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Why Are These 4 Stocks Among Today’s Biggest Losers?

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Although they started in the green, U.S stocks have turned south, having dipped into red territory by noon, as investors keep a cautious eye on oil prices. Brent dipped below the $40 level for the first time in seven years, putting pressure on the markets. There are several stocks that have been falling hard since the beginning of trading today, which didn’t need any help from Brent to aid their fall. Let’s have a look at what frightened investors into pushing Lululemon Athletica Inc. (NASDAQ:LULU), Costco Wholesale Corporation (NASDAQ:COST), Eagle Pharmaceuticals Inc (NASDAQ:EGRX) and Sigma Designs Inc (NASDAQ:SIGM) lower today.

Lululemon Athletica Inc. (NASDAQ:LULU) announced its third quarter results this morning and investors are not impressed. The company posted revenue of $479.7 million, falling short of Wall Street expectations of $481.6 million. The manufacturer and retailer of technical athletic apparel also registered a profit of $53.2 million, which translates into $0.38 per share. When adjusted for non-recurring gains, the profit stands at $0.35 per share, which also came in below the analyst forecast of $0.37 per share. These results prompted Lululemon to revise its full year guidance, with the company now expecting revenue to range between $2.03 billion-to-$2.04 billion, while earnings are expected to be between $1.81-and-$1.84 a share. Lululemon previously estimated full-year revenue of $2.03 billion-to-$2.06 billion and a profit of $1.87-to-$1.92 per share. Shares are currently trading at $48 apiece, down by 8% from yesterday’s close.

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During the third quarter, Lululemon Athletica Inc. (NASDAQ:LULU) lost some support from the smart investors that we track, as the number of them invested in the stock decreased to 32 from 35. Billionaire Ken Griffin is the biggest fan of the company among those investors, and upped his stake by 64% to 3.3 million shares worth $167 million during the quarter. Steven Cohen also decided to bet heavily on the stock, boosting his holding to 2.88 million shares.

The news is bad for Costco Wholesale Corporation (NASDAQ:COST) shareholders as well this morning, after the company’s own quarterly financial report revealed slowing growth in membership fees. A key source of profits, membership fees rose by just 1.9% to $593 million during the first quarter of fiscal year 2016, the slowest year-over-year growth rate in years. Total revenue came in at $27.22 billion, up from $26.87 billion from the same period of last year. Costco also reported a profit of $480 million, which translates into $1.09 per share, below analyst expectations of $1.17 a share. The stock tanked by as much as 6.3% before regaining some ground in the first hours of trading.

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Although Costco Wholesale Corporation (NASDAQ:COST)’s fan base shrunk to 38 elite funds by the end of the third quarter, it has retained the support of legendary investor Warren Buffett. According to its latest 13F filing, Berkshire Hathaway’s position is intact at 4.33 million shares, valued at $626 million at the end of September. Ken Griffin is also bullish, having increased his investment to 1.0 million shares by the end of the third quarter.

Why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 38 month period beginning from September 2012, returning 102% (read the details here).

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