $0.38-to-$0.40 per share. Management attributed the cut to sluggish holiday sales and a shift in gross margins.
Over the third-quarter of 2015, Skullcandy Inc (NASDAQ:SKUL) witnessed a slight decline in hedge fund interest. The number of funds that disclosed long stakes in the company among those we track fell to 13 from 14 over the quarter. Steven Boyd’s Armistice Capital, the largest shareholder in our database, also trimmed its exposure by 40% over the period, to 854,000 shares worth about $4.72 million.
Another big loser today is Ascena Retail Group Inc (NASDAQ:ASNA), down about 12.7% after management announced disappointing holiday sales; consolidated comparable-store sales fell by 4% year-over-year over the holiday period. Following the poor performance, the company trimmed its second-quarter of fiscal year 2016 EPS guidance to $0.00-to-$0.03, from last month’s estimate of $0.02.
As in Skullcandy’s case, hedge fund interest in Ascena Retail Group Inc (NASDAQ:ASNA) fell during the most recent filing period. Long positions fell by two to 23 over the period, though these funds still held about 17.4% of the company’s total shares, led by Alexander Medina Seaver’s Stadium Capital Management, holding almost 5% of the outstanding stock.
On the next page, we’ll take a look into the events pushing Boot Barn Holdings Inc (NYSE:BOOT) and Sunedison Inc (NYSE:SUNE) lower today.