It’s a red day on Wall Street, as all three major indexes are off by around 0.35%, potentially due to some market participants remaining on the sidelines until the Deutsche Bank AG (USA) (NYSE:DB) uncertainty is finally settled. Although traditional wisdom says that either the U.S. government will settle for a relatively-painless amount or that the German government will bail the bank out, stranger things have happened before.
In this article, we’ll take a look at why Allergan plc Ordinary Shares (NYSE:AGN), AstraZeneca plc (ADR) (NYSE:AZN), eBay Inc (NASDAQ:EBAY), KBR, Inc. (NYSE:KBR), and Dynavax Technologies Corporation (NASDAQ:DVAX) are capturing investors’ attention this morning. In order to make a more complete analysis, we’ll also check SEC filings to see what the smart money thinks of each stock.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
Two drug companies are in the spotlight today after Allergan plc Ordinary Shares (NYSE:AGN) entered into an exclusive license agreement with AstraZeneca plc (ADR) (NYSE:AZN) to obtain the global development and commercialization rights to the latter’s MEDI2070 inflammatory disorder development program. Under the terms of the deal, Allergan will pay AstraZeneca an upfront payment of $250 million and up to $1.27 billion in potential launch and sales-based milestone disbursements over a period of up to 15 years. MEDI2070 is an anti-IL-23 monoclonal antibody in Phase IIb clinical development for the treatment of patients with moderate-to-severe Crohn’s disease. It is also Phase II ready for ulcerative colitis and other associated conditions.
Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 131 of them were long Allergan plc Ordinary Shares (NYSE:AGN) on June 30, while 24 of them were shareholders of AstraZeneca plc (ADR) (NYSE:AZN).
eBay Inc (NASDAQ:EBAY) shares are almost 2% in the red after Facebook Inc (NASDAQ:FB) introduced ‘Marketplace’, which is intended to allow the social media giant to compete against eBay and Craigslist in the e-commerce realm. Facebook’s Marketplace feature is a revamped, more mobile-focused version of its previous Classified/Marketplace function, and could take market share away from eBay in the long run given Facebook’s massive daily user-base and its strong engagement. Jim Simons‘ Renaissance Technologies bumped up its holding in eBay Inc (NASDAQ:EBAY) by 59% during the second quarter to just over 3 million shares as of June 30.
On the next page, we’ll find out why KBR Inc and Dynavax Technologies are heading in opposite directions this morning.