In yet another volatile trading session, the S&P 500 is off by more than 0.8% and the NASDAQ is down by 0.84% as investors weigh the negative implications of a Federal Reserve interest rate hike. Among today’s losers are Cemex SAB de CV (ADR) (NYSE:CX), Enterprise Products Partners L.P. (NYSE:EPD), Netflix, Inc. (NASDAQ:NFLX), Twitter Inc (NYSE:TWTR), and bluebird bio Inc (NASDAQ:BLUE). Let’s find out why investors are selling these five stocks.
Let’s also analyze relevant hedge fund sentiment toward these stocks. Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
First up, Cemex SAB de CV (ADR) (NYSE:CX) has lost 2.68% as the analysts at Morgan Stanley remain cautious towards the Mexican cement company. Although the analysts expect the cement demand to be strong next year, with pricing likely to rise faster than inflation, they think the long term picture for Cemex SAB de CV (ADR) (NYSE:CX) is still cloudy, as industry costs are too high and the return on capital is too low. Of the around 730 elite funds we track, 18 funds owned Cemex in the third quarter, with Ken Fisher’s Fisher Asset Management and Cliff Asness’ AQR Capital Management among them.
Along with other midstream oil and gas companies, Enterprise Products Partners L.P. (NYSE:EPD) shares are down today because of declining energy futures prices and worry that Kinder Morgan Inc (NYSE:KMI) might cut its dividend. Because its fundamentals are more secure than Kinder’s, Enterprise Products Partners L.P. (NYSE:EPD) shares are only off 6.4% versus other midstream companies that have seen their shares fall by double digits today, however. In the long run, EPD shares should rebound as oil prices recover.
In other news, Netflix, Inc. (NASDAQ:NFLX) has lost 3.69% after the company said that it might have difficulty striking global licensing deals in the future at the UBS Global Media and Communications Conference. At the conference Netflix revealed it has 31 original series and 10 films planned for release on its streaming platform next year. Shares could also be down on profit taking, given that Netflix, Inc. (NASDAQ:NFLX) shares recently hit an all-time high. A total of 57 funds from our database were long Netflix at the end of the third quarter, up from 50 funds a quarter earlier.
On the next page, we examine why Twitter and bluebird bio have lost ground.